The idea of passive income is utterly misleading for a newbie. Most people think of passive income as something reserved for the rich, like living off the interest from a huge deposit you inherited from an eccentric uncle. The truth is that passive income can be generated by anyone who has some form of initial capital. Capital does not only mean money, although it is a good starting point, yet for some of the most successful passive income gatherers, capital is more a combination of time and skills put to good use.
Myths about passive income
The biggest myth about passive income is that it is quick, easy money, which lasts forever. Let’s take that myth apart step by step and get some ideas of generating revenue along the way.
To generate passive income you need to put in some amount of initial work, either by writing a book, designing an app, building a website or looking for the best place or tools to buy and then rent. This is hard work in itself, as you need to think carefully, create quality content, scout the market, identify needs and niches, create systems and attract positive publicity. By no means is this going to be easy. Some people find this step so exhausting and overwhelming, that they give up the whole idea of generating more income and return to their day jobs without even looking back.
As described before, good things take time. Even if you are a fan of Tim Ferris’s “4 hour work week”, this only comes after doing the hard work, putting systems in place and calibrating them to run smoothly. Most passive income ideas require huge amounts of time in the product design phase. Even for a 100 pages eBook or a 5 hours course, there are a few months of work behind it. If you choose a way to produce money that requires continuous updating, like having a dedicated YouTube Channel or a blog, than the time necessary to produce the content needs to be scheduled in your weekly agenda, it will be almost like a second job. Building a large fan base and having enough followers on the marketing funnel in order to convert some into paying customers can take anything from a few months up to a few years, so don’t just plan how you will spend your potential revenue just yet.
It’s long lasting
Trends change, people get interested by new things, technologies are updated and your carefully planned and crafted passive income generator could soon be as interesting as a steam engine in a sports car. The only way to continue cashing in from passive sources is to schedule some time to think about new opportunities, to design new items that people find valuable, amusing or interesting and to create a program of retiring your own items before competition or time does that for you.
Ways to generate passive income
A quick search on this topic reveals hundreds of ideas from people creating from $ 1K to $ 50-75K per year, depending on their initial financial investment, the amount of time they dedicate and the existing competitors. We are going to list a few, grouped by the skills required by each one. Most of these ideas require no initial money, just a lot of time and some skills.
One of the most cited ideas to generate passive income is to create a blog and attract visitors or to write and sell an eBook. The first idea is monetized by affiliate marketing and the downside is that you need to generate a lot of content regularly to keep a steady flow of people, while the second idea takes more time initially, but ensures you get revenue without much trouble afterwards, provided you have chosen an interesting topic and people want to buy it. However, both require a lot of publicity and finding your niche. The most labor intensive idea in this category is to write for various publications and collect royalties, but you might be better off just freelancing.
One of the most popular passive income streams these days is to write and publish an online course. There are platforms like Udemy, which provide you with all the tools to produce quality material and even take care of the marketing, for a commission. You can teach people anything from Forex trading to knitting, as long as you are professional. To make yourself known, at first create a simple, light version of the course you have in mind and offer it for free to give a sample of what you can provide and attract potential clients.
You can also be an educator if you run a YouTube Channel teaching people about various topics, from cooking to a foreign language or make-up. This is more labor-intensive, as in the case of blogs, you need to create new content regularly and promote it to attract new followers. Monetization is done via affiliate marketing, sponsorships or donations.
Apps area great way to generate small amounts of passive income and can get you rich through the volume of sales. If your app is interesting or useful enough, you could become a millionaire in a few weeks charging around $1 per download. Of course this is the kind of idea best suited to programmers, but if you have a revolutionary idea and no coding skills, you could just outsource the actual work and cash on the benefits. Another thing you could do is to improve an existing app, but usually copycat ideas have limited impact. There are even apps paying you.
Designers & Photographers
People love personalized items, anything from t-shirts, to mugs, aprons or pens increases its value exponentially if the right design is put on it. Think of a niche where you could make a difference, like for the fans of certain series, games or a category like crazy cat ladies. Design a line of products, set up a web shop on Etsy or Cafepress and refresh your bank account. Any idea involving stocks and deliveries is not exactly easy money as you need to take a lot of things into consideration.
Thinkers & Investors
For those with a solid background in business consultancy who don’t want to create courses, you can create franchises and sell them. This is exactly the idea described in Gerber’s E-Myth, a book stating that any entrepreneur needs to create business systems that could just be picked up and run by anybody. Creating such systems can be very rewarding financially, but you would need the initial money to make the first store or unit to prove the concept before being able to sell it.
If you are financially educated you could invest your money in buying stocks, creating a portfolio and leveraging interest, moving money to higher yield bank account, but this is an option suitable for those who know what they are doing or you could end up losing money instead of watching your account grow.
If you have no particular skill, but you have certain amounts of cash that you would like to put to good use you could try to buy things that are valuable and people would be happy to pay for the right to use them. Think houses, apartments or expensive gear (ATVs, photography, bikes). This is worth only if you have enough money to buy enough items to justify the outsourced management costs, or you could end up working more than you intended.
The worst passive income idea is to imitate successful people in this game without any expertise in the area you are trying to get famous in. If you are a poor writer don’t start blogging, if you are not innovative don’t just copycat an app and if you are not great at something, you can’t teach others. Another bad idea is to invest money in things like a few vending machines or slot machines, usually the maintenance costs surpass profits and they are only valuable if you have hundreds and a dedicated service team, but that is a business, not passive income.
The golden rule related to passive income streams is: “Don’t get passive yourself, use the freed up time to create new revenue opportunities”.