Passive Income.... What is it, and how do you get it?

"Financial freedom" is being free not to work if you choose not to.

It is a state whereby you can choose to spend your day watching television, or doing private Physics research, or studying your navel, and still receive enough income to cover your living costs.

Definitely not a bad situation to be in.

So why is it that most people aren't financially free? Why is it that some people can stay at jobs they might find quite boring?

The reason is they are lacking in financial education. You can't blame them though. In my opinion, schools don't teach a lot about good financial skills. They teach you to work hard, choose subjects to go to a particular profession, and then work in that profession to support your lifestyle. At least that's the impression I got when I was in highschool and going through career guides -- "investor" and "entrepreneur" weren't in the list of what we could choose to be when we grew up.

I believe that too many people are focused on their ACTIVE income, being the income they derive from hourly work, usually at a job. It's the main focus throughout school, and seems to be the main focus of many people.

What is your focus? If you ask yourself, "How do I make more money?", do you start thinking of ways to get a salary raise or a promotion, or do you think of ways to invest more?

The Key to Financial Freedom is building your Passive Income.

Passive Income is income you receive without having to work. Income you'd receive if you sat at home all day, or went out to see movies. Things like rental income from property, dividends from shares, royalties from products, and so forth.

For it is only with Passive Income that you can truly be financially free. If Active Income is your only source of income, then you need to continue at your work, job, and so forth to meet the bills.

I'm not saying to quit your jobs. Active income can be important, especially to assist in building your passive income. What I am saying is that your focus should be on your passive income, not your active income.

Consider the limits you face with active income as compared with passive income. With active income, where you are usually paid an hourly rate, you are limited by the number of hours in the day. With passive income, on the other hand, there aren't so many "set" limits, as your passive income can continually grow with more, and better investments.

If you look at the richest people in the world, you'll find that most of them derive the majority of their income and wealth from passive income. Look at Bill Gates. Do you think his salary made him rich, or was it the creation of his company that will continue whether he works there or not?

With this in mind, I'm often surprised at how some people can spend many years studying and improving their skills to build their active income, but spend little time on any skills relating to their passive income.

So, the message I deliver today is, work on building your passive income, and build up your financial education.

- Thomas Rice.