What is Passive Income?
There’s a lot of talk these days about making money online and earning passive income, but what exactly is that? What’s the definition of passive income?
As I define it, passive income is income that you earn without being actively engaged in its generaton. A good example might be a guy who owns a vending machine. He has to occasionally load goods into the machine (and extract the money, of course), but the majority of the time he is generating money in a hands-off fashion. In short, the owner only has limited participation in the generation of revenue. This is slightly different from residual income, although many people – myself included – use the terms interchangeably.
With residual income, you are usually referring to some sort of work done up-front, but which keeps on producing income without any additional effort. An example might be music royalties. After you write a song, you will continue collecting royalties from it (as long as it produces) without any additional work on your part. Residual income, then, can be seen as a type of passive income.
Bearing this in mind, there are some great options out there with respect to residually and passively earning income.
Affiliate programs are pretty straight-forward: you earn a commission by promoting a company’s products or services. Ergo, when someone you directed to the company makes a purchase (usually by going to the requiaite site through your referral link), you earn money.
The advent of the internet has caused a boom in affiliate programs over the past two decades. It seems that almost every large company with an online presence has an affiliate program these days, and with good reason: a good affiliate can add a tremendous amount of revenue to the bottom line. More importantly from your perspective, dear reader, affiliate programs can provide significant income. (Some affiliate marketers report earning well over six figures per year!)
Getting started as an affiliate is pretty easy. As I mentioned, lots of advertisers have affiliate programs, and in many cases you can sign up directly with the company, such as with Amazon (whose affiliate program is known as Amazon Associates). Many, however, will require that you sign up through an advertising network, such as FlexOffers. Needless to say, commissions will vary, but affiliate programs offer an opportunity to earn at least extra spending cash, if not a full-time salary.
Start Your Own Website
Historically, the best way to become a millionaire was to start your own business. These days, doing that is easier than ever – anyone with a computer and an internet connection is a potential entrepreneur. All you really need is a website.
Whether you offer do-it-yourself painting tips, advice on romance, product reviews, what have you, having your own website can help you generate passive income in a number of ways. For instance, you can provide advertising space on your site, such as through Google Adsense. You can also use it to promote products or services as an affiliate marketer. Or you can use it to sell items that you yourself create.
In short, having your own website gives you the potential to generate significant revenue. There are several excellent platforms (such as Bluehost) that you can use for building your own website, and most have pretty good support so that even someone with few technical skills – like me – can get a website up and running in no time.
Earning Passive Income with Articles
Several years ago, writing online articles – product reviews, how-to items, etc. – were undoubtedly a good way to get your passive-income efforts going. There were tons of places for you to publish on, and many of them had a respectable royalty-split. These days, the article-writing landscape has changed to a large degree. Many of the old sites have gone the way of the dodo (R.I.P. Squidoo), while others seem to be on life support (eg, InfoBarrel).
Part of this is Google’s doing, but I don’t necessarily mean that in a bad way. As the internet behemoth continues to refine its algorithms, this understandably has an effect on search results. Long story short, sites that Google tend to identify as having a lot of spammy content and the like tend to get punished. (And let’s face it, a lot of article-writing sites fell into that category.)
That said, there are a number of article-based websites that still appear to be going strong – e.g., HubPages. For those who don’t know, HubPages is a site where you build discrete web pages – “hubs” – on select topics. Considering how so many similar sites have bit the dust, you might wonder why I’m still high on this as a method of passive income, but consider this: I wrote dozens on articles on Hubpages years ago, and haven’t published anything new in ages (although I have updated some articles recently). Moreover, I put almost zero effort into sending traffic to my articles. Nevertheless, those articles that I wrote several years back have continued to produce income on a daily basis. (It’s now down in the cents-per-day range instead of dollars, but it’s still moolah.) That’s the power of passive income – the work I did years ago is still throwing off cash today (and if I had continued writing articles it could be significantly more than it is now). Bearing that in mind, I still advocate article-writing as a way to start building passive income. If you haven’t done so already, you can quickly and easily sign up at HubPages.com
Earn With Dividends
In another post, I refer to dividends as the “Granddaddy of Passive Income Streams.” This is because dividends – which have been called the original passive income investment – are essentially what this kind of income is all about. You do a little work upfront (in this instance, buying the stock), and then kick back and collect dividend checks from now until doomsday – or as long as you hang on to the stock. It’s practically a no-brainer.
As you can see by visiting Getting Rich With Dividends, investing for dividend income can be quite lucrative. (By way of example, $1000 invested in Wal Mart roughly 30 years ago would now be worth about $183,000 and would be paying you $4400 in dividend income every year.) Moreover, if you want to see some real-world examples of how ordinary people have done with this type of investing, visit Everyday Millionaires: How Ordinary People Got Rich and You Can,Too. You’ll be surprised at how much a little invested now can turn into.
Finally, if you can stand a wee bit of risk, you’ll be shocked at how much you can earn Making Money With Stock Options on a monthly basis. In brief, the stock market offers some excellent opportunities to earn income.
Publishing Your Own Books
One of the purist forms of passive and residual income is book publishing. You do all the heavy lifting up front in terms of writing your book; afterwards, you merely collect the royalties as your work sells. (As I’ve mentioned elsewhere on this site, self-publishing has been incredibly lucrative for me.)
Moreover, self-publishing – whether in e-book or hard copy form – is shockingly cheap these days, and can be done with almost no out-of-pocket cost via services such as Kindle Direct Publishing (Amazon’s publishing arm), Draft 2 Digital or Smashwords. Needless to say, providing ebooks to readers is almost effortless, but even when it comes to hard copies the process is practically worry-free: books are printed and shipped on demand, so you don’t have to deal with any of the traditional headaches of self-publication, like keeping inventory on hand to fill orders. In short, if you’ve ever wanted to write the great American novel, now’s your chance.
Other Resources to Help Earn Passive Income
While they won’t actually make money themselves, there are lots of other resources you can utilize that will greatly assist your online income-producing efforts.
Dragon Naturally Speaking
I have mentioned Dragon Naturally Speaking in several of my other posts. That being the case, it’s probably quite obvious that I think a lot of this technology, which is voice-recognition software that types as you speak, among other things. (See the video below.) This will undoubtedly save you immeasureable amounts of time in the generation of online income, and since they say that time is money – well, you can figure out the rest.
As you can now see, there are plenty of resources avilable for you to use with respect to generating passive income. In fact, there are a lot more out there than what I’ve listed here (for instance, you can Earn Great Passive Income With A Vending Machine Business), and I doubt that any single list will contain them all. However, maybe that’s a good thing.
The truth of the matter is that you aren’t going to be able to take advantage of every option available to you when it comes to earning online. For instance, I noted a couple of sites related to article-writing, but there are probably hundreds of them – possibly even thousands. You can’t write for all of them, though. Heck, you probably can’t write for more than a handful before you’re spread too thin, and not having much to show for your efforts. Basically, from my point of view, you need to pick 3 or 4 sites and work with those. That will give you diversification – you won’t have all your eggs in one basket, so if one site goes down you’re not starting back at zero – without spreading yourself so far and wide that you miss out on the synergies created by having a generous amount of content on a single site.
In short, you’ve got to find that balance between resources that work for you and allow you to optimize your talents for producing income.
(If you are interested in finding out more about what I am personally doing in this arena, please continue reading the Passive Pursuit of Income Blog.)