Passive income is money made that you do very little if anything to make. It may be time consuming at first to create the passive income, but once you start getting a steady stream of passive income, you will make money while you sleep or when you are on vacation.

Whether you own your own home based business or work from home for another company, learning how to develop a passive income will enable you to increase your annual earnings and worry less about how your bills will be paid.

There are a couple of different types of passive income. You will have residual income, leveraged income, and active leveraged income. We will discuss each of these in this article.

1. Residual Income

Residual income is money earned when you do something one time, but you are paid over and over again. For example, affiliate marketers earn residual income when someone signs up and pays a monthly fee for a service or program they use every month. For as long as the customer pays the monthly charge, the affiliate earns their residual income. Marketers like this income because they get paid over and over for a presentation or ad that they did one time.

Some examples of residual income would be selling memberships to special report of the month and e-book of the month clubs. When people sign up for these, they order or receive something every month and you receive money each time.

2. Leveraged Income

Leveraged income is where others do the work and you are paid for what they do. The best example for this is an affiliate program. You do all the work to set up the affiliate program and your affiliates take care of all the marketing and advertising. When income comes in, your affiliates are the ones that generated it, but you get paid.

An example of a way to generate leveraged income would be creating your own e-books that your affiliates sell for you. If you are a service provider, another way to generate this type of income is to outsource your work load. You hire someone else to do your work and you pay them a percentage and you take the rest.

3. Active Leveraged Income

This form of passive income is most used by service providers such as business coaches and those who host webinars, online parties, and conferences. While you might have affiliates who promote your services, you are required to be directly involved in helping the clients with your expertise.

Active leveraged income is different from the other two forms of passive income because more of your time is required for helping your clients. But this is an excellent way to get your name known and to have affiliates do some of your marketing for you.

Passive income is a wonderful way to make money and add extra income to your pockets. Each of the categories above offer several different examples of how to earn money. Deciding which plan to choose may be more difficult than actually making the money.

posted by Chris Simpson