7 Myths About Passive Income

It always sounds so great doesn’t it, making enough money while relaxing on a beach somewhere?

Few concepts are more appealing than passive income. What’s better than making money without having to do anything?

You’ve probably seen headlines before that Amazon founder Jeff Bezos earns over $200,000 per second, it’s natural to wonder how you can start making money without working.

Even without crazy passive income numbers compared to Bezos, an additional source of income could be enough to let you leave the daily grind of the 9-to-5 workday so you could pursue entrepreneurial dreams, travel, or just sit on that relaxing beach somewhere.

Generating passive income isn’t as simple as some of these people and articles make it out to be. To get to a healthy level of steady cash flow requires a lot of up front work or money to invest.

If you’re serious about having passive income increase your quality of life, you simply can’t afford to fall for these seven passive income myths.

1. You can “set and forget” your income streams.

This might be the most dangerous myth associated with passive income.

Everyone likes the idea of not needing to do anything else after setting up a blog or online store. But, in reality its never so simple. Blog visitors will need new content to come or they won’t keep coming back. If you have a course or Youtube they may need support or want up to date content that is keeping up with the rapidly changing world. The internet itself is constantly changing as well.

If you aren’t doing anything to stay on top of these industry changes, customer expectations and other responsibilities found in any active business, your passive income will quickly fade away. Even when delegating responsibilities, you’ll need to check in with team members to ensure tasks are done up to your standards.

2. You can set it up quickly and kick back and relax.

It’s easy to assume that anyone can toss together a blog or another passive income source in a single weekend. To really build something that will last and have an impact on your customers and fans will require hard work, time, and research.

Take something as simple as starting a successful blog, this requires extensive research and planning to make a name for yourself out of the millions of blogs out there.

A short list of things to learn and get right for bloggers is they need to find the right niche, choose a web hosting platform and buy a domain name just to get started. After that, they still need to learn about browser caching, SEO, permalinks and more — and don’t forget about writing good content and uploading quality images!

Needless to say, you probably won’t be able get all this done successfully in just a weekends time, sorry.

3. One source of income is all you need.

Another dangerous myth of passive income is that you can generate all the money you need with a single source of revenue. This is kind of like putting all your money into one stock, it can go up and offer big gains while on the flip side it can hurt bad when it’s down or out.

As with stock market investments, it’s better to diversify your income sources, especially if you’re planning on having these passive income streams replace your job.

An example is with blogger bloggers who have relatively low web traffic may use everything from affiliate links or selling their own products to offering online courses and freelance writing services to generate extra income. Through diversifying your income streams, you’ll have a increase your chances of earning enough to support your needs.

4. Passive income is easy

Passive income is defined as income that is received on a regular basis with little effort required to maintain it. This definition causes many people to mistakenly believe that generating passive income is easy, which isn’t necessarily the case. Passive income is not easy to create, and like we learned earlier isn’t created overnight. Most of the work required to generate passive income is done upfront when you acquire or create an asset that produces passive income in the first place, like creating a business or blog, or buying stocks or an already running business.

5. You have to choose the right vehicle

There are many different methods or vehicles that someone can choose to generate passive income. Rental income from real estate, dividends from stocks, and royalties from music or book sales are just a few of my favorite examples.

The myth that causes many people to believe that their lack of financial success is due to the wrong choice of vehicle is the myth that they have to choose the perfect vehicle at the right time to have any success. In reality, there is no right or perfect vehicle. There are people out there generating generous amounts of passive income with each of the vehicles mentioned above and many many more not list, just as there are people generating little to no income using those same vehicles.

The vehicle you choose doesn’t matter nearly as much as the knowledge, skills, and dedication that you possess as you work to create passive income in whatever path you choose. Someone can introduce you to a specific vehicle that has the potential for creating passive income, but if you’re not equipped with the knowledge, skills, and dedication to make it work, you not likely to be successful.

