While passive income has been loosely defined since it’s inception, the idea is that passive income refers to money that is regularly earned with little or no effort.
Popular examples include money earned from
- retirement pay
- and rental property.
Many work-from-home type companies also throw the term around. With the age of the internet business, many people are also creating passive income in the form of affiliate sales, niche sites and product sales. There are also new ways of investing, including peer-to-peer lending where you invest into loans you then earn interest on.
Although the term “passive income” has gotten a bad rap over the years, it’s important to note that creating passive income can be done successfully. In fact, incorporating forms of passive income into your financial plan is a great way to work toward financial independence or simply supplement your current income.
The more you can stop trading time for dollars, the more freedom you have in your life. That’s why creating passive income should be a part of everyone’s financial goals.
There’s just one caveat when it comes to creating forms of passive income: You have to keep in mind that the work is done upfront either by investing time, money or both. If you can handle that, then you’re already well on your way to understanding and creating passive income. Here are the steps you can take to get started.
Part of the problem that arises when people begin creating passive income is that they try and do too many things at once. This can lead to information overload and burnout, which many times leads to quitting.
When it comes to most things in the world of finance, simple is best. Passive income is no different. Choose a form that works best for you right now and then focus on building just that one form for now. You can worry about layering in other forms later.
This may require you to do some research to see what is most feasible for you at the moment. For example, maybe you don’t have enough saved for a down-payment on a rental property but you have a few thousand dollars you can invest in peer-to-peer lending. Or, maybe you have neither of those but you have an online presence and can launch a book.
Take one step.
Let’s face it, it’s easy to do research but it’s an entirely different thing to actually execute your desire to create passive income. In fact, this is where most people drop the ball.
After you’ve chosen your preferred form of creating passive income, the next phase is to take one step in the direction of incorporating it into your life. Did you choose to write and sell a book? Set a deadline for getting a draft out. Did you decide to throw some money you have lying around into stocks? Find the stocks you want to invest in.
Passive income does not happen over night. I’ve been slowly creating forms of passive income for years and now is when I’m starting to see some of the dollars roll in.
Whether you’re creating something for sale or investing in stocks, passive income is a marathon. Unfortunately, lots of people are trying to sell a pipe dream by telling individuals they can make passive income quickly. If you can avoid falling into this trap and remember to be patient, you’re already way ahead of the game.
The last and final step is to repeat the process. Once you’ve incorporated one form of passive income into your life, then it’s time to look for another depending on what your financial goals are. The good news is you may feel less overwhelmed the second time around.
How will you start creating passive income?
This post was written by Amanda Abella, a business coach for millennials, speaker, and best selling author.