Tuesday, 09 August 2016 01:00

Automated Income With Passive Income 101

automated income passive income

What Is Passive Income and Income Automation?

Passive Income and Automated Income are two terms that mean the same thing, and that is simply the act of making money without actively being involved during the sale or transaction of money.

Working at a 9 to 5 job is active income because you physically have to be either at the job or working in order to be paid. The vehicle to make money in this situation is time. Without putting in the time, you make no money. 

Other types of jobs, ones that are task based, for example also are an example of active income. You have to actually complete tasks in order to be paid here. The same is true with freelancing and subcontracting.

Passive Income, on the other hand, doesn't require you to be actively involved in order to bring in money. Passive income can be made while you're sleeping, eating, in a meeting or even when you're out spending time with your kids. 

The internet is the number one place to generate passive income. If you sell products online, you don't have to physically be at your computer in order to make a sale. If you are a one person shop, you do have to spend the time to fulfill the order, however.

You can make money online by recommending products or services too. You can write a review or create a video walking the viewer through the product. At the most basic level, if a site visitor decides to purchase the product you've reviewed, then assuming that you have an affiliate agreement with the company that is actually selling and fulfilling the product, you will make a sales commission for the referral. This, in essense, is much closer to passive income as it requires no work from you after the intial review is created and posted. You could be doing any number of things and people still are hopefully coming to your website, reading/viewing your reviews, and making a buying decision.

How Is Passive Income and Income Automation Useful To You?

Beyond having a vehicle that is potentially making you money even while you're doing other things, Passive Income is the driving force behind a number of different things:

  • Supplementing Your Existing Income - It adds to your income giving you more breathing room in your finances to get where you want to be. Should you lose your job, you'll also have something still coming in so you might not have to panic (as much).
  • Saving Money Without Sacrificing Your Current Amenities - Having the additional money coming in could let you really start saving money for something bigger. Since it is additional, you wouldn't have to give up that Starbucks coffee in the morning to save.
  • Replacing Your Job - More or less, replacing your job with Passive Income is the holy grail that we're on a quest to acquire. When the automated income you make exceeds your wages at work, it could be time to fire your job, but be careful and really think and consider all the options before doing so.

How Does Passive Income Work

For the most part, you probably have some idea of how it works, but it's the process of setting up ways to make money without you having to be involved actively at all times. Understand that it will take a lot of extra time and work to get things going, but once the wheel is in motion, you can do other things, only coming back to it once in a while to maintain it. Regardless whether you're working on the automated income stream or not, it always has the potential to make money, and if you do things right, it should be bringing in cash in some amount on a daily basis after it's gained momentum.

One of the most well known passive income streams is investing. Whether you're investing in the market or a start up business, the potential is there to really get a good payout IF everything goes right. I'd probably be dabbling in this if I had capital to invest, but since I don't, I take the low-cost option:

Creating simple websites that recommend products and services as well as provide valuable information, and when someone buys from one of my recommendations, I make commissions on the sale. People come to my websites at all hours. I've gotten emails telling me that people have made purchases while I've been sitting in board rooms, boring meetings and even when I wake up in the morning.

I prefer to affiliate myself with online retailers such as Amazon that pay commissions when someone you refer sells. It's worked really well for me, and in December 2015, I walked away with over $8,000.00 in commissions while putting less than 20 hours into the site over the course of the whole month. Sure, since I actually was working on the site, it's not true Passive Income, however, until December, I had never made $400 per hour in my life!

Types Of Passive Income

While I did mention a couple ways to generate Automated income streams above, there are also other ways to make money without being directly involved. If you already own a brick and mortar shop, you can hire a manager that's good enough to run the whole operation while you're away doing other things. You could start a lawn service with just a couple lawnmowers and contract people to do the actual cutting while you focused on building the business and gaining new lawn cutting appointments. There's a lot more ideas out there on how to create automated income, but you just have to be creative in your ways, and you should have a clear plan of action to make it work.

Managing Your Expectations

It's very easy to get caught up in the thought that you could get rich quickly or that your website will just take off, which isn't the case in 99.99% of the time. Building Passive Income Streams Takes Time. There are some expectations you should have if you decide to start creating automated income:

  • You might not see income from the endeavor for six months to a year, if at all. Many attempts fail for various reasons, and the odds are stacked against you.
  • You might have to try several ideas before one sticks and starts to take off.
  • You will get dejected and feel like it's not worth it. This will happen, even if you're the most driven person in the world -- It's all a matter of doing diligence, having faith and believing in your plan, even during the rough periods.
  • Even though you may start by using free tools, you will need to invest money into your endeavor sooner or later. Whether it be online or social media ads, SEO services or anything else, you will need to invest into your business in order for it to succeed.
  • Always have a contingency plan that you can fall back on if this doesn't fly. Having something that you can fall back on is essential. For most of us, it's our 9-5 jobs that we fall back on when things fail (and they will) while creating automated income.

Good Information... What Now?

I will walk you through the process of setting up a website that is positioned to generate passive income in the exact way that I do it. I will take you through how you buy domains, get the right hosting and build a site.

Expect to pay $20-$30 for the domain and various services to start.

See you next post!

-- The Purpose Driven Dad