It probably isn’t a secret to anyone who has shared a conversation with me in the last year: I am fascinated by the concept of passive income.
Before I go to much further with this, I feel as though I should probably define what the term “passive income” or “passive revenue” means to me. In its simplest form, I define passive income as an income stream that doesn’t require continuous investment in time. In other words, it is money flowing into my bank account while I’m sleeping, while I’m on vacation, and otherwise while I’m not actively doing something to earn it.
Does that make me come off as lazy? It shouldn’t. Passive income almost always requires long periods of initial time and financial investment in order to reap the benefits later.
I consider Money Journal to be a potential source of passive income for me. While I am just starting out, there is no material income flowing in from this site. I spend hours each week researching keywords, working on the design of my site, and writing articles – all the while receiving virtually no revenue. The reason why the income I will eventually get is passive is because once I write an article, it will be sitting on my site forever. This article I’m writing right now might be seen by 20,000 sets of eyes over the next five years and may generate $20 or so in advertising revenue. I’m putting in the work today in the hopes that I can reap the benefits later.
Why is Passive Income Important?
I work hard at my job and make a fair salary, so why do I still pursue passive income? It’s not because I’m greedy, but rather because I want to have diversity in my income streams. There are a few reasons for that – the most important being a hedge against future income challenges. A stream of passive income would be extremely helpful in the event of job loss, for example.
What about something a bit more serious, though? I may have 35 years of work ahead of me before retirement. What if some new technology comes out during my working years that either makes my profession (Financial Analyst) obsolete or do significant harm to my industry (Electric/Gas Utility)? What do you do when you’re in your forties and suddenly everything you went to school for and everything you have experience doing becomes obsolete? From my vantage point, this is where passive income has its true value. In short, it helps you weather any storms that life may send your way.
Why Not Get a Second Job? Or Freelance?
I have a couple problems with the idea of getting a second job, as well as doing something like freelance writing. Firstly, I’m already part of a dual-income household – other than the fact that my free time is too important to me to be pledging it away to another job, there just feels like something unethical about me taking on a second job (potentially from an unemployed person looking for work) when I don’t actually “need” the money.
Freelance writing is also something that has never appealed to me. The idea of getting paid to write an article for somebody is convenient and a great way to make extra money, but again, I’m not looking to trade labor for money – I already do that at my full-time job.
My Favorite Types of Passive Income
Right now, internet properties and mobile apps are my favorite types of passive income. As I wrote last week, a couple partners and I have an Android app out that’s bringing us more than $300 per month in passive income. My current websites aren’t earning nearly that much, but I’ve only been pursuing the monetization of these sites in the last six months.
Dividend income is another great source of passive income, and it is a lot less risky than investing in something like a website. You simply invest your money in companies that pay dividends, and you get quarterly payouts right into your brokerage account (which you can reinvest to compound your interest). It’s not as fun or potentially lucrative as other sources of passive income, but it’s still passive income nevertheless.
My challenge to you as a reader: Search for things you can to do initiate a passive income stream. Keep in mind, again, that we’re not trading labor for money. Labor may be involved, but it will be an investment in a future revenue stream. What kinds of ideas can you come up with?
Do you have a passive income stream? Are you pursuing passive income? Let’s discuss in the comments below.
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