The term “Passive Income” is thrown around quite a lot these days, but I feel like many of us don’t really have a good handle on what it means. In short, it basically means that you’re getting paid for an action that you took a while ago. In other words, your payment is not dependent on the number of hours you put into your work. Instead, you are getting paid because you set up a system of wealth creation in the past, which may be recent or many many years ago. In order to receive this passive income, you would have to choose one of two options: either you would (1) invest your time, or (2) invest your money.
Invest Your Time
Since many of us don’t have tens of thousands of dollars to invest, the only thing of value that we have is our time. And, whether you think so or not, your time is incredibly valuable! For most individuals, they place a very low value on their time, which is why many waste their evenings plugging into the television or hanging out with their loser friends at the bar. But, what many do not realize is that the value of your time should not be calculated on the reality of your life today, but by what you could make of it in the future!
After many people clock out of work, they realize that they are no longer making money. Therefore, their time outside of work is of no value. No matter what they decide to do (whether it be bowling, drinking, or just watching TV), they will still be earning the same amount, which is absolutely zero dollars. So, what they decide to do with their time seems ambiguous. At this point, instead of placing value on your time, it’s just much easier to value your time by how much fun you have. This is the poor person’s mentality.
The wise man (or woman) realizes that their time should be valued at their potential. If they spend 4 hours each evening catching up on their favorite Friends episodes, how much value have they added to their lives? Pretty safe to say that they’ve added no value. What if they instead read an entire book on how to start their own business for less than $500? I would say that that time spent would have been much more valuable.
Here are a few businesses that could be started by pouring in your time, and later turning them into passive income investments:
- Starting a website
- Building an App
- Start your own lawn mowing business
- Start your own car detailing business
- Sell life insurance
Each one of these options is incredibly time intensive to start, and might yield zero to no money. But, if you persist and cater to the demand of the consumer, then you could transform your time-intensive business into a passive income business with just a few simple steps. Mainly, you just need to develop a system where either technology or human capital (labor) can run your business for you.
Invest Your Money
Some people might be on the flip side of the channel surfers. They might have quite a lot of money, but not a lot of time to invest. If this is you, I would suggest investing your money into various business ventures that produce a passive income. Of course, nearly any business can be turned into a passive income, but here are some that you might be familiar with and have consistently produced passive money in the past:
- Real estate
- Car wash
- An established website
One could purchase a rental complex and hire a property management company to cater to each of the emergency calls from the renters. Very little time would be put into the business operation, but cash flow would continue to roll in. The same is true for the car wash and the established website as well.
Invest Your Time then Invest Your Money
As I stated before, many people need to start out with passive income ventures that are time intensive because they don’t have any money. But, what you might not have thought of is that those that start by investing all of their time might eventually become investors with their wealth. Think about it. As you continually build your business to be larger and larger, earning more and more money, your wealth also increases. Once you develop a consistent passive income stream, you won’t know what to do with all of your money other than, yep you guessed it, invest in more passive income opportunities. 🙂 Once you understand the power of passive income, you will never invest in any other way.
Do you plan on building a passive income soon? How are you going to do it?