Freedom is only great if you take advantage of it, use it to it’s full potential and make your life the way you want it to be.
So what’s the first step?
The first step is realizing what’s wrong with the way you currently make money. And that is if you work a regular job, you get paid in linear income. What is linear income? It is when you get paid an X amount of money for every hour you work.
The problem with this is that you must keep working 40 hours a week to keep your income, you can’t stop because if you do you won’t have any money to pay your monthly expenses.
You make things worst if your are the only person in your company who can do the job.
There's a saying in the corporate world: "Don't make yourself irreplaceable. If you can't be replaced, you can't be promoted." As an entrepreneur, this is still true in its own way. Let's think of "being promoted" as earning more and working less. You can raise your prices, but until you can remove yourself from being directly involved in doing the work that generates the income, there's always going to be a limit to how much you can earn, and it can only increase very slowly.
Passive income, on the other hand, is income that does not require your direct involvement. If you disbelieve this, then your perspective is of those traditional self-employed people.
Investopedia.com defines passive income as earnings an individual derives from a rental property, limited partnership or other enterprise in which he or she is not actively involved.
Some kinds of passive income you may be familiar with include owning rental property, owning oil and gas wells, royalties on an invention or creative work, and network marketing. If you want to earn more, work less, and have a decent retirement, you're going to have to start creating income streams that do not require your direct involvement. Whether you're just starting your business, or you've been running it a while, the sooner you start thinking about how you are going to shift your business model to create more passive income, the sooner you can achieve personal and financial freedom.
Financial freedom is achieved when your passive income exceeds your monthly expenses.
There are two basic types of passive income. First is the residual income, a kind of revenue that occurs over time from work done one time. Some examples include:
>An insurance agent who gets commission every year when a customer renews his policy
>A network marketing or direct sales rep's income from her direct customers when they reorder product every month
>An aerobics instructor who produces a video and sells it at the gyms where she teaches
>A marketing consultant who creates a workbook and sells it in e-book format on the Internet
>A photographer who makes his photos available through a stock photography clearinghouse and gets paid a royalty whenever someone buys one of his images
>A restaurant or retail owner who has grown to the point of hiring a trustworthy manager
As you can see, there are many different ways to generate residual income across a wide variety of businesses. It may be recurring income from the same customers, or the sales of a product to new customers. It may require no personal involvement whatsoever, such as an e-book sold on a web site, or it may require some personal interaction, such as the insurance agent calling the customer to remind them about their renewal and ask them if they want to change any of their coverage. Often, it's something that you can delegate to an assistant.
Note that this is different from merely recurring income. Recurring income may still require your involvement to earn the income, e.g., a coach or consultant on a monthly retainer, or a caterer who delivers lunch every Monday to the local school board. While this "active recurring income" offers welcome stability, it also tends to tie you down, and you still have limits on your earning capacity based on your own personal production capacity.
The second type of passive income is leveraged income, a kind of revenue that leverages the work of other people to create income for you. Some examples of leveraged income include:
>An e-book author selling her e-book through affiliates who promote the product
>A network marketer who builds a downline and receives commissions on the sales made by people in his downline
>A general contractor who makes a profit margin on the work done by sub-contractors
>Franchising your business model to other entrepreneurs (the ultimate leveraged income)
Again, there are many different models in many different businesses. The key is that you are making money off of other people's labor, rather than primarily your own.
