What is passive income?
Passive income is income that is earned with little to no ongoing effort. It is called “passive” because the income is generated without the need for the recipient to be actively involved.
Examples of passive income include:
- Renting out a Property: If you own a rental property, you can earn passive income by renting it out to tenants.
- Dividend Income: If you own stocks that pay dividends, you can earn passive income through the dividends you receive.
- Interest Income: If you have money in a savings account or other interest-bearing account, you can earn passive income through the interest earned on your deposits.
- Royalties: If you own the rights to a patent, trademark, or other intellectual property, you can earn passive income through royalties.
- Online Courses: If you create an online course or e-book, you can earn passive income through sales of the course or book.
- Affiliate Marketing: If you have a website or blog, you can earn passive income through affiliate marketing, which involves promoting products or services and earning a commission for each sale made through your referral.
There are many other ways to generate passive income as well. It’s important to do your research and consider what options might work best for you.
What are the benefits of a passive income?
There are several benefits to generating passive income:
- Passive income can provide a source of income that is not tied to the number of hours you work. This means you can earn money even when you are not actively working.
- Passive income can help you to diversify your income streams. This can make your overall financial situation more stable and secure.
- Passive income can give you more financial freedom and flexibility. With passive income, you may be able to reduce your reliance on a traditional job and have more control over how and when you work.
- Passive income can provide an opportunity to earn money from assets that you already own. For example, if you own a rental property, you can generate passive income through rental payments.
- Passive income can be a way to generate additional income to help you reach your financial goals faster.
It’s important to keep in mind that while passive income can be a valuable source of income, it is not always easy to generate and may require a significant upfront investment of time or money. It’s a good idea to do your research and carefully consider the potential risks and rewards before starting a passive income venture.
How many passive income streams do you need?
There is no specific number of passive income streams that you “need.” The number of streams you should have will depend on your financial goals, your risk tolerance, and the amount of time and effort you are willing to put into creating and maintaining your passive income streams.
That being said, it is generally a good idea to diversify your income streams, including both active and passive sources. This can help to make your overall financial situation more stable and secure.
If you are just starting to build passive income streams, it’s a good idea to start small and gradually add additional streams over time. This will allow you to learn and gain experience as you go, and will give you the opportunity to test different passive income ideas to see what works best for you.
Useful Tips for Passive Income
DO NOT choose a passive way of earning before reading these tips.
1. Diversify your passive income flows
There are two types of passive income. We recommend choosing a mix of the two:
Passive income from your expertise
You can sell your expertise and generate passive income. Examples include writing an ebook, taking a course and starting a website. It takes more time to generate revenue this way, but you don’t have to have the money to get started.
Passive income from your capital
Use your money or your property to make more money. You can buy shares, rent a property or invest in a company and make money immediately. For some of these methods you need some money to get started. Not for others. We will cover them all in the list below.
2. Do not ignore your Passive Income Flows
Having a passive income stream doesn’t mean you can ignore it and keep making money forever.
You must monitor and manage your revenue sources ( or pay someone to do it for you ).
If you don’t, your revenue stream could dry up…
For example, if you have a popular website, you should be aware of your competition to avoid losing customers.
3. Beware of Scammers
No legitimate passive income stream can quickly make you rich.
But there are plenty of scammers trying to convince you that this is possible.
Remember, if it seems too good to be true, it probably is.
Generating a real passive income requires effort and time.
4. Always think long term
In general, passive income methods will not make much money in the short term. But over time, they can turn into big money makers.
Another way to give this tip: be patient.
If you keep an eye on the future ( 5 years, 10 years, and even 20 years from now ), you have a much better chance of creating an income stream that is sustainable ( and is growing ).
5. Do What You Can Do, Not What You Want To Do
If you can earn a passive income by following your passion, that’s great. But most of us can’t.
Take advantage of the resources and expertise you have. It will be much easier to make money that way.
For example, if you are an accountant, it could be your dream to write a novel and make money from the sale.
But you would be much more likely to succeed by writing an ebook on how to get a bigger tax refund.