We’ve all heard about passive income, whether from a financially well-off friend or from the buzz of the internet, it has spread like butter over a hot saucepan – and for good reason.
Also referred to as residual income, this is certainly the most effective way for anyone to get out of the nine-to-five cycle and build their financial independence and wealth.
Earn money while you sleep
It is also perhaps the only way for us to build up a significant amount of wealth, simply because when you trade your time for money you automatically set time-specific limitations. Since you can only work for so many hours a month you therefore are only able to earn a set amount of money in that month. When you “earn” money regardless of whether you are actively working or not – you would have no such time limitations on your earning potential. So, if you’re looking to earn money while you sleep, just like those who are driving dashing sports cars and living in some of the most expensive real estate on planet earth, then it’s passive income you’re after.
Apart from its ability to create massive wealth, passive income can also set you free from location dependence because you don’t have to go into the office every day to earn an income and you don’t even have to work every day. You're not held back by specific hours, by a raging boss or by demanding employees. You essentially become financially independent and free because whether you’re sitting at home in your pajamas or jetting off to Tokyo – your income isn’t being affected. Perhaps one of the most notorious materials available on the subject is the book “the 4-hour workweek” by Timothy Ferriss which gives a fantastically detailed explanation on how to create and develop a fully automated business that will bring in the passive income you deserve. If you haven’t read this book yet, I suggest you pick it up as soon as possible!
Think – Multiple passive income streams
Despite its immense popularity, passive income still harbors a lot of confusion for new comers, particularly regarding how someone can go from being a regular nine-to-fiver to a successful passive income earner and naturally, we’re going to tell you how. Passive income is basically any form of income that is earned while no active work is taking place. A monthly paycheck earned by going to work every day is active income and even monies earned from contract and freelance work, which is usually more flexible, will fall under this same category because it requires your time and active participation to continue bringing you the same amount of income. As you can imagine, you cannot just quit your day job and start earning the equivalent in passive income; you have to begin working on the passive income stream while maintaining employment. This is because despite its potential to help you earn big without putting in all your time; setting up any form of passive income stream requires a huge amount of work, dedication and investment. The other thing is that more often than not, a single passive income stream will certainly not be sufficient to replace your monthly paycheck. You would really have to build on one income stream or develop multiple income streams in order to earn the equivalent of what you’re earning at your day job.
No such thing as 100% passive income
Just so we’re on the same page right from the start; there is absolutely no such thing as 100% passive or residual income – even renting out property requires that you manage tenants, repairs, leases and a hoard of other things. Even if you outsource the bulk of the work to a rental management company, you will still have to at times show up to make decisions and check on how things are going. With passive income, the bulk of the work or the investment is done in the beginning, after which very little work is required to maintain the income stream. Passive income is earned on a continuous basis without active involvement on your part, which means that you would have to put into place some form of automation that allows money to come through to you 24 hours a day and what better way to do this than using the internet? Since this article is part of a series, we’ll focus on online businesses and, more specifically, affiliate marketing as a way to earn passive income.
Intellectual property is one form of residual or passive income that is really hard to get going but will remain strong for years to come – and will require less maintenance than all other options. One of the best forms of residual income is an e-book or an e-course. Once you’ve actually created the content and have put it all together – it goes up for sale and can remain that way - forever. Almost everyone knows enough about at least one subject or area or has a story worth telling that can be turned into one of the best passive income streams you’ll ever have. Sure, it may take you a year, maybe even longer to write a high-quality book but then again it will really be worth it considering that this book will bring in money over and over again and will require basically no work, or very little work on your part. Once you put your book up for sale, you really don’t have anything to do except wait for the sales to come in. Sure, you may have to put effort into advertising and promoting, but the book will always exist and anyone that stumbles across it and wants to read it, will buy it. Whether you create a guide book, a how-to book, a language course or even a novel, you’ll be setting up one of the strongest passive income streams possible. Since we already know that the internet is one of the biggest income automation tools known to man, let’s continue by looking at ways to earn passive income online.
There are many ways that you can earn passive income online and these options also hold an endless number of variations. One of the best ways to earn a passive income from the above mentioned platforms is through affiliate marketing. In order to be able to make use of the affiliate marketing strategy for passive income, you need a platform from which to sell the product or promote the services of another company. This platform can be a website, blog or even through one of the many social media sites. The platform that you create has to be strong enough to attract people and keep them interested and the product or service you recommend has to suit or meet a need that is present within the market your platform is targeting. So if you have a blog about fashion, you could sell clothes and accessories from a particular brand you like however, selling car batteries to a predominantly middle-aged female target group will not work so consider your choices carefully. Since we have to be able to provide people with something valuable, it’s always quality that will outrank quantity. I would rather have you write up one single post a day that is unique, of exceptional quality and highly valuable to your audience than have you post a new article on a daily basis that has little value to your audience. Posts that are short but contain a lot of good information will outdo longer posts that repeat the same information many times over.
