What is passive income? You’ve probably heard the term before, right? But what is it exactly? And how does it work? To explain what passive income is, we need to look at how money works. Most people understand that they need to work to make money. Meaning that they need to spend time to earn an income. And if they don’t work, they can’t make money. All that is very clear to everyone.
So, if you need to work to make money, what happens when you stop working? Do you stop making money? As an employee, you most certainly stop making money when you stop working. We call that an active income. Active income just means that you’re working a fixed amount of time for a fixed amount of pay. That could be hourly, weekly, monthly, or even on a per-project basis.
Passive income is very different. By definition, the word passive means that something happens on its own without resistance. Meaning that it requires little to no effort. When you earn passive income, it happens automatically. You’re not working 40 hours or 80 hours per week just to keep the lights on. It’s much different than an active income.
Imagine it like this. You’re sitting on a white-sandy beach somewhere on a tropical island gazing out at shimmering turquoise waters. Suddenly, your phone buzzes. Then again. And again. Payments are arriving one after another. You’re not hustling or working the phone. You’re not cold-calling or door-knocking. Money is rolling in on autopilot.
What is Passive Income?
Passive income is the dream. It’s the Holy Grail of all income-earning. That’s because passive income means that you’re not running around day and night trying to make money. It’s a frictionless way to make money that doesn’t require much of your time at all. However, passive income is not what most people make it out to be. Yes, it is the dream. But it’s also monumentally difficult to create real passive income streams big enough to sustain you for long periods.
In the beginning, passive income requires a massive level of effort. That means you’re sacrificing your time for zero pay in the beginning. Unlike an active income or side hustle, you do not get paid for time spent. You could work for months or years before a passive income stream starts producing revenue. For that reason, passive income is difficult to produce at a level that can sustain your monthly expenses.
To create a real passive income stream, you must invest time now for pay later. It seems like a novel idea. And in the beginning it’s exciting. But are you the type of person who can go months or even years without pay while working at an intense level? Because that’s really what it takes to create a passive income stream that’s large enough to be worthwhile.
How to Make Money on Autopilot
There are so many ways to make money. But what are the best ways to create money passively? There are so many ways that you can approach this but it all boils down to what you’re passionate about. Because passive income is difficult, you should only invest your time in passive income ideas that you can safely plug away at without pay for an extended period.
However, there are some steps you need to take to earn income passively. You need to be in a position where you can invest a lot of time into the passive income project to get it to eventually pay off. Otherwise you’ll be spinning your wheels. If you create a plan and stick to it, you’ll eventually get that income stream off the ground.
If you’re at a point in life where you’re sick of doing the same thing again and again, then passive income may be for you. It provides you the freedom and income to do the things you want to do when you want to do them. It means spending time with family and loved ones and not being held down to a specific job or geographic location.
Step #1: Pick a Passive Income Idea
There are many ways you can create passive income. It all boils down to picking the one that’s right for you. Each passive income idea will require a lot of work to get off the ground. Do you love making videos? Maybe you love writing? Social media? Real estate? Sales funnels? SEO? Investing? Affiliate marketing? Streaming? There are many creative ways to approach this. You only need to pick one and go all in.
When you go all in, you commit to that idea. You know what you’re getting into and you know that it’s going to be hard. Nothing about this is going to be easy. Although the steps are simple, it requires consistent effort and dedication. You can’t just start this one week and stop the next week and start again the week after. Passive income doesn’t work that way. This is about devotion.
For example, if you try to build a YouTube channel, you need to post consistently at least once every week. That means you need to make 52 videos per year. And the average YouTube channel takes about 18 months to reach 1,000 subscribers when you post consistently. Imagine only getting 1,000 subscribers after a year and a half of working to shoot content, edit that content, and promote it without pay. Does that sound glamorous to you?
Maybe you love writing and you decide to write a book and it takes you a year to write that book. Then you need to edit it, self-publish it, and then promote it. You’re forced to learn all the ins and outs of book publishing and promoting. Is it easy? No. Can you make money doing it? Yes. And it is passive income. But the book needs to be good and you need to get a lot of reviews for it.
Step #2: Decide How Much You Want to Make
The second step after you pick the idea is to decide how much money you want to make. This is about setting real goals that are written down and in front of you. Don’t just set the goals in your head. It makes them less real when you do that. Decide right now how much money you’ll make either weekly, monthly or annually. Make sure it’s much more money than your overall expenses.
When you decide on the amount of money you want to make it sets a clear intention. You should look at this every single day and rewrite those goals daily. When you rewrite your goals daily it solidifies those goals in your mind. It’s a daily reminder of where you’re heading. After all, it’s easy to lose sight of your goals when things get difficult.