6. Passive income is permanent

It certainly makes sense to define financial freedom as the point at which your passive income exceeds your expenses. This definition assumes that passive income is permanent. Unfortunately, passive income is not permanent. A source of passive income can dry up or disappear at any moment if not given a certain level of care or attention.

Remember to remain relevant, and up to date in the ever changing world or you won’t attract the attention of those necessary customers.

7. You need to make money (Passive Income).

From investing in the stock market to starting a small online business, many people assume that they need a lot of money to start earning passive income. This simply isn’t true. You can invest in the stock market with as little as a few dollars with most brokers offering fractional shares. For those looking to start their own blog, web hosting is often available at less than $8 per month.

Having additional savings that you can devote toward getting your blog or business idea off the ground can certainly be beneficial, especially early on. But, at the end of the day, what matters most is your willingness to put in the time to research your market idea or investment opportunity.

Doing the right background work will help you use your limited financial resources wisely so you can generate a great return on your initial investment.

Create passive income the right way.

Pursuing a dream of generating passive income isn’t always easy but it’s far from impossible.

Whether you’re trying to add stability to you financial life, find a better way of financing your retirement, or travel and life live on your terms, avoiding these common pitfalls and misconceptions will go a long way in helping you reach any of your goals.

Success is closer than you think!

5 Ways To Create Passive Income With No Money

Passive income seems to be a Holy Grail of personal finance. When it comes to income, what could be better than earning your money without having to trade your time for dollars?

There are two main paths to passive income – you can either invest money to make it happen, or invest time to make it happen. But there is sort of a third option.

I’ve written about passive income before (you can see over 7 passive income ideas here) but today I wanted to tackle another question that often comes up: How can I create passive income with no money?

Can You Create Passive Income Without A Financial Investment?

Passive income can be earned in two ways. The first is to make your money work for you. This could be done by investing in the stock market, real estate, P2P lending, or into a business.

The second way to earn passive income is to invest your time. For example, you can start a side hustle, read 20 Side Hustles You Can Start Today! for more info.

While it’s definitely possible to earn passive income with no money, it isn’t easy. It requires a lot of initial hard work and comes with no guarantees.

If you want to give it a shot here’s how to create PASSIVE INCOME with no money.

Write A Kindle eBook

A popular way to earn passive income with no money down is to write an eBook and sell it on Amazon through the KDP program.

KDP stands for Kindle Direct Publishing and is Amazon’s program for self-publishers. While you will have to write your book, figure out Kindle formatting and come up with a cover design, it costs you nothing to self-publish a book through Amazon.

If your Kindle eBook is priced at $2.99-$9.99 you’ll receive a 70% royalty on the sale price of each book. When your book is priced below $2.99 or above $9.99 you’ll only receive a 35% royalty.

Ebooks don’t have to be long, so no need to write an opus to make some money. There are several places you can publish besides Amazon’s Kindle Direct Publishing including, Booktango, and Lulu.

The essential services on most of the publishing sites are free, and you can pay for premium services like marketing and editing.

Sell Stock Photos

If you’re a freelance photographer or just enjoy taking photos and are good at it, you can earn a passive income selling your stock photos online.

If you want to make some extra money for your photos, you could consider selling your images as stock photos. The easiest way to make your images available for sale as stock images is to use a third-party site, such as Adobe Stock, Shutterstock, Alamy, etc.

The great thing about selling stock photos is that one photo can be purchased by many different people.

How much you earn depends on how large your portfolio is, experience level, and the number of stock photo agencies you work with.

Like with investing, diversification is key. The more photos you have spread across agencies, the better your chances of earning passive income.

Blog

Many bloggers write with the intent to make money, and the way to do that is by providing value to your readers, which drives traffic to your site and then monetizing it with affiliate links, ads, or promoting your own products.

Remember, the more niche your website and topics are, the better. When you’re building residual income, the less competition, the better.

You can make affiliate marketing income by linking to Amazon to all of the products you write about on the site.

Part of providing value is building trust. Don’t link to things that aren’t of good quality, or people won’t trust your recommendations.

The other part of making an audience is consistency. It matters less how often you post than how consistently. If you only have time to do one post a month, that post should come out on the same date and time each month.

