Getting aggressive on passive income

Dear Dave,

I've been following your plan, and I'd like to find a way to make a little more money on the side. Do you have any ideas for generating some passive income?

Taiwan

Dear Taiwan,

First, I want to make sure you're not getting involved with some get-rich-quick scheme, like a nothing-down real estate seminar. "Passive income" is a term that's sometimes attached to those sorts of things.

Passive income is pretty simple; it's income off of investments. In other words, it's money you set aside that makes you money. There's not any other income that is real passive income.

If you wrote a book and got royalties from the sales, some people would call that passive income. I get royalties from the books I've written over the years, but the people who would call that "passive income" didn't follow me around while I was working my tail off to write and sell those things. To me, it wasn't passive income at all; it was a business. Technically, the government would call it passive income. But they don't have anything to do with reality.

When it comes to passive income, I only invest in two things — real estate, for which I pay cash, and good growth stock mutual funds. Active income usually takes the form of a small business idea or your career. That's income that you, yourself, are literally creating.

But that's how I look at that stuff. Some people may have a different view on it, but I like to keep things simple.

-Dave

Dave Ramsey is America's trusted voice on money and business. He has authored five New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover, EntreLeadership and Smart Money Smart Kids. The Dave Ramsey Show is heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.