Now let’s talk about why having sources of passive income is so important. The average person is not going to earn a huge salary. True, a select few people do earn enormous salaries as CEOs or in other top executive positions. Others may be in-demand consultants who can charge huge hourly rates. For the majority of us, though, our income potential is not huge. We are limited by our education, experience, and the number of hours that we can physically (and mentally) spare for work.
Passive income opens up possibilities that might not otherwise exist. It allows us to earn money in ways that do not require hours of additional effort on an ongoing basis – and that’s huge. If you find that working long hours translates to having only a limited amount of time with your family – or that you’re passing up opportunities to do what you love – then passive income can make the difference.
Passive income matters because it’s the kind of income that can easily supplement your active income – and eventually, it may even replace your active income. Your earnings with active income are limited based on the number of hours you work, as well as by things like your education and work history. There are no such limitations on passive income. You have complete control over it, which means that nobody can cap it. The fact that you can earn it while you are sleeping, playing with your kids, or on the golf course means that you have the freedom to do what you please with your time.
As you can see, passive income does differ significantly from active income. Money is money, but the money you earn from passive income streams is the kind of money that can set you free from the daily grind and allow you to pursue the things that are most important to you.
In the next chapter, we will talk about the benefits and risks of passive income in greater detail so that you know what to expect as you work toward setting up passive income streams.
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