An excellent way to stay consistent is to write several posts before you release the blog. That means when life gets in the way, and you don’t have time, you have a backlog of material you can consistently publish.

Affiliate Marketing and Ads

Affiliate marketing works well when you discuss products on your blog, or have some kind of social media following.

Amazon Associates is the best-known affiliate marketing program, but there are others like Impact RadiusCommission JunctionClickBank, and Rakuten too.

Google Adsense pays to post ads on your blog. There are two ways to make money with Adsense; impressions which give you cash for every 1,000 page views and clicks which provide you with money when a visitor to your site clicks on a displayed ad.

You can design courses and charge for access to those. Plenty of bloggers sell classes on how to make money blogging.

There are numerous ways to earn money online, but monetizing your site with the above ideas are some of the best.

Digital Product

One of the most common ways people make money on their websites is by selling courses. Platforms like Udemy, Teachable, and Skillshare are making it easier than ever to launch and sell online courses.

You also even create an app or service which, is decidedly harder than making a course but the income potential here is far larger.

Building digital products takes a bit of work, but once the work is done, you can sell it forever so long as it remains relevant.

Passive Income: It Takes Time or Money

There really are no shortcuts to passive income. You’ll find a countless number of people who’ve created solid passive income streams with and without money.

The important thing to remember is that those people who did create passive income without money were willing to put in the hard work it took to create the product that would earn them passive income over the long haul.

Why Pursue Financial Freedom?

What is Financial Freedom?

Financial independence is a journey, not a destination: Every day, by the choices we make, we move closer to or farther from Financial Independence. While there are some important milestones along the way (e.g., building an emergency fund, paying off all non-mortgage debt, retirement), these signs mark progress, not the finish line.

Some view Financial Independence as the point where one can live off of savings, a pension, social security, and the like. While the ability to live without the need of a 9 to 5 job is an important step toward Financial Independence, it doesn’t automatically make somebody financially independent. The problem is, we all know of people who are retired but are just getting by and, because of limited financial resources, are not living life as they choose.

Financial independence is not “one size fits all”: What I want or need to live life as I choose may be very different from what you want or need to live life as you choose.

What are You Working For?

You go to work for five days (or more) a week for 40 hours (or more). Even if you love your job, it’s time away from the other things you love, your family, your friends, your hobbies. We want to use the money we work so hard for to pay for our freedom. So, what are our financial goals and how do we achieve financial freedom?

Most of us will spend our entire lives doing hard work to make ends meet. And for what? A house bigger than you really need or can afford full of stuff you never use and don’t even remember buying?

Related: 10 Reasons You’re Still Poor

To pay off credit cards that you charged that house full of stuff to?

For the occasional vacation that you can’t really afford and your boss gives you a hard time about taking?

For the status that driving a Lexus and wearing expensive clothes gives you?

Dave Ramsey says it simply “We buy things we don’t need with money we don’t have to impress people we don’t like.”

Maybe you realize it and maybe you don’t but you’re in debtor’s prison and you don’t have much freedom.

What Can Money Buy?

Question Mark, Knowledge, Question, Sign

When people dream about having money, it’s often the things they would buy that they fantasize about. But material things are not the best part of having money, not even if you have a garage full of Sports cars, lifted trucks, and any fun expensive grown up toys you can think to put in there.

Money can buy choices and choices mean freedom.

Do you hate your job? You can quit and take your time finding a better one.

In an unhappy relationship? Hate the town you live in? 

You don’t have to stay, you can take your money and leave.

Money can buy convenience.

Are you too tired to make dinner? Order out.

Don’t you have time to clean your house? Hire a cleaning service.

You’ve been told to evacuate because of a hurricane? Woo! You’re not going to sit in a flooded house with no electricity for a week. You’re going on a impromtu vacation, which sounds kinda exciting.

Money can buy time. 

You had a baby and you don’t want to go back to work? You’re a stay at home parent now.

Is your sister having a destination wedding in somewhere remote? Excellent, pack your bags.

