The Reasons Why Passive Income Is So Important

5 Reasons Why Passive Income Is Important

“Don’t let making a living prevent you from making a life.” — John Wooden

Time is precious. It’s sacred. Just 24 hours in a day. That’s all we get. Not one person on this earth has more time than that. No matter their age, occupation, religion, color of their skin or where they live. No one. Time is the greatest equalizer because not a single person can have more of it. It can never be recreated or re-spent. It exists once, then it’s gone. And that’s precisely why passive income is so important — because time is more valuable than money.

Unlike money, which can be earned, saved, spent, invested, squandered and lost, we can’t tuck away minutes on a clock. We can’t expect dividends on seconds or hours in the bank, or invest the time that we didn’t use on something else. Considering that most of the free world needs to work for a living, consuming much of the time they do have, this precious commodity needs to be nurtured and savored.

Passive income is quite possibly one of the most important and central ways that the rich get richer. It’s how you detach your ability to earn from the time that you do have in a day. If you’ve ever heard the term, making money while you sleep, no truer words have been spoken. With passive income, you do make money while you sleep. You also make money while you’re awake. It’s automatic and simply keeps coming in.

However, creating a passive income stream is far from automatic. It’s no easy feat by any measure. It takes an enormous amount of effort and exertion of your time with very little return in the beginning. It involves an overall sense of frustration and an enormous learning curve. Still, it’s one of the most fruitful and worthwhile investments of your time that you could possibly engage in.

While passive income might not be the answer to all of your immediate problems, it is the pathway to success and most certainly the foundation for wealth and happiness. When you’re not stressed just to make enough money to pay the bills and you’re no longer living from paycheck-to-paycheck, there’s a mental clarity and an emotional catharsis that sets in. You become free from the shackles of a life-sucking 9-to-5 job and begin embracing a more fulfilled life.

When you have the time to choose to work or spend those precious moments with your children or go on some trip halfway around the world, you’re free. You’re free in the greatest sense of the word. Isn’t all the headache and the hassle worth that? Isn’t it time to break the chains that have restrained you to a life that’s been less fulfilled? I would think so. And I would imagine that if you truly are serious about getting rich in life, then you’ll embrace the passive-income machine.


What Is Passive Income?

Before I dive into the reasons why passive income is so important, let’s first describe what it actually is. Passive income is income that’s received automatically with little requirement for maintenance. In contrast, active income can only be earned by directly translating your time for money. Whether it’s a pay-per-hour job or a salaried one, the amount of money you make is directly correlated to your time.

With active income, when you don’t work, you can’t earn. If something were to happen to you and you were incapacitated for whatever reason through an injury, illness or some other calamity, you would lose your ability to earn. If, for example, you were an athlete and you injured yourself so badly that you were unable to continue your occupation, you would lose your ability to compete and earn money altogether.

If you work as a contractor or a builder, without mobility and the usage of all your limbs, how could you work? If something were to happen to you and you lost a leg or an arm, how could you continue to earn money? If you got sick and needed an organ transplant and were out of work for months, how long do you think your employer would keep you on before letting you go? If your car broke down and you didn’t have money to fix it, how could you go show homes as a realtor or meet with prospective clients in any other capacity? It would certainly become far more difficult.

Most of the world lives in accordance to an active-income credo. They earn only based on the time that they work. The wealthy, however, operate on another set of standards, which involve a detachment of their physical time for the money that they earn. They earn passive income from a number of sources such as real estate rentals, dividends, interest income, royalties, franchise fees, laundromats, website advertisements and so on.

Now, don’t get me wrong. Creating a passive income stream is a massive undertaking. It involves the investment of a tremendous amount of time. During that investment of time, you receive no income. You’re investing your time with the hopes of producing an income down the road, not today. With active income, the money you earn is directly correlated to the time you work. But passive income continues to pay you long after the work has been completed.

Clearly, there are a number of ways to make passive income. Whether you’re looking to make money online or simply earn passive income through more traditional means such as real estate rentals, there are a number of ways to produce these types of income streams. While difficult at first, what you’ll come to realize is not only the importance of having passive income in your life, but you’ll also become addicted to it, seeking out ways to produce additional streams of this powerful fiscal method.

So when it comes down to it, there are likely dozens of reasons why having passive income is important in your life. This doesn’t mean that you have to quit your active-income employment. Of course, if you can afford to do that and throw yourself at passive-income generation, then you’ll fare much better down the road. But many people simply can’t afford to do that. With debt and other financial obligations, going without income for a specific period is simply not feasible for most.

The Reasons Why Passive Income Is So Important


#1 — Passive income gives you the freedom of time

All things considered, time is our greatest asset. In fact, time is far more valuable than money. While money can be spent and earned, time can only be used up but just once. After that time has passed, it’s gone forever. You can never physically relive that moment again. This is why passive income is so important — because it gives you the freedom of time. When you’re less shackled by the necessity to earn just to meet your monthly financial obligations, you have the freedom of time.

