What is Passive Income?

This post was written by Derek.

In a nutshell, passive income is a cash flow of money today for a job that was performed in the past. There is most likely a 90 year old man somewhere that does not lift a finger, yet his business that was set up 40 years ago is still generating an income today. Those checks keep coming in, but his work was done long ago.

Here are some forms of passive income that you may have heard of:

  • Real Estate (rental units)
  • Song Writing/Singing
  • Writing

Out of these three options, real estate is often the passive income of choice, simply because not everyone has the talent to sing or write, but for the most part, real estate can be learned by almost everyone. The only problem is, in order to accomplish a passive income (without high risk), you must have quite a lot of cash for the down payments on various properties.

So What Do I Do Then?

That’s the common question I get, “I can’t sing or write, and I only have $1,000 to my name, so what can I do to begin earning a passive income?”

For these people, I do have some alternative options. I have to say that I cannot take credit for the majority of these ideas, but since I have learned how to make a little money online, my eyes have become opened to these new sources of passive income.

The Power of the Internet

For most of us, we learned about the Internet around 1995, when it was first made available to the public. We thought it was great, not because it was a business opportunity waiting to happen, but because we finally didn’t have to buy any more stamps…. this was made possible by a phenomenon called, “Electronic Mail”, or “e-mail”.

Well, the Internet has evolved far beyond e-mail. It is now a potential source of income for all of us! Not only that, it can be utilized in many ways to provide a passive income.

Niche Websites

This has become incredibly popular in the new millennium. Webmasters study the search patterns of regular internet users and create a website for a high-volume topic! For example, if (for some reason) many of us have been searching the web for “chocolate covered bananas”, someone will most likely create a site that is titled, “Chocolate Covered Bananas”. They’d post a few pictures, a couple dozen articles, and most importantly, Ads.

The hope is that in your search, you will click on their site, look at it for a while, and then find a useful link (which is actually a paid ad of theirs) for another topic of interest. These small sites can each generate hundreds of dollars in profits each day! And, best of all, once they are set up, nothing really has to be done with them to keep them going. It’s certainly a form of passive income.

iPhone Apps

The iPhone has been huge for quite a few years, and it’s still just as cool today. If you are lost in New York and you don’t have a map, no problem, just whip out your iPhone and download the New York City App. It will show you where everything is in just a matter of seconds.

Some apps are developed to be purchased (most of the time for a very small fee), but others are available for free. Understand though, that every app is making money. For the purchased apps, they are obviously making money on the individual sales, but the free apps often make money through advertisements that are connected to the app! There’s money to be made on everything!!

Again, this takes some work up front, but once the app is developed, it’s simply placed in the app store, and you can watch your income soar! All while you’re lying on your couch.

Get Your Butt Moving

I provided only a couple of passive income ideas, but hopefully they will inspire you to take some action! What’s stopping you? If it doesn’t work out like you planned, maybe you’ll only make $1,000 rather than $1,000,000, but it’s still a thousand bucks more than you had before you started!


Comments

What is Passive Income? — 13 Comments

  1. The only true passive income, in my opinion is locking up a high interest Treasury bill. I view passive income as something I would consider stable or reliable.

    • krantcents, what you’re talking about is actually portfolio income. This is one way to go, but it requires millions of dollars in savings. It takes a lifetime to accomplish this, and then there’s no guarantee that you’ll get a decent return on the money.

      I’d rather build a business that might require quite a lot of work up front, but that pays a consistant income month after month once it’s set up.

  2. Sadly, I don’t have any BIG forms of passive income… but I do have a few… Its only a few dollars a month, but its something.

    We get small bits of interest from CD’s and a few savings accounts where our emergency fund is kept.

    Eventually when I can open my new Roth IRA, the mutual fund i’m planning of purchasing has a yield and some dividends so its a bit of passive income that i’ll roll into new purchases.

  3. Niche websites seem like a good idea, they have to be very specific and rank highly with SEO. I know that The Financial Blogger has been good at creating/buying niche websites.

    • The Financial Blogger is amazing at creating niche sites. His income is typically $9,000 per month. Once they’re set up, there’s really not much to do with them and they become very passive. I am on this journey myself. 🙂

  4. My goal is to be the next J.K. Rowlings (Harry Potter author) and write those bestseller books with royalties coming in for years.

    Nice dream. In the meantime I too am trying to learn the ropes of this niche site idea. It is lots of work so far!

  5. I used to write for eHow and have an inventory of about 50 articles there. Every month I receive between $10-$46 (varies, huh?) of income for not doing anything else. Sounds good to me!

    • @Frugal Confessions. That’s great. I don’t know how you found the time to write 50 articles a month. You must be super woman. Good for you. Thanks for sharing the idea.

    • Hi Amanda! eHow was a great way to earn passive income back in the day. It’s too bad they don’t offer that option any more. If you find something else like that, you’ll come tell me right? 🙂

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