A family member had surgery and needs you to stay with her for a few weeks? Cancel your appointments, you’re going to be out of town.

All of these examples are examples of having control over your own life, not feeling trapped. When we feel like we’re trapped and we don’t have choices, we feel unhappy and anxious.

Money can buy happiness.

We feel happy when we have control over our own lives. Money can also buy happiness if you know what to buy. Too many people think buying things brings happiness. And it does, but it’s very temporary and usually, the happiness extends only to you.

If you want to spend money to get happy, spend it on experiences. It’s been proven that experiences make us happier than material possessions. And it’s not hard to think of an example from your own life.

Experiences, rather than things, make us happy. And the even better thing about experiences versus things is that you can have all sorts of wonderful experiences for free.

It doesn’t cost anything to take your kid to the park or to go hiking with a group of friends. It doesn’t cost anything to spend the evening making dinner with your partner.

7 Passive Income Ideas For Increased Cash Flow

How Passive Income Works

Passive income is any money you earn on a regular basis that doesn’t come from a job. In some cases, passive income is money you get from a project or investment that you put money or time into at the start. For example, if you own part of a business but are not actively involved in running that business, your cut of the profits is passive income.

You can also earn passive income from a project that you’ve invested your time in, rather than your money. For instance, if you spend a year writing a book the royalty payments you get from that book’s sales are a form of passive income.

Having a source of income that doesn’t require the day to day grind can offer some unique benefits including :

  • Extra Cash. When you’re short of money, financial experts usually advise you to respond by tightening your belt. Little luxuries, such as a daily latte or cable TV, are usually the first expenses to be slashed from the budget in an effort to make ends meet. But if you can find a way to supplement your regular paycheck with a passive income stream, the extra income can allow you to enjoy these simple pleasures again without going into debt.
focus photography of person counting dollar banknotes
  • A Cushion for Emergencies. Many Americans live paycheck to paycheck, with no savings to fall back on in an emergency. The Federal Reserve’s annual report on the economic health of households  found that 47% of Americans couldn’t easily come up with an extra $400 to cover an unexpected expense, such as a car repair or a trip to the emergency room. A passive income stream could give you the extra cash needed to build up an emergency fund without having to cut back on your current spending.
  • More Job Flexibility. When your job is your only source of income, you’re dependent on it. You’ll put up with unpleasant working conditions or unreasonable demands from a boss, because giving up your job would leave you with nothing to live on. But if you have some passive income to fall back on, you can afford to be a little picky in your selection. If you don’t like your current job, you can afford to ditch it for a new one that pays less, eking out your lower paycheck with passive income. And if you lose your job altogether, you’ll still have at least a little income to hold you over until you find a new one.
  • Extra Money in Retirement. The vast majority of Americans aren’t putting aside enough money to support themselves comfortably in retirement. If you’re in this position, you could one day find yourself with no income except for Social Security, which was never designed to be a family’s sole source of support – and which might have to cut its benefit levels still further before you reach retirement age. But if you do the work now to create a passive income stream, you’ll have some additional money coming in (in addition to Social Security checks) after you retire.
  • An Earlier Retirement. If you can earn enough passive income – from one stream or, better yet, from several – it can replace your paycheck altogether, making you financially independent. This would give you the option of retiring early, or perhaps quitting your current job and taking up a new career that interests you. Making this much money solely from passive income doesn’t happen overnight – but it is possible.

This website contains affiliate links and I will receive a commission at no additional cost to you. Thank you for your support!

Ways to Earn Passive Income

When you see the phrase “passive income” in an article, it’s often referring to money earned from passive income investments, such as dividend-yielding stocks or real estate. However, investing is one of many ways to earn income when you’re not working. There are a variety of other ways to set up a passive income stream by putting in an initial investment of time, money, or both – and there are even a few that don’t take very much of either.

1. Real Estate 

One of the best-known ways to earn passive income is through real estate. Renting out a building can bring in a tidy sum of money each month, with little work in some cases – but it can also require a big chunk of cash up front to buy the property. There are also low and no money down options but these can bring on more risk, and many people recommend the traditional route when first getting started.

