How to earn passive income and improve your finances

One of the easiest ways to gain financial independence is to reconfigure your life so that your work doesn't get a substantial share of your income. To achieve this, you will need to earn passive income.

One of the easiest ways to gain financial independence is to reconfigure your life so that your work doesn't get a substantial share of your income. To achieve this, you will need to earn passive income.

Passive income is money received that requires little or no effort to maintain income stream once the initial work has been done. Some common examples of passive income include:

Rental of real estate investments.
Patent royalties for an invention.
Trademark license charges for characters or brands you've created.
Royalties from books, songs, publications or other original works.
Business benefits where you have little or no daily liability
Earnings of online ads on a blog or on a website you own.
Dividends of shares, REIT, mutual equity and other capital securities.
Interest on owning bonds, certificates of deposit, money markets and other cash and cash equivalents.

Why passive income is so attractive
Passive income is attractive because it frees up your time so you can focus on the things you really enjoy.

If workers in most professions want to earn the same amount of money and enjoy the same lifestyle year after year, they must continue to work the same number of hours with the same or more rate of payment to keep up with inflation.

Once you decide to retire or can't work anymore, your income will stop unless you have some kind of passive income. In the past, this has been easily achieved by participating in company-sponsored pension plans, but these are much less common today.

Ways to earn passive income
Consider someone who gets substantial bank loans to build an apartment building or buy rental homes. While this can convert a very small amount of capital into a large cash flow stream, it also has risks.

Another example of passive income that requires capital to begin with is someone who has a stake in ownership of an operating business, such as a factory or furniture store, and allows the business to issue debt to finance the expansion.

The first store managers at Wal-Mart who were allowed to invest before the company went public were in this position.

The second category of passive income is based on sources that do not require capital to begin, maintain, and grow. These are much better options for those who want to start on their own and build a fortune out of nothing.

They include assets that you can create, such as a book, song, patent, trademark, online site, or recurring commissions. The Internet domain has given way to companies that get almost infinite returns on capital, such as dropship e-commerce retailers that have little or no money frozen in operations but still make a profit.

These publishers can generate web traffic by early production of content, and then allow search engines to do most of the work of attracting people to the site.