Property owners collecting вЂњpassiveвЂќ rents must worry about repairs, maintenance, regulations, and other competing properties that could take away tenants or turn their income-producing asset into a liability. Authors, playwrights, and actors who earn royalties must ensure that their art is still relevant and that they continue to produce new works in order to keep their prior works in the public eye. Investors who earn вЂњpassiveвЂќ money from interest and dividends must stay on top of their investments, lest they suffer losses. In fact, thereвЂ™s nothing passive about any вЂњpassiveвЂќ business. There was nothing passive about this business. They were grateful for the current cash flow but worried incessantly about where the cash was going to come from in the future. Both the owners and the managers of this company-even as the checks were вЂњrollingвЂќ in-were running to answer questions, dealing with complaints, negotiating with politicians, and doing their best to appease the community. Technologies changed and required continuous investments. Competing companies offered better deals. For starters, no business runs itselfД®ven my cable company client had its share of challenges. There is no such thing as вЂњpassiveвЂќ income. If you think youвЂ™re going to build a business where you can sit back and be passive, then youвЂ™re surely fooling yourself. Passive income isnвЂ™t what you think it is. ItвЂ™s the ultimate goal of everyone who runs a business. Like an author, investment manager or property owner, they could sit back, put up their feet and just let the cash roll in. It is the dream-and I envied the owners of that company. What a dream! The perfect business, right? Lots of money coming in without so much as lifting a finger. Their dad had spent millions in cash and sweat laying down cables and infrastructure in many local areas and now his children were reaping the benefits: monthly checks for cable service that were dutifully mailed in by the companyвЂ™s tens of thousands of customers, which required no more than a small administrative staff to handle. The company has since been sold to Comcast, but at the time its owners were three siblings who seemed to do very little to run the business.

When I was just starting out in accounting back in the mid-1980s, one of my largest clients was a cable company located near Philadelphia. The types of passive income that people typically associate with the term-like lottery winnings, capital gains, stocks, interest, retirement pay, etc.-actually donвЂ™t fit the вЂtechnicalвЂ™ definition outlined by the IRS and its вЂPassive Activities.вЂ™ Before you jump the gun on investing in an avenue that will lead to a potential passive income revenue stream, letвЂ™s cover the basics. But really, what is it? Who wouldnвЂ™t want passive income? The ability to be your own boss, work from home, choose your own hours-itвЂ™s all very enticing. Many people agree that passive income can describe real estate pursuits, peer-to-peer (P2P) lending and sometimes dividend stocks.

Passive income is a term that is loosely thrown around to define a revenue stream that takes little to no effort to manage. LetвЂ™s debunk the passive income myth outright: truly passive income doesnвЂ™t exist.

Passive income meaning