Passive income simply refers to the money you get paid for work that you already finished, long after you finished it.
Take, for instance, royalties from songs, movies, or books which trickle in with every purchase or download.
Another great example is getting earnings from investments such as real estate and similar businesses without you having to be necessarily present doing any work.
In most instances learning how to generate passive income requires lots of work and time to get done but once finalized, they can earn you money in perpetuity.
Having a passive income is one of the ways you can guarantee yourself financial freedom and live your life as you see fit.
Master Passive Income
While everyone loves the idea of earning money as they sleep, it takes hard work to set up and master the creation of such a passive income system.
You must also be prepared to make the initial sacrifices that make your passive income source capable of earning the money you need it to.
To properly understand what you will be getting into you have to review if your source truly has a passive income generation potential.
So what does this really mean?
This largely involves structuring the income source so it requires less and lesser effort to maintain with time and eventually needing zero to very little effort to produce income.
This then means by definition:
Any side hustle or job you cannot easily leave unattended for it to continue to generate income is definitely not a passive income source.
Building a passive income source is no magic trick and it rarely happens overnight, if it ever does.
However, there are numerous options available to different types of individuals from talented artists to entrepreneurs with amazing ideas, and even those with extra cash to invest.
The following are just a few of some of the things you may have to do towards generating passive income:
- Start growing your nest egg. Money is always valuable and when you have a lot lying around there are numerous ways you can use it to generate more. Some of the simplest ways include opening a high-interest savings account
- Do a Skills assessment. This involves taking a personal inventory and assessing your marketable skills. Remember to also evaluate your passions and the things that people say you are great at. The objective of this exercise is to use that information to know how you can generate income. You can start by researching how other people have used skills similar to yours to make money
- Determine the money, effort, and time you can use for the creation of the income source. It takes a lot of time sometimes to research new business ideas and learn new skills. At other times developing something that will generate money can drain you financially in addition to time and energy. You need to decide whether you will be committed enough to see your work through to the time when you don’t have to be around in order for the money to flow in. You can also hire someone else to do the work or choose to invest in readily-setup channels if you cannot afford to dedicate your time to the venture
- Generate ideas and pick one. You should put your ideas down on paper and set out a business plan. Exhaust your options and pick the one that you think is most feasible or has the biggest reward potential
Digital Income System
Most digital passive income ideas require a huge time investment and sometimes specialized skills.
A majority of them also many times need a website to execute.
Luckily, there are numerous cheap hosting sites available with even free domain names. The following are some of the things you can do to earn passive income over the internet;
- Selling an online eBook. Self-publishing is one of the mainstream ideas today on sites like Amazon. You need to be a great writer first to venture into this. After writing a book you can edit it yourself or hire a freelancer to do it then upload it to a direct publishing program. You should, however, market the book to gain great traction
- Selling stock pictures. You can turn your passion for photography into a passive income source by uploading your pictures on stock photos sites. From here companies, magazines, blogs, and websites can purchase and use them earning you a commission for every sale
- Creating an online course. You can create a course teaching others something you are great at and post it on sites like Udemy. This is a great idea if you already are a tutor relying on traditional means
- Affiliate marketing. This is great if you have a blog and agree to promote people’s or specific companies’ products and get a commission every time a referral from your site makes a purchase
- Creating an app. You can even hire a programmer to create the app you need if you are not one
- Licensing music. The market for music is ever increasing and you can license your productions and earn a royalty when people use them
- Selling digital files. This is ideal if you are artistic and can create artwork for use in projects like house décor. Etsy is one of the sites you can post your files for download after someone buys
- Designing t-shirts. You can log into sites such as CafePress and make custom designs for t-shirts. Amazon’s new service, Amazon Merch also supports such and only needs you to post your idea while they handle the rest
Simple Passive Cash Flow
The easiest way to earn passive income without upfront capital is to invest in your time.
You can choose to invest your time in learning new skills or by using the skills that you already have to generate a passive income applying any of the ideas discussed above.
While it might require lots of effort or even a steep learning curve, it will be worth the while when you can lay back and watch the money flow in.
Some programs like Sofi can also help you invest with as little money as you grow on your earning and learning curve.
Instant Income System
There are numerous income generation methods marketed online nowadays. Some of the most common include network and multi-level marketing.
These work through a system of referrals and you make money by getting other people to join the specified program. It is essential to research such a program and ensure its credibility as some require initial membership fees and could con you.
Many of these are Ponzi schemes and you must beware and do due diligence before parting with your cash!
However, there are numerous stories of people that have used some of the programs to generate passive income.
Conclusion –How To Generate Passive Income
It feels great having learnt how to generate passive income and so be able to earn money while still sleeping, mowing your lawn, or relaxing by the pool.
While many people dream of achieving that lifestyle, yet it proves ever so elusive!
Learning how to generate passive income is one of the routes you can follow to becoming financially free.
However, as we have found out here, you have to dedicate your time, effort, or money, and sometimes a combination of two or all of them to succeed.
The greatest benefit of understanding the techniques of how to generate passive income is that it only needs a lot of time, money, or effort during the initial stages.
Once your idea starts earning it should require less and less of you as time passes. You, however, need to watch out for deceitful ideas that can con you out of your hard-earned cash.
We welcome your feedback. What other passive income generation ideas come to your mind and how have you explored them?
Use the comment box below to share your feedback.
Related post: Online business for dummies
Frequently Asked Questions (FAQs)
1. How does passive income differ from active income?
Passive income often refers to money generated from an already expended effort or by doing zero or little work; while active income means money generated by exchanging your time in performing various services or selling merchandise
2. Can passive income make you rich?
Yes. Several passive income streams can accumulate to generate you lots of money e.g. real estate
3. What is the tax rate for passive income?
They are taxed at 0-20% subject to your annual taxable income
4. What is the best strategy to build multiple passive income streams?
Focus on one income stream at a time and only move onto the next when you are no longer needed by the initial one for it to generate money