Why you need passive income

Just imagine. If you can no longer go to work the next morning, how long will you survive without your active income? What is the actual number of years you will survive when you stop working? That’s the measure of your wealth!


Frankly, I don’t know a lot of people who can afford to quit their jobs right now to retire, find another job, or simply enjoy their life to the fullest. No, not just yet! If asked, “How many sources of passive income do you have?” Most of us answer, “None.”

To emphasize the need for passive income, let me first describe what active income is. Active income is the income we get from our current jobs. It is the reason why we go to work day in and day out. If we work in an office, it’s where we get our money to pay for our food, shelter, clothing, education, bills, etc. The doctor gets his source of income from his patients, actors from their movies, OFWs from their work contracts, and boxers from their matches. But realize that even if you are the greatest doctor there is, will you still get your income when you no longer have patients? Even if you are the most famous actor in the world, will you still get your income if you are no longer offered to do movies? If you are an OFW and you no longer have contracts to work abroad, will you still be able to receive salary? Even if you are as strong and as fast as Manny Pacquiao in boxing, don’t you need a match to get paid for your profession?

Realize that no matter how good you are with what you are doing, if you have no clients, it is useless. You may be the best but without activity, you will get no active income. Thus, income is good only while your activity lasts, and only if you are able to create sources of passive income.
– the income that keeps coming even if you have already stopped working.

What happens on the day when you can no longer work? Thus, while still young and strong, it is necessary to create sources of passive income. We have to learn how to invest so that we can accumulate sources of passive income. The great thing about passive income is that it requires little maintenance and management as well as makes a fortune from a small amount.

There are three main sources of passive income:

1. Interest income – from investments (like mutual funds)
2. Royalty income – e.g. Composers get their income from the songs that are used in movies, sang by bands or singers. If you get a franchise of McDonald’s, you pay 5% of your annual income to the McDonald’s main office because you are using its name, system and technology.
3. Rental income- from condo units, apartments, or expensive equipment.

On our next blog, we will teach you another way how to earn passive income. Don’t miss it!