Though it can take a while to build up enough cash to put a 20% down payment on an investment property (the typical lender minimum), they can snowball fairly quickly. The key here is to correctly project income and expenses in order to calculate cash flow. However you have to be sure to include the cost of a property manager in your calculations unless you want to manage the property yourself. Even with a property manager, you may be required to make large repair decisions every now and then – so while this is not a 100% passive activity there are completely passive options with real estate investing.

Many buy and hold investors (ie rental property investors) take that excess cash flow and put it toward their next down payment. This allows them to slowly amass portfolios of dozens and sometimes hundreds of rental properties.

aerial photography of rural

Investing in real estate can be very profitable and mostly passive. However, a lot of people don’t want to deal with owning a physical property where they need to deal with tenants and property mangers.

Another option for passively investing in real estate is through a real estate investment trust (REIT). REIT’s own multiple real estate properties and allow investors to invest in the portfolio. The great thing about an REIT is that there is a 90% distribution rule. Each REIT is required to pay out 90% of their net income as a dividend to investors.

One of my favorite places to invest in REIT’s is through Fundrise. They have a historical return of 8.7 – 12.4%. Plus, you can invest with as little as $500.

Related: Best Real Estate Crowdfunding Platforms for Passive Income

Investing in REIT stocks can also be a great way to make passive income. It requires an upfront investment, but once you’ve done your research and found solid companies with high dividend yields, you can sit back and collect the dividend checks (or reinvest the dividend earnings).

Related: How to Passively Invest in Real Estate

2. Residual Sales Income

Typically, when you work in sales, you earn your money in the form of commissions. Every time you sell a product or a service, you are paid a percentage of the money paid by the customer. With some types of sales jobs, however, you don’t just earn a single commission when you make a sale – you also receive ongoing residual payments from sales you’ve made in the past. This type of residual income that can last for years after the original purchase.

Products and services that sometimes pay their salespeople this way include:

  • Insurance. Say you’re an insurance salesperson who has just sold a 10-year term life insurance policy. You earn a one-time commission for making the sale, but you also earn a percentage of the monthly premium every time the buyer pays it. So long as the insured keeps making those monthly payments, you can keep collecting residuals off that one sale for up to 10 years.
  • Financial Products. Certain types of financial products, such as annuities, also pay ongoing commissions to the professionals who sell them. Financial advisor Ethan Braid of High Pass Asset Management writes that when he sells a $500,000 annuity, he not only earns a 7% commission, or $35,000, immediately – but on top of that, he gets a 1% “trailer commission,” or $5,000, every year the buyer owns the annuity. So a financial advisor who has sold 10 annuities that are still active could bring in an income of $50,000 a year just from these trailer commissions.
  • Service Contracts. It is sometimes possible to earn residuals for products or services with pay-as-you-go contracts, such as home security services. If a client signs a contract to have his or her home monitored for a monthly fee, the salesperson can receive a residual payment each month the client pays for this service. Furthermore, agreements often pay monthly residuals to sales employees. For example, alarm companies selling ongoing home or business monitoring for a monthly fee may offer residual income to those who sell this service.

No type of sales job can be considered truly passive. In fact, sales can be more active than most jobs, since your pay often depends on how much you sell, and it takes plenty of hustle to bring new customers on board. However, if you’re already working in sales, or considering it as a career, it could be useful to focus on products that can bring in residual income in addition to the usual commission. That way, you can continue earning money on work you’ve already done.

5 Dividend Stocks to Consider During 2020 Market Crash

Since late March, the S&P 500 index has partially climbed back from the coronavirus-driven market sell-off that began in February. However, as of Monday, April 13, the index is still down more than 18% from its all-time high, set on Feb. 19.

During times like these, many investors are looking for rock-solid dividend stocks to help them weather the turbulence, and myself and many others take advantage of lower stock prices to lock in a high long term yield on cost.

