One of the common characteristics of self-made millionaires is that they generate income from multiple sources. In fact, 84% of the self-made millionaires in my Rich Habits Study had three streams of income.
But, not all income is created equal.
One or more of those streams of income are what’s called passive income. Passive income is income that you do not have to work for to generate income. It is automatic income.
An example is an annuity. An annuity is an investment that you make at some point which grows over time and eventually generates a stream of income.
Other examples include: rental income, dividends, interest, capital gains, book royalties, ad dollars from a blog or website, income from a phone app, licensing fees, franchise fees, revenue from the sale of a business, silent partner income, etc.
Think of passive income as any investment that generates income many years down the road.
It is an income stream that is commonplace among self-made millionaires.
The investments that generate passive income are working for you all the time.
If you’re not making money when you sleep, on the weekends or on vacations, it will be very difficult for you to become wealthy or even financially independent.
Tom Corley is an accountant, financial planner and author of “Rich Kids: How to Raise Our Children to Be Happy and Successful in Life”, Effort-Less Wealth, Change Your Habits Change Your Life, Rich Habits Poor Habits and “Rich Habits: The Daily Success Habits of Wealthy Individuals.”