Passive Income

If I were to give you two options as a profession, a steady paycheck with benefits or a ton of work with no immediate income and a high risk of failure, which would you choose? I’m guessing most readers would easily pick the former, especially now in the Great Recession when a steady job is such a hot commodity. But what if I told you that, with the latter, if you created a product with enough value in the market that you wouldn’t have to “work” another day in your life?

What I’m describing here is the difference between active and passive income. The regular clock-in/clock-out job is active income meaning that you are directly trading your time for a paycheck from a company or client. It could be a service in which you wash windows, massage people, or dance in a Broadway show; but it could also be trading your time to build a car or web application for a paycheck from your company. The key ingredient here is that, outside vacation and sick time, you must be actively working in order to make money. That may sound solid and steady, but it may also sound a bit like slavery.

There’s a different type of earnings altogether: passive income. This is income in which after a significant initial investment (of time or wealth), very little is required to maintain income. Sitcom actors earn passive income every time their shows are aired. Insurance salesmen earn passive income every time their clients renew with them. And homeowners receive passive income when they rent their place out.

Some people in the Occupy Wall Street crowd or other irrational types may not consider this a valid form of income. They may see this is not really earning money and might even claim it’s a form of exploitation. No one should be able to get income without working, or as Dire Straits would say, “money for nothing and your chicks for free.” But this argument is pure poppycock. Passive income earners work just as hard (or harder) for their income as active income earners, only they work before their profits, not simultaneously. This means that they oftentimes must work two full-time jobs while making money for just one or be disciplined enough to save up wealth in order to make the initial investment that will eventually bring in the passive income.

If you have the drive and the passion, I highly recommend passive income as the gateway to the Good Life. There are plenty of ways to earn passive income and just about any motivated person can do it. All it takes is a good idea and a lot of determination and you could be living the dream life you’ve always envisioned.

You could rent your home for passive income, as mentioned above, but there are other goals you could pursue, which are more suitable to the general populace: website ad revenue, network marketing, and writing books. Each avenue requires different skills and each is difficult in its own way, but they are all achievable by the majority of people out there and can be accomplished while working a day job to maintain a baseline of income.

Website Ad Revenue

There’s this thing called the Internets. I’m sure you’ve heard of it. It dominates most people’s lives. If asked to give up the Internet for the rest of their lives in exchange for a million dollars, most people decline. And it is the single-most opportunity-rich environment in the modern economy. In other words, if you have an idea for a website (or application), opportunities abound to make it happen. The best way to make money on the internet is to create a platform in which users generate content and which is supported by ad revenue. Estimates place the value of Interactive advertising at $300 billion in the United States and active web browsers are just itching to give a slice of that pie to you.

Network Marketing

I haven’t participated in these but the pitch-people are very persuasive and the principle lines up nicely with passive income. If you don’t have a product in mind that you’d like to create and sell but you have a big network of friends and you’re a natural salesperson, you can always sell other people’s brilliant ideas through multi-level marketing (MLM). MLM is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of others they recruit, creating a downline of distributors and a hierarchy of multiple levels of compensation. In other words, you sell the product to your friends who in turn sell the product to their friends who in turn sell the product to their friends. All along the way, you get a cut of each sale. If the product is good, this could be a great technique. If not, then it’s just a pyramid scheme.

Write a Book

My personal favorite form of passive income is writing. Everyone has an idea of a book that they’d like to write and the actual skill is fairly easy (especially if you team up with a decent editor). And the technology is available to allow everyone to publish for themselves at very low cost. With the advent of print-on-demand technology and e-books, the publishing industry is exploding and there is plenty of opportunity to make a living as a writer/publisher. Of course, as a writer at a conference once derided, soon there will be 300 million published authors in the United States all with about eight customers, but there will be a lot more information out there. Making your book a bestseller is another topic, but you must take the first step in order to get there.