Is passive income a myth?
We keep hearing and seeing advertisements for this thing called “passive income.” Sounds good, right? But there is a big misunderstanding about passive income, what it is and how to get it.
The first thing you need to do is learn to distinguish between passive income and leveraged income.
Passive income is when you do nothing and the money keeps coming in. The only real examples I can think of would be things like real estate and the stock market. Even with those, you have to make some kind of initial investment to take advantage of properties and stocks so the money has to come from somewhere. Unless you’re a trust fund baby, you’re going to have to earn it. Once the investment is made, the income will be passive. It is not without risk, but it will not require daily management. Most of us would like to receive this type of income.
What is leveraged income? Leveraged income, in my opinion, is when you can continuously generate income from work done previously.
Examples can include things like writing a book. If the book sells well, you write it once and the sales go up. You get royalties. Same for writing a hit song. You write the song once. If the right people pick it up, the artist records it, and the song becomes a hit, you’ll be making money for a long time.
Another example of leveraged income is what we do in network marketing.
We work to do two things:
1) Get clients
2) Create a team of customer collectors.
The key is that we DO the work. Then, as customers order, we keep getting paid. This is where leverage comes in. The more customers we have, the more we can earn. Teamwork creates another form of leveraged income. As our team gathers customers and those customers order, we continue to receive commissions for the life of those orders.
This income is not passive. We need to actively collect customers and build a team to take advantage of this revenue. This income is put to good use because we can get paid over and over again for the work we did before. This income is leveraged because we can get paid for the work our team members do as they build your business.
I have been involved in leveraged income for over 20 years. Initially, my income was based on the financial services I was selling for a company in Houston. You would work to close the deal and then receive commissions for as long as that client was active with the company. In some cases, I received ongoing monthly commissions for years after the initial deal closed.
These days, I apply that same concept to the world of network marketing. I provide services that network marketers use to advertise, build their lists, follow up with prospects, and close more sales.
I show travelers how to save money on hotels, rental cars, resorts, etc… and get paid every time they pay less.
In each of these cases, I’m actually doing the work to get clients, so I don’t consider this to be passive income. But the fact that you can leverage the capabilities of the internet and team efforts to get paid on an ongoing basis is why I refer to this as leveraged income.