When you invest during a bear market in a solid company with a history of increasing its dividend payments, you obtain a degree of comfort that you’ll receive cash flow while you own that stock. Even if the shares lose value during a bear market, you’ll receive income from your dividends.

During uncertain economic times like today, it’s wise to invest thoughtfully. Dividend stock investing during a bear market may reward patient shareholders with long-term profits. Below are stocks I have focused in on for my long term investments, primarily for dividends for the very long term (forever being ideal).

Some links are affiliate links and I will receive a commission at no additional cost to you, thank you for the support!

Coca-Cola (KO) 

When it comes to a tried-and-true dividend stock, it’s hard to beat Coca-Cola (NYSE:KO). And investors can use the argument, if it’s a good enough for Warren Buffett, it’s good enough for you. The potential anchor to the stock has been that soft drinks, particularly of the sugary kind that Coca-Cola is known for, have sort of fallen out of favor. Part of it is due to concerns over childhood obesity and some is because of the changing tastes of consumers who are demanding various options in every aspect of their life. But Coca-Cola is navigating this pivot well. First, they’ve invested in other brands. This strategy is providing an effective hedge against potential revenue losses to the flagship brands.

And the company just released its own energy drink, Coke Energy, in January and the company is looking to get into the caffeinated seltzer and flavored water arena. Analysts are becoming bullish on the company in advance of its earnings which the company reports on January 30.

Sector: Consumer Staples   Industry:Soft Drinks
Recession Return: S&P 500 lost 55% from 2007 – 2009; KO shares lost 31%

Dividend Growth Streak: 55 years

Coca-Cola is the world’s largest beverage seller, marketing over 3,900 products under 500 brands in more than 200 countries and territories via 24 million retail markets. The company owns 21 brands that generate over $1 billion in sales including: Coke, Powerade, Dasani water, Simply and Minute Maid juices. 

Coke’s wide moat is courtesy of the world’s largest distribution network which has taken over 130 years to build up at a cost of tens of billions of dollars in marketing spending. Smaller rivals simply can’t replicate the company’s reach or brand awareness. As a result, Coke enjoys premium shelf space in almost every retail outlet in the world.
Coca-Cola’s plans for the future include continuing to diversify into healthier options where it has less share today, such as teas, juices, and water. These markets continue to grow strongly in both developed and emerging economies. 

Recently this focus on healthier beverages has helped drive mid-single-digit organic sales growth, which is among the best in the industry. Meanwhile, the beverage maker plans to re-franchise its capital-intensive bottling operations (over 900 plants worldwide) which will drastically reduce its annual costs. 

The company has had annual dividend increases for 55 consecutive years (since 1963). Management targets a reasonable 75% payout ratio over time and expects to continue to grow the dividend as a function of free cash flow. 

While the firm does need to invest somewhat aggressively in beverage categories of the future, Coca-Cola should have flexibility to keep its dividend moving higher along the way. From the company’s excellent credit rating to its recession-resistant portfolio (sales declined just under 5% during the financial crisis), support for the payout is solid. 

Meanwhile, investors enjoying Coke’s dividend can also expect below average volatility. During periods of maximum market fear, Coke shares tend to do even better. For example, during the financial crisis shares lost just 31%, outperforming the S&P 500’s slump by about 24%. The bottom line is that Coca-Cola remains one of the safest consumer staple stocks you can own if the economy hits a downturn and brings on a bear market.

Best Real Estate Crowdfunding Platforms for Passive Income

Real estate crowdfunding has become a real estate investment wave of the future. Individual investors can now buy pieces of commercial real estate projects throughout the country that were once limited to high net worth/income individuals.

Continue reading “Best Real Estate Crowdfunding Platforms for Passive Income”

How to Passively Invest in Real Estate

What’s the difference between being efficient and just being busy? Why is this difference so important and how can you maximize efficiency? Many are swamped and are overwhelmed by it all. Most busy professionals who want to tap into the world of real estate “just don’t have the time.”

Continue reading “How to Passively Invest in Real Estate”