How to Develop a Safe Passive Income Stream
Today more than ever, making money while you sleep sounds enticing. The promise of a steady passive income stream can improve lifestyle beyond the guarantee of holding a steady paying job, it can weather financial storms, lead you to financial independence, and often make your way to early retirement. The idea is an appealing thought, however, establishing a reliable passive income stream takes a great deal of strategy, patience, and most importantly and avoidably consistency.
What is Passive Income?
Passive income is basically money you earn with little or no measuring involvement after you initially set it up. Passive income, unlike active income, does not need a person to work a job or run a business, and if done appropriately, passive income can lead someone to create multiple streams of income with virtually no consistent effort. Instead of using the analogy of planting seeds today for a money tree tomorrow, instead, let's use planting apples. One apple will not make you a passive revenue stream but say you planted hundreds. With apples, you can create hundreds of passive revenue streams and only pick them, sell them, and the cycle continues.
The Steps to Develop a Safe Passive Income Stream
1. Identify your Skills, Resources, and Risk Tolerance
Before developing a reliable, steady passive income stream, you should access what you've got: skills, time, capital, and risk tolerance. A person with writing skills may engage in digital products to house their skills. An investor with money may engage in real estate investing or dividend stocks.
2. Select a Passive Income Route.
Everyone creates passive income differently, and there are barriers for entry and maintenance for all types of passive income. Here are just some that you might consider:
• Dividend Stocks & ETFs: Investing in stocks that have dividends can create a monthly or quarterly cash flow by investing in companies that pay dividends.
• Real Estate Rentals: Rental properties (or REITs [Real Estate Investment Trusts]) can create monthly returns; however, they may require up-front investment.
• Digital Products: e-books or courses or software can create long-term revenues once created.
• Affiliate Marketing & Blogging: Build your own blog or niche website and earn commissions by talking about your recommended products for your audience.
• Peer-to-Peer Lending: There are a few websites that allow you to earn interest by lending money directly to someone who needs to borrow money through the process of peer-to-peer lending.
• Royalties from Creative Works: if you are a musician, author, or designer, you could create a product that allows you to earn royalties whenever someone listens to your music, reads your book, or uses your design.
3. Start Small and Diversify
Don't put all your eggs in one basket. Perhaps you are investing in the dividend company stocks like in the last section which is where you will focus your time; however, you could still be building a digital product at the same time. Diversification limits overall risk and creates multiple income streams that can affect and complement each other.
4. Automate and Systematize your streams
Automation is the foundation of true passive income. Find systems and tools that will automate most of the work:
• Property managers for your real estate.
• Automated trading for your investments, or use robo advisors.
• Email marketing systems for your digital products.
5. Reinvesting profits
Get in the habit of reinvesting your profit. Rather than cashing out now you can reinvest, which will increase the speed at which you build your income streams. For example, when you reinvest dividends in your investment portfolio you are using your money to create exponential growth, similarly when you reinvest profit from real estate you are also growing your portfolio through purchasing more properties.
6. Be patient and persistent!
Creating a passive income stream is WORK . It is not, and shouldn't be perceived as, a get rich quick scheme and most passive income streams will take weeks or months to bear fruit, and possibly years to get going, which is OK , just be persistent and continue to develop your plan.
Common mistakes to avoid:
• Expecting Overnight Results - Passive income will be anything but - at first!
• Forgetting about costs - Always remember to factor in costs, and all possible taxes.
• Overestimating Passive - All income streams require incrementally tweaking , and most require monitoring!
Final Thoughts
An ongoing income stream will change everything about your financial future. But keep in mind, passive income is not magic, it is an incremental process. If you have the right mindset, implement some diversity, and take incremental steps, you will relieve your financial stress incrementally and get closer to financial freedom.
The best day to start was yesterday; the second best day to start is today. Get your seeds in the ground today, and your passive income will grow.
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