Passive Income - 1. Introduction

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Passive Income - 1. Introduction - So today my new series of articles on the subject of “Passive Income” starts.

The readers of my blog have voted and a large majority voted for “Passive Income”.

In this first part of the series, of course, I would first like to define what “passive income” actually is and what it is not.

I will also present the series of articles in more detail myself and show you what to expect in the other 8 parts.

Have fun with it.

Parts of the article series:

Introduction
Requirements and Myths
Examples of passive sources of income
Outsourcing and automation
Problems and obstacles
Maintain passive income
Passive Income Checklist
Combination of active & passive income
Step by step to passive income

What Is Passive Income?

Passive Income - 1. Introduction

Not everyone knows the term “passive income” or there are certainly different ideas about it.

That's why I went to Wikipedia and looked up what “Passive Income” is official.

And there are 3 different types of income:

Active Income
Active income is everything that employees and wage earners do every day. You go to work and get paid for the hours you invest.

Many self-employed people also earn their living as “active income” by providing services for customers.
Passive Income
“Passive income”, on the other hand, is defined as income generated without (or with very little) work. Examples include rental income, book commissions, pensions, and the like.

Passive income is therefore independent of the time invested and flows even if you do nothing. I explain below why this strict definition is not so suitable for our purposes.
Portfolio Income
The third type of income is distinguished in the USA. Portfolio income comes from stock dividends, funds, and the like. In principle, however, this can also be added to passive income.

Differences To Active Income

It is important to understand where the difference to the direct income lies because it is precisely this difference that is decisive.

“Active income” is usually the well-known “exchange” of hours for money. Anyone who goes to work as an employee earns their money (and that stays more or less the same) as long as they don't stop working.

If the employee stops working, he will no longer receive any money (apart from vacation and illness).

It works the same for many self-employed people. Anyone who builds or installs something as a craftsman earns money for precisely this work. Once he has finished his work, he no longer earns any money but has to look for a new customer.

The “active income” can be described as “1: 1” work. You work for a customer and are then paid by them for the work done.

The difference with “passive income” is simply that you break up the direct exchange “hours for euros”.

With 1: 1 work, even 5 years later, you can only achieve as much as at the beginning. Certainly, your prices may rise and some very well-paid self-employed people work 1: 1 with customers, but you are limited because you cannot work more than 10 or 12 hours a day.

The “passive income” is therefore based on a 1: n “relationship”. This means that certain work is no longer just done for one customer, but that work that has been invested can be turned into money again and again.

An example is the web designer who no longer (only) works for individual customers and creates a website, but who, for example, builds WordPress themes and then sells them again and again without having to invest work again.

Another feature of passive income, according to Wikipedia, is that no (physical) use of the material is necessary. You can see that very well when you compare the craftsman example above with the web designer example. The craftsman will have significantly more problems building a passive income.

Passive Income For Self-Employed People Online

However, this is usually not an obstacle for self-employed people online, as no material in the traditional sense is usually required anyway.

That is why the Internet in particular is very suitable for building up passive income streams.

The possibility of reaching many people on the Internet relatively easily and cheaply (compared to the offline world) facilitates the establishment of “1: n” relationships.

However, I have to say here that the strict definition of “passive income” as it was in Wikipedia is not realistic. If you don't work at all and still want to earn a lot of money, you don't need to read any further at this point.

Instead, “passive income” for self-employed people online means that you can earn good money with relatively little additional effort once you have invested in work.

This series of articles is all about what opportunities there are for self-employed people on the Internet, what problems can arise, and what to watch out for.

Benefits Of Passive Income

Before I get to the specific content of the series of articles, a few words about the advantages of “passive income”.

Of course, you could already see one or the other fundamental advantage in my remarks above. But besides “working less and earning more” there are other advantages:

If an illness leads to the fact that you can no longer work as much or for a time at all, then money still comes in through “passive income”. The “active income” then breaks away with the self-employed immediately.
In general, various passive income streams reduce the risk, as one is no longer dependent on a source of income. Multiple pillars are always good and passive income is very suitable for this.
Those who are no longer so dependent on 1: 1 customer orders can also afford more free time. Passive income also flows on vacation.
With many passive income streams, you are also very flexible, as you can test more and start something new without completely losing your previous income.
As a self-employed person, you usually don't have a stable income as an employee is used to, for example. In addition, there are unfortunately many self-employed people who just get by with their active income in normal times. When the times are bad, it quickly becomes financially tight.
In the medium, to long term, you can increase your total income significantly with “passive income”. Of course, with “Active Income” you can increase the hourly rates, etc. and many people live very well with 1: 1 work. But in many industries, the price pressure is quite high and quite a few self-employed people fail to increase their income substantially.

Content Of The Article Series

After the introduction, I would now like to list the other 8 parts of this series of articles.

Introduction
This is the article you are reading right now.
Requirements And Myths
Here I will go into the basic requirements that a passive income stream requires. You can't passively earn money with everything.

I also go into typical myths and false expectations.
Examples Of Passive Income
This is where it becomes very practical. I will post a lot of examples of “passive income” on the internet and go into the specifics.

Of course, there are thousands of possibilities and I cannot imagine all of them. That is why I will focus on opportunities where I have already been able to gain experience myself.
Automation And Outsourcing
Two essential aspects of passive income are automation and outsourcing. I'll go into that in this article.
Problems And Obstacles
Of course, “passive income” is not a sure-fire success and there are some obstacles and problems one can face.

Here, too, I can contribute a lot from my own experience. But of course, I will also incorporate the experiences and tips of others.
Maintain Passive Income
A myth of "passive income" is that you keep earning from it forever. The truth is that you have to do a lot to ensure that these last longer.

This part of the series is about this care.
Passive Income Checklist
Is a certain idea even suitable for generating “passive income”?

In this part of the series of articles, there is therefore a checklist to check this
Combination Of Active And Passive Income
My recipe for success is the combination of active and passive income. I dedicate myself to this combination in this part.

This is a very recommendable option, especially at the beginning of self-employment.
Step By Step To Passive Income
In the last part of the series of articles, there is a summary of the most important tips and recommendations.

My Experiences

As already written, this series of articles is mainly based on my own experiences.

However, I have also read a lot of know-how in recent years, although the practical examples and tips come mainly from my wealth of experience.

Therefore, this series of articles cannot be conclusive and all-encompassing. I am generally not a fan of the “this is the only right way” slogans that some “experts” use on the web.

For this reason, I would be very happy if you could bring your own experiences and questions and either leave them as a comment.

So It Goes On

The second part of the series of articles is about the requirements for passive income and I dedicate myself to the typical myths.

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