Friday, June 25, 2010

Passive Income

My ultimate aim is to have various passive income streams. Recently I realised not everyone knows what this means or how to go about it. In a nutshell passive income is basically money made without doing any work. Interest from a bank account is a perfect (albeit low) example of this. You put your money in there and you make money from it.

Many people have the idea that if the money is made outside of their regular job/career it’s passive. This is wrong. You do earn passive income outside of your job but not all income is passive. I have been thinking about it and many things people list as passive income aren’t really passive. Blogging and freelance writing for example are often listed as passive income, but they involve a lot of work.

So after thinking about it and knowing already what I plan to do here are my passive income ideas

1.) Rental properties. If you have a good manager and tenants, this can be something you don’t have to do anything for. It is finding a good property manager and tenant that can be the hard part. Yes, you can do it all yourself, but then it’s not passive, is it? It can save you a lot of money if you chose to do it that way, which is fine.
2.) Shares. They are risky as we have seen recently, but if you pick stocks well, you can earn dividends from them.
3.) Bank deposits. Here in Aus we have a pretty good interest rate at the moment. This is not always the case. Whilst it won’t earn you big dollars generally, it is passive. Your money sits there and multiplies.
4.) Own a business. Some businesses run without you and they are the sort you want. You are just the owner. You don’t work there or do any of the work, other people do. They can be hard to get or you have to start them yourself and it doesn’t always work out, but it is an option.
5.) Online. There are a variety of things you can do online which require a little bit of work at the start, such as an eBook, but once set up, they are automatic.

So those are my plans. Do you have any other suggestions?

They are not all easy and things do not always work out. Shares and property drop in price, people might not buy your eBook, all your staff might walk out and you have to run your business. Lots of things can happen, but unless you try how will you know?

Obviously you need to be comfortable with varying levels of risk and have to know what is right for you. What works for one person can cause someone else to have sleepless nights. Work out what level of risk you are willing to work with and go from there.

Also most things require some money to start up. We don’t always have the extra money lying around to do these things with. That’s where being frugal, or finding a business partner/investment partner come in. Often you can find people willing to invest in your idea, for a split of the profits.

Make sure you do proper research though. No one is going to invest in something that has not been properly thought through and has no research to back it up. Also, you need to know that what you are doing is the right thing. Even with copious amounts of research things can go wrong or not quite as planned, but it is better than going in blind.

7 comments :

  1. I'd love to get a rental property, I'll have to wait a fair while before I can afford one though.

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  2. I have no suggestions, but I wanted to tell you that I am finding your journey very interesting and motivating.

    (PS - my 'word verification' words at the bottom of this comment are 'nopoo'... and I was thinking 'iwish'!)

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  3. I love the idea for your blog!! I'm a new follower now! I hope you'll check out my blog, although it probably won't help you much in your quest to become a millionaire!! lol

    http://www.ingenuemom.com

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  4. Just discovered your blog via FYBF... and I am loving all the great ideas you have on here!!

    :) Hazel

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  5. Hi, I'm following back from FMBT. Been scoping out your blog, and I think I'm going to like following you! I really liked this post. But I have to say rental properties are not passive lol. At least ours is not. When you start off small with 2 properties getting a property manager is just not in the budget. And tenants are never perfect. There is always some problem.

    How about this passive income strategy: Amazon Associates. It doesn't make a ton of money. Maybe about $30 a month (depending on how much you push it) but you really don't do much but throw up a link.

    ♥ Rachel @ Anya's Room

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  6. Thanks guys.

    lol @ no poo

    I'm following you all :)

    ParaJunkee, it really depends on your rental property. Ours requires pretty much no work and is easy. I had more probs with a property manager and now I have the perfect tenants who pay on time every week adn don't complain abotu anything. I'm really lucky.

    Amazon are a good affiliate. Thanks.

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  7. I get some passive income through writing online articles for Associated Content, and from returns on investments. Fortunately I have been able to increase my income in the last two years, so I am able to put more away and increase income from dividends and growth.

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