Regardless of whether you’re going to be providing people information about the latest gadgets and inventions or about the best ways to escape the modern rat race, your content has to be of a very high quality in order to keep generating a good influx of visitors. Maintaining a steady and continuing stream of visitors is crucial to the success of any website, blog or social media channel because they will essentially be earning you money. In order to truly understand how passive income can make us rich, let’s take a look at someone who managed to do it right - Pat Flynn. He has slowly but surely climbed the ranks and established himself as a passive income expert. He started his passive income journey almost by accident when he created a blog to help him study for a challenging Leadership in Energy and Environmental Design exam. He passed, but later found out that he would soon be out of job even with this new certification under his belt. Pat then revisited the blog he had created and was surprised to find that it had really taken off with other people looking to take the same exam directing questions he’s way, he had basically become an expert on the matter. He decided to monetize the blog and 12 websites later he is now one of the most well known passive income experts and a successful online earner. These websites that he’s created are mini-businesses that attract visitors who then via one medium or another earn Pat some nice doe. Pat himself uses a mixture of advertisements, Google Ad-sense and affiliate marketing strategies but the key, I think, is that he does it in a very elegant way and doesn’t try to hide it.
Super-charge your passive income with Affiliate marketing
You’ve probably heard of affiliate marketing and may even be a little skeptical about the whole thing and I don’t blame you. Many people that have no value to offer online abuse affiliate marketing and give it a bad name but, used correctly, affiliate marketing has the potential to super-charge your passive income earnings. Say for example that you created a website that gives people information about how to become a pilot. You have a range of articles and videos and even a free e-book that lists all the top flight schools in the country, what you can expect from your training and all the bells and whistles. One of the flight schools may offer you a commission for every student you manage to refer to their training institution, so every time that a student fills out an enquiry form from your website with the school in question, you then earn money. Even six months after you’ve set up the whole thing, you could still be earning money from this affiliate marketing scheme. You simply need to get your readers to purchase a product or service through the links on your platforms and cha-ching, you’ll have money pilling up in your account. In order to use affiliate marketing right, you need to ensure that your audience doesn’t feel pressured or over-bombarded with sales pitches for the various products. So let’s say you started a website about self improvement and you wanted to tell people about how speed-reading can make your life so much better. You then write an article about how you improved your own reading speed 10-fold and mention the course that helped you do this. You can then provide your reader with link to where they can purchase this course – and tell them you recommend it. If your website has a decent flow of traffic, this article will be read by people from the first day but, will continue to be read for months and even years down the line – and every time someone purchases this product you receive a commission. The key to getting affiliate marketing right is to be honest with your audience about it and Pat Flynn does this exceptionally well. Apart from actually mentioning that if you purchase the product using this link, he’ll receive a commission, he also gives people information on how they too can use affiliate marketing to earn additional income, and people love this honesty and actually want to buy the products and services he recommends because they want to support him. The key is not to add to many affiliate links because if you want to maintain trust with your audience you can’t make it seem obvious that the purpose of your website or blog is to sell as much stuff s possible through the affiliate links – the fewer affiliate links you have, the more likely you’ll sell through them. In addition you simply have to say “no thanks” to products you haven’t used or are not of a good quality and those that simply do not, for whatever reason, sell on your website or blog. As mentioned, affiliate marketing can work as well on a blog as on a private website – you just have to know how to do it right. Placing Google Ad-sense in between your blog posts is an easy way to earn money but you can also go a little further and place advertisements down the side of your website. Both options will earn you money and you simply have to give different combinations a try to find out what works best for you. You could use Google Adsense in conjunction with a couple strategically well-placed affiliate links and be well on your way to a decent passive income. The reason that affiliate marketing is one of the purest forms of passive income that there is, is because as people click the affiliate links and purchase the various products you are doing absolutely nothing.
Another fantastic opportunity is that of app-creation. If you're not a programmer you’d certainly have to outsource the work to a programming company but if you create an app that is really useful for people than you could certainly create a passive income stream that will last for years to come. Creating your own application is a bit of a gamble since you won’t know if the application is going to be successful until after its been approved. Creating an application takes time anything from a week for the simplest of application to six months and more. Why would anyone develop an app on your behalf and then not keep the profits for themselves? Well there is simply no clear cut answer to this question but I assume it’s the same reason someone would help you get your business of the ground and turning a profit but wouldn’t steal the business for themselves – because they make enough money doing what they’re doing and they’re playing a different ball game. The point is that you need a good idea and some investment into promoting the app. If you have an existing website or blog, you could easily market the app without having to spend any money. Sure it takes an upfront time and money investment but then again so does every other form of passive income.
Many of these strategies are most effective when used together. Having a website or blog will be able to bring in money in pay-per-click as well as affiliate link income while also being a great way to market an e-book or I-Phone application. Using the income you generate online to make investments into stocks or bonds is a great way to ensure your money really works for you and if you prefer investments that are less risky a great option is investing in some rental properties. In the next article which will come as part of this series on passive income we’ll take a deeper look into using property and other big-value investments to generate a strong passive income.
The people who are really successful in generating passive income streams will all tell you that putting all your eggs into one basket is not the way to go. You will always find that these people have very diverse investment portfolios and at least a handful of different online businesses. Understanding what it is that these people did to get to where they are today is perhaps the best way ensuring that you can get in on the action in as little time as possible. Learn from their mistakes, triumphs and varied approaches but, always remember that everyone is different and what may work for someone else, will not necessarily work for you.