Building a passive income is a daunting task for virtually everyone who ever tried it. However, it has proven to be a sustainable well of revenue which will never run dry. Imagine a steady flow of income without having to do any work. Yeah, that is what passive income provides you.
Okay, let’s get to the bitter truth.
Like anything in life, you have to lay the groundwork before sipping from this well of never-drying income. This groundwork usually entails sacrifices, efforts, investments, time, and patience.
No one has built a stream of passive income by barely setting something up and leaving it to thrive. In fact, one of the fundamentals of succeeding with passive incomes is focus and dedication at the start.
The good thing about passive income is that you get to reap the fruit of your hard work without inputting any more effort, time, money, or investment. You could be doing anything besides that project yet receiving income from it. It is worth it in the long run.
However, committed efforts over a long period of time is the key to achieving passive income. This is why I took the time to write this article aimed at exposing the relevant steps you should take as you get started on your path towards financial freedom.
It All Starts With a Dollar
Passive income starts with saving. Every successful investor out there started with putting aside a dollar. It may look insignificant but they quickly add up to a huge amount. The beginning of every passive income journey is marked with active efforts and sacrifices. It is very important to put aside a few dollars each week. The goal is to create a long term stream of income where you get to harvest from already planted efforts. Therefore, I would advise you to take the pain and start saving today.
Of course, saving is not as easy as it sounds or everyone would have healthy savings. Fortunately, there are a few tools that make this easier. Acorns is an app that will round up your credit and debit card purchases and invests it for you, it’s a mindless easy way to save. Personal Capital is designed to help you track your monthly income and expenses. This tool help you make informed financial decisions by showing you how much you spend and the things you spend your hard-earned cash on. Consequently, they help you to cut back on frivolous spending and increase your savings.
Leaving your cash sitting in the bank all month will earn you minimal interest in todays environment. Dividend investing, on the other hand, earns you so much more. The goal is to invest in something that is capable of creating recurring income and stocks that pay a healthy quarterly dividend can accomplish this. Companies such as ExxonMobil, Proctor & Gamble, and Altria have been paying steady dividends for years. For additional information on this subject refer to my Modern Dividend Investing Strategy for Beginners article.
Become the Bank not the Borrower
Investing in peer-to-peer platforms such as Lending Club is yet another way to boost your savings. Lending Club allows you to invest in several loans with a reasonable return on your investment. To maximize your profit and minimize your risks, I would advise you to spread your investment across several worthy notes. The initial stage of investing may be demanding as you have to spend some time scrutinizing each loan offer but after that you will have a steady stream of monthly income. You read my full Lending Club review here.
Investing in Rental Real Estate
Rental real estate is a very good way to generate passive income. Like other streams of passive income, this may require you to put in some cash, time, and effort. Choosing the right property, making repairs, and dealing with tenants take a special skill set that can be learned over time or you could also hire an experienced property manager to handle this for you. What I like most about owning rental properties is the longer you own them, the more income you receive. I always buy a property that will generate positive cash flow from day 1 (that means that after all expenses and mortgage is paid there is profit leftover). As time goes by, the rents will increase and the mortgage will be paid off allowing you to generate massive passive income.
People that want to get started investing in Rental Real Estate that do not have the down payment required to make a large purchase on their own or do not want to deal with the hassle of tenants there are solutions for that too.
Fundrise is a real estate investment company that allows average investors to participate in their deals for as little as $500. They invest in primarily commercial real estate and you can expect an average return or 8-10% on your investment. I will be doing a full review of them very soon.
Investing in a Business
Lastly, setting up a business is a good way to go too. The initial stage may require you drafting a plan, seeking a good location or online platform, choosing the perfect brand, campaigning for an audience, etc. But after this stage of development comes a recurring income stream that could last forever. A good example or semi-passive business ideas would be a Coin Operated Laundromat, Car wash, and other low labor intensive ventures. An established Laundromat that has an employee capable of cleaning and fixing machines can be a really good passive income generator, just show up once a week and collect the cash.
Starting a website or blog is another good example of a business that anyone can start. Pick a topic that interest you and away you go. Once established it can generate many years of passive income with very little support or maintenance. Check out my Wealthy Affiliate Review and learn what’s involved.
Passive income is pretty difficult to start up. The entire process can be daunting and you could earn very little as days roll into weeks and weeks roll into months. Some forms of passive income such as setting up a business may take a couple of years. However, this phase quickly fades and after that it can be an uninterrupted flow of never ending income. Income that is generated while you are asleep, partying, or on a vacation. Unlike active income that drys up when you stop working, you continue to benefit from passive incomes without having to ever work again. What would you rather spend your time on?