Reader Question: I’ve been following your plan, and I’d like to find a way to make a little more money on the side. Do you have any ideas for generating some passive income?
First, I want to make sure you’re not getting involved with some get-rich-quick scheme, like a nothing-down real estate seminar. “Passive income” is a term that’s sometimes attached to those sorts of things.
Passive income is pretty simple; it’s income off of investments. In other words, it’s money you set aside that makes you money. There’s not any other income that is real passive income.
If you wrote a book and got royalties from the sales, some people would call that passive income. I get royalties from the books I’ve written over the years, but the people who would call that “passive income” didn’t follow me around while I was working my tail off to write and sell those things. To me, it wasn’t passive income at all; it was a business. Technically, the government would call it passive income. But they don’t have anything to do with reality.
When it comes to passive income, I only invest in two things — real estate, for which I pay cash, and good growth stock mutual funds. Active income usually takes the form of a small business idea or your career. That’s income that you, yourself, are literally creating.
But that’s how I look at that stuff. Some people may have a different view on it, but I like to keep things simple.