For the average person income primarily comes from an active source, such as working or other active forms of investment or trade. Given the limitations of time, this will mean that sources of income however large, will always be limited. One method that can be used to improve income streams is to consider passive sources of income.
What is Passive Income?
Passive income is a revenue stream for which a person derives an income, without having a continuing direct input into the process. Passive income can largely be broken down into two categories, namely residual income and leveraged income. Residual income is generated as a result of previous efforts, which continue to generate a revenue stream without any further participation. For example, a photographer who uploads images to a stock photography website will then generate a residual income from all future sales, without any further participation.
Leveraged income on the other hand, is a passive income which is generated by the use of another’s labour in order to bring in a revenue stream. For example, where the same photographer uses an agent to actively market previous works, then this is a leveraged source of income.
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