What is passive income and why is it important to have it? Part I

Those of us who develop careers such as accounting and administration must learn the accounting structure of financial information. This information is usually summarized in Financial Statements that will contain different information.

There is a Financial Statement called "Statement of Financial Position" that contains accounts or items that contemplate the accounting equation of every company, that is, the amount of Assets, Liabilities and Capital or Equity of the company.

On the other hand, there is another Financial Statement called "Income Statement", which will compile all the information referring to the company's Income, Costs and Expenses, obtaining a result at the end of the economic exercise that may be a "Profit" or a " Lost".

Source

You see, the company's liabilities are in one financial statement and the income is in another. Even its meaning is totally different. The "Liabilities" are the debts and obligations of the company and the "Income" are the money received from the sale of a product or the provision of a service.

So how is this passive income? what does it mean? and why is it important to have them?

If you have been struck by knowing the meaning of the title that today baptizes this publication, I invite you to continue reading until you get to the farewell.

Debt is Debt and Income is Income

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We have already said it before, the liabilities of a company correspond to the debts or commitments that it has acquired with others, which may well be with partners, with its suppliers, with the bank or with third parties.

The income for the contraio represents money that enters the company, money that is obtained according to the nature of the company, if this is a service company then we will say that the income generated will be the product of this service provided and if it is a company commercial or manufacturing because we will be talking about sales income.

Perhaps at this point you are wondering, then how is it to unite the expression income-liabilities in the same sentence?

Well, here I will explain what it is about.

Passive Income

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I would say that it is not about semantics, but about the context where it is applied, because if we are guided by, for example, the purely accounting aspect, we will see a contradiction in the sentence.

In the phrase that this publication titles today we "Income-Passive", we must understand the passive term of passivity, which gives another meaning to the phrase.

That said, "Passive Income" is about generating money without having to make an effort to achieve it.

Yes, yes, surely you will tell me that everything in life requires an effort, but this time with a little knowledge, investment and trust you can make money work by itself in your favor.

The rich don't work for money

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This phrase is not mine, in fact you can find it complete in the book "Rich Dad, Poor Dad" by Robert T. Kiyosaki, right on page 36, you can read the expression:

"The poor and middle classes work for money", "The rich have money working for them"

Indeed, this expression summarizes the meaning of Income-liabilities. And just like that I want you to begin to understand it.

Passive income is a strategy or tool used by those who accumulate more money and I would even say that they do not even accumulate it but continue to invest and put it to work to generate more and more.

Changing beliefs, changing paradigms

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I know that each of us was trained to comply with a sequence of steps imposed by society: study, get good grades, graduate, have a steady and secure job, have a professional career in one place and wait for your well-deserved retirements after of more than 20 years of work (a challenge that many of us have gone through victoriously), but even so this has not been transformed into quality of life, especially when governments or the economic system seems to play against us.

Hence the importance of opening ourselves to the possibility of leaving our conventional beliefs and risking investing producing "Passive-Income".

It will not be easy, especially when the little money we have is at stake, but after the decision to test has been made, I think the first and most important step will have been taken.

n fact, right now you have a way of trying it, a resource that you may not have begun to exploit, I assure you that with a little knowledge you will get the confidence you need to gain momentum.

In Part II of this publication I will tell you about that invaluable resource that you have and how to start using it to generate passive income.

For now I say goodbye but not before thanking you for having read to the end.