When you have an amount you want to make, break that down into weekly or daily milestones. Then, as your efforts start producing income you’ll know exactly how much more effort you’ll need. For example, if one eBook makes you $100 per month, then ten eBooks should make you $1,000 per month. That makes sense, right? Although this is not a literal example, it’s just a way of knowing how much extra effort is required.
Step #3: Carve Out Your Working Hours
If you have a day job, don’t quit it to pursue passive income full-time. Instead, carve out hours you can work toward your dream. It could mean that you’ll work early mornings or late nights. Either way, decide where you to put the time. This is important because you need a consistent pattern of work. Think about this like a second job that doesn’t pay for a while.
The way that passive income works is that there’s no pay for a long time. Then, the money starts trickling in slowly but surely. Eventually, a tsunami of income hits you. It will happen suddenly and drastically. And it will hit you like a storm out of the blue. But it won’t be a bad thing. It will be a good thing. Plus, when you look back you’ll be glad you invested the time to make it work.
There’s a quote by Eliud Kipchogi that goes like this. “The best time to plant a tree was 25 years ago. The second-best time to plant a tree is today.” You’ve heard that, right? Don’t put off for tomorrow what you can do today. Carve out the time and the schedule to do this and get to work. Stop worrying about what other people think about you and put in the time and grind now for pay later. You’ll eventually be glad you did.
Step #4: Reverse Engineer Success
Tony Robbins says that if you want to be successful at something, find someone who is succeeding and model their behavior. That doesn’t mean you’re copying what someone else is doing. Modeling is different than copying. It means that you’re using a templated approach. It’s like reverse engineering, or taking something apart to dissect it and see how it works.
This is kind of like funnel hacking when you find a successful sales funnel that’s crushing it in your industry, naturally you want to know how they’re doing it, right? In the funnel-hacking approach, you take that funnel and model its approach by buying everything so that you can see all the upsells, downsells, emails, and so on. That’s because there’s so much more going on than meets the eye of any successful person or business.
No matter what you have to realize this will take time. Passive income is not for the faint of heart. It will take blood, sweat and tears. And I don’t just say that to be dramatic. This is serious work and serious effort for an extended period. That’s why you need a roadmap to get there and reverse engineering is your ticket to the so-called promised land.
Step #5: Hire a Coach
Passive income is hard. Your best bet is to find and hire a coach. A coach is someone who has already achieved the results you’re after. They can guide you better than you can guide yourself. Most people simply can’t stay motivated for long enough to achieve big passive income goals. That’s why you need someone who has already done it in your corner.
A coach will help you overcome frustration as you push toward your financial dreams. They’ll help guide you and steer you toward success in the biggest way. But only hire a coach that you can verify has achieved the thing you want to achieve. If you can’t verify it, don’t waste your time. Keep searching and hunting for someone who can help.
Coaches can help you in so many ways. They can offer resources and support. They can give you guidance and wisdom when times are tough. And they can provide a roadmap for how they did it. This is probably the most important part of having a coach. There are so many coaches that you can hire in so many different fields, but you should certainly start here.
Frequently Asked Questions
What are the Most Profitable Passive Income Ideas?
There are many ideas for generating passive income. But the most profitable ones that are sustainable and have great tax advantages are rental properties. Rental properties are by far the best way that you can generate passive income. You can buy rental properties for long-term tenants and you can also buy rental properties to use for short-term vacation rentals. x
What’s the Average Amount of Money You Can Make With Passive Income?
According to the US Census Bureau, roughly 20% of the households in the United States generate passive income, which comes through three primary sources. The first source is rental properties. Rental properties have many tax advantages beyond just being a great source of passive income. The other sources are interest income and dividend income. The average annual income for these households is $4,200.
What’s the Best Passive Income Idea if You’re a Complete Beginner?
If you’re a complete beginner and you’re just starting out, there are many really good ways to generate passive income. But the best way you can start is to build sales funnel designs and sell them in our marketplace. You can create the designs once (requires zero coding or tech skills) and put them up for sale. Every time someone purchases a sales funnel design you get paid. So you do the work once and get paid repeatedly for it. This is the best passive income idea for complete beginners.
Can You Live off of Passive Income?
It all depends on your monthly expenses. In the beginning, living off of passive income will be hard. Since it takes so long to generate a real flow of passive income, your expenses need to be at a bare minimum to live off of it. However, over time, you can certainly live off of passive income as long as you stick to that same method for years and years. Eventually, you’ll find a way to succeed at it. But it will take time.