If you’re tired of being an employee and doing work based on someone else’s decisions, then don’t worry – you’re not alone. It seems everyone wants to be their own boss. Or, we at least want to bring in a little more money on the side. However, it isn't always practical to quit your job and dedicate all your time to building a viable business just so you can be in charge of everything that you do. So, what's the solution?
Consider generating a passive income online. Requiring little active attention, setting up a form of passive income can be a great way to generate extra revenue while you still work a full-time job. Sometimes, a passive income venture can even turn into your full-time job if you build something sustainable. But what exactly is passive income, and what are the best ways to accomplish it? Keep reading to learn more.
What is Passive Income?
There are three major types of income in the world: active, passive, and portfolio.
Obviously, active income is money you earn by performing a job. This includes wages, commissions, tips, and income from a business where there is material participation by you. Passive income can be defined as income you earn without needing to directly participate in its creation. One of the most common and popular sources of passive income is owning rental property. The third type, portfolio income, is a subset of passive income. This is money you earn after an initial action or effort. It includes collecting stock dividends, royalties, and capital gains.
From Side-Hustle to Infinite Revenue Stream
Forbes writer Brianna Wiest calls passive income an "infinite potential income stream." Online sources of passive revenue generation require some initial setup and monitoring to make that income stream truly infinite and sustainable. There’s a number of legitimate ways to earn such income, but we'll cover four proven strategies that have been used by millions of online entrepreneurs.
You don't necessarily need specific credentials, a business license, or any form of legal entity to build a passive income unless you're engaged in an activity that requires professional licensing or the platform that you're using requires it. For example, you may have to get a business license if you're going to open an online store on eBay rather than selling single pieces of merchandise by auction.
But many online entrepreneurs create a limited liability corporation for tax purposes. This helps protect you from any personal liability that results from your business activities and shields your personal assets from forfeiture. An experienced business lawyer can provide you with legal guidance regarding your personal situation.
When conducting any sort of business online, it's important to keep security and privacy in mind. You can accomplish both by connecting to the internet through a virtual private network (VPN) server on all devices.
1) Producing Online Courses or Educational Materials
This strategy may require a bit of knowledge or expertise on your part to get started. Many e-tailers use this as a supplement or value-added product to support other online business activities, as well as building traffic when establishing an online presence. However, it can also be used as a standalone business model.
People pay to learn about activities that can be taught through video or written materials. Popular choices are web design and programming, but courses can also be catered toward painting, auto repair, or almost anything that you can demonstrate. You'll have to spend a little time and money creating your course, but you can distribute it through an eCommerce website, by creating a YouTube channel, or by offering it through platforms like Udemy.com and Teachable.
2) Software Development
Even if you're not technologically inclined, you can generate a nice passive income by offering a software-as-a-service (SaaS) product. This means of generating income has become very popular due to the rise of cloud-based computing and open source coding, which doesn't require a license to produce, use, or distribute. It allows you to offer software products and applications to users around the world.
How do you find or create such products to offer as a service?
You can hire a developer to create an app for you, build an app yourself, or work as a reseller of an existing SaaS product. Software is usually sold to customers online for a yearly licensing fee or as an on-demand service.
3) Online Investing
Online investing and day trading have become very popular. It's an easy way for novices and seasoned speculators to increase their investment portfolios from the comfort of their home or office. There are several ways that you can go about investing online.
A simple and relatively low-risk way is through passive investing through a platform like Acorns. You simply open and fund an account. Then, you use your attached Acorns debit card as you normally would your bank card to make purchases and pay for services that you already use. The company rounds up to the nearest dollar from these transactions and invests that spare change on your behalf.
A little more complicated is an investment activity like stock trading, where you speculate on money markets and contracts for difference (CFDs). Neither of these platforms involve buying stocks, bonds, or purchasing tangible assets of any kind. You're basically betting on the value of an asset or currency at the close of a specified time period and collecting the difference. Forex trading is legal in the US, but CFDs are not, so pay attention to where your trading platform is physically located or registered.
Working with online robo-advisors who can help you purchase various dividend stocks is another way to create passive income through investments. Several online platforms, such as Betterment and Wealthfront, provide several products for homeowners and individuals, one of which is diversified, low-cost index funds. This investment opportunity is powered by “smart” technology in the form of their application that does all of the research and allocation. It then makes investment decisions on your behalf using your goals and proven strategies that minimize your risk.
This one can potentially cover a lot of ground, and it can take some time and initial investment to get it up and running, so I want to be very specific. There are two solid ways to turn eCommerce into a relatively passive revenue stream. One is dropshipping, and the other is through affiliate marketing.
Dropshipping is the digital version of the direct mail catalog sales venues of old. You decide what type of merchandise to sell, find a reputable dropshipping supplier, and offer visitors these products at retail. This may cost an initial investment to start an online store, and you may be required to purchase a membership through a wholesale buyers club. There is virtually no limit to the types or amount of merchandise available, and you set your own profit margins, which can be a big stepping stone with managing your marketing budget.
While you have to depend on the reliability and quality of the products you sell from other parties, a reputable vendor has likely already investigated the suppliers they work with for quality and dependability. They also handle shipping, warehousing, and refunds for you. Once you have everything set up, your participation is mostly limited to providing minimal customer support. But, before you make any long-term commitments, be sure to do your research and read the fine print of any dropshipping agreements.
On the other hand, affiliate marketing is a means of generating income through links to advertising partners. Whenever a visitor to your website clicks on one of your affiliate links, you collect a commission. Affiliate programs are often used by bloggers and other content creators who want to add a revenue stream to their platform that supplements other activities.
What could be better than waking up to a fresh batch of deposits in your bank or PayPal account? While there are no viable get-rich-quick schemes, there are ways to create a substantial passive income with a little knowledge and application on your part. A few of these methods, such as eCommerce, can be started as passive income and built into a full-time, large-scale business venture with enough success.