This doesn’t mean you have total freedom from all of life’s obligations; it simply means that you have the flexibility that comes along with not having to struggle to make ends meet at the end of the month. As long as you can ensure that your passive income outpaces your monthly expenses, you’re free to spend your time as you choose. With each new passive income stream, your revenue eventually far surpasses your expenses and you ultimately attain true financial freedom.

When you have freedom of time because you’re not engaged in active-income work, you’re free to do as you please. You can choose to travel the world and become a digital nomad. You can choose to settle down and start a family. You can engage in work related to creating additional passive-income streams of revenue. The choice is yours. You have the freedom to choose because you have the freedom of time. That’s the power of passive income.

#2 — It reduces your stress, anxiety and fear of the future

There’s nothing worse than having the pressure that comes along with an inability to pay your bills. It causes anxiety, fear and an overall hopeless desperation for the future. The what-if scenarios begin to encircle your mind, like a hawk flying above its prey prior to swooping in for the kill. It does a number on you mentally, physically and spiritually. It emotionally beats you up and destroys your hopes and aspirations.

Anytime we live in dire fear of the future, it’s hard to be present. It’s hard to enjoy what we have in the here-and-now because we’re so tied up with those doomsday scenarios. We’re so worried about an impending fiscal collapse that it’s hard to extricate ourselves from the shackles of that train of thought. It consumes and becomes you. It’s hard to get away from that when it’s all you can think about.

Passive income helps to alleviate all of these worries. It helps to put fears to bed because you aren’t worried about losing your job or being the byproduct of corporate-downsizing. When you don’t have to worry so much about impending financial doom, not only do you feel better mentally and emotionally, but it translates into physical vitality. You have more energy and are more motivated to get out there and achieve more because passive income also helps to build that all-important financial momentum in life.


#3 — It allows you to pursue doing the things you love rather than what pays the bills

We all have things that we’re passionate about doing in life. But we always seem to put them off for later. Whether it’s art or music or travel, we can indulge our fantasies when passive income frees us from debt that tethers us to the never-ending cycle of payments and interest. It allows you to exit that proverbial rat race by elevating you above all the things that worry so-called “normal folks.”

It also frees you to produce an active income by following your heart. When your passive income outpaces your debts, why not get involved with a project that you care deeply about? Maybe you want to help out at a homeless shelter downtown that can’t pay you. Maybe you want you to teach your neighbor’s son piano lessons and they can’t pay you much. Whatever it is, you can do it because you’re not worried about the paycheck.

It doesn’t matter what you’re passionate about, you can do it. If you want to take a language class for a few weeks and study full time, you can. When you want to go camping with your kids for a full week, you can. You don’t need to worry about calling in sick or taking time off from work. You’re your own boss. It’s the dream of those out there that wake up every single day dreading another moment of work that totally and utterly bores them.


#4 — It gives you the ability to live and work from anywhere

I don’t know about you, but I have a deep-down passion for travel. If I were to categorize the things in this world that I love the most as a pastime, that would be amongst one of the top contenders. But the problem with travel, for most people, is that it’s temporary. It’s a momentary state of bliss that seems to come and go too fast. But this isn’t about just taking a week-or-two vacation from work; this is about really traveling the world with the ability to work (or not) from any place.

When you have passive income, you can pick up and hit the open road. You can head to a city like Chiang Mai, Bangkok, Berlin, or just about any other place on the planet, live and work. You can exist for peanuts on the dollar compared to most other major metropolises around the planet. But you don’t need to stay. You can continue to wander after just a few months. And why not when you have the financial ability to do so?

Still, it’s easy to not put passive income as a priority when you’re so actively concerned about the day-to-day. Rising above that is difficult. But you just need to set a goal, focus and move towards that goal with persistent action on a daily basis. There is light at the end of the tunnel. It will take you time, but you’ll eventually get there. It all just depends on how badly you want it and how important it is to you at the end of the day.


#5 — It provides a platform for financial stability and growth

When your income is automatic, and you don’t need to worry about meeting your expenses at the end of the month by exchanging your direct time for money, it allows you to think and explore new ways to further strengthen your financial stability, and to grow it. It gives you the time to research things like taxes, stocks and other investments. This helps to create fiscal clarity in your mind, fueling you towards your financial goals.

It’s easier to train your focus on your finances when you’re not pulled in so many other directions. While problems can and still will arise in your life, financially and otherwise, you’ll be better prepared to deal with them. Without having the obligation of rushing off to a job you dread every single day, you can train your mind’s eye on the things that will provide you with greater growth and prosperity over time.

No matter how you look at it, the importance of passive income is paramount. Many people discount it because they either don’t understand it or don’t think that having passive income that exceeds your expenses isn’t an attainable goal. Well, whatever the mind believes, the mind can achieve. That’s as true for passive income as it is for anything else in life. Believe it wholeheartedly with your spirit, and you can accomplish it. As long as you don’t give up.