This crucial question to achieve financial freedom is a big challenge for any Happy Investor. How to generate passive income? How can I let my money work for me? After all, money makes more money. With passive income the goal is to get a monthly cash flow without having to work hard for it. Stop for one second if you think this is easy. Those who want to get rich fast, should either put all their money in an extremely high-risk investment, or go to the casino. This article is not about getting rich fast, it is about building passive income streams that will generate monthly cash flow for many years. To achieve this, a human has to work very hard in the early beginning. Yet, with the right financial education and some creativity, it can be done by everyone.
Passive income ideas are one of element of achieving financial freedom. If you want to become financially free you should read our free guide full of insights and tips on how to become financially free.
In this article about how to create passive income streams that generate monthly cash flow, we will first discuss about the nature of passive income stream. We will explain what kind of passive income streams are possible. And, we will discuss several ways to build such a kind of revenue stream that requires significant little time of yours.
Table of content:
1. What is passive income?
2. Is passive income truly passive?
3. What ideas of passive income streams can I start?
4. How to make passive income?
What is passive income?
Passive income streams are channels that earn money for you without having to spend a lot of time on. Passive, in this context, means that you do not have to put a lot of effort on it once a passive income stream is in place. The latter is key, and implies that first everything has to be in place before an income generating stream can become passive. In this article, we are going to explain how to build passive income streams. But first we are going to discuss what a passive income stream does.
The very basic foundation of gathering more money is to spend less than that you earn. It is a very simple concept: ensure that every month you have a positive cash flow. This means that every month you will have to get more money in, than that you give out. There are many tools to can help you with financial budgeting. In this course however, we will not address this point. What is relevant in this topic is to find several ways to earn money. Most of us earn money by income. Yet, there are so many limitations on income.
The limitation of time with active income
One of the biggest is the limitation of time. You get paid for your working time (except from bonuses). So let say you work 40 hours per week and earn 3000 dollars per month for this full-time job. Often, when you choose to work 45 instead of 40 hours, you will not get extra money instantly (except from overwork). Nonetheless, it is crucial to understand that you get paid for every extra hour you spend.
I hope you will understand that this is a big limitation for if you want to earn more money. In this case you have two options. Firstly, you can work more hours if you get paid for the extra work. Secondly, you can earn more money per hour (promotion, raise, …). Yet, there is another way. The way of passive income.
Passive income generates money beyond the limitation of time.
Passive income ideas will yield money without the need to put a lot of hours in it. What is the benefit of this? The benefit of passive income is that it goes beyond the limitation of time. You can earn money while you eat breakfast, you can earn money while you sleep, you can even earn extra money while you work during your full-time job! That, my friend, is the beauty of a passive income stream. It will generate money for you without having to actually work on it. Without actually having to put focus and energy on it.
So, the concept of passive income sounds truly amazing doesn’t it? Well then, why doesn’t everyone does it? There are multiple reasons for this. But before reading about why people don’t build passive income streams you will have to realize that it is more simple then you think, and that IT IS POSSIBLE.
Why doesn’t everyone generate passive income?
Why doesn’t everyone build passive income?
1. People are not willing to do the extra work that requires to build a passive income stream
2. People do not have the financial education to build passive income streams
3. People don’t believe in passive income ideas
4. Many people don’t think that it is possible to build a passive income stream
Are you willing to do the extra work? Are you willing to work hard in your spare-time to achieve your dreams and create passive income streams? Do you want to follow financial education to understand how to do it? Do you believe in it? And, most of all, do you believe IT IS POSSIBLE?
We will learn you about the true nature of passive income streams. We will learn you about what kind of passive income streams exist, and we will learn you how to build passive income.
Is passive income truly passive?
The magical question: is it possible to earn money while I’m sleeping? Can I earn money while I’m doing absolutely nothing? Or when I’m travelling? Or even when I’m shitting on the toilet!?? The answer to all these questions is YES. YOU. CAN. And in this course you are going to learn exactly how to achieve it by following the basics and implying your own knowledge and creativity on it.
That having said, the true answer is that passive income streams are not truly passive. Even when you’ve realized a recurring revenue stream, it always need some attention. This is very logical. Think of a flower, or even a relationship. It takes time, energy and money to make a flower grow. Eventually, the flower is big and beautiful. You will enjoy from it every day. But still, the flower needs water to stay alive. Depending on the type and strength of the flower, it will need water daily, or perhaps monthly.
Sustainable passive income streams
For passive income ideas the exact same principle is at force. In the early stage there is a need of time, energy and money to build a passive income stream. Depending on the type and strength of the passive income stream, you will need to invest more or less time, energy and money in it. Also, your own financial education and dedication are important factors in building enduring passive income streams.
Once the residual income is strong and solid, it can become passive. You can enjoy from it every day. It will generate money every day, without having to work 24 hours on it. When the passive income stream is strong and solid, like for example a very good stock investment with dividend, you can sit back and relax. In this case you only have to check the stock markets and you stock portfolio once and a while to check if you need to re-balance your portfolio.
It is also possible that you have a passive income idea that still requires one hour of daily work on it. Think about a web shop for example. In this case, you only have to send some invoices each day to collect your money. Or perhaps you do some extra 30 minutes to improve your SEO. Despite you need to work one hour daily on this passive income stream, it will generate i.e. 300 dollars a day.
The power of passive income
This example brings us to a valid question: how can a passive income stream be passive, when I still have to work for it? That is: the true power of passive income is that it requires significantly less time and energy compared to other types of income, while generating significantly more money (per hour).
To help you understand the essence of the above, we will describe a situation. In situation A you have a full-time job as a Manager. You enjoy your job and earn well. You will receive a monthly secured salary of 4800 dollar, that results in a hourly income of 30 dollar (based on 40 hours per week).
In situation B you have a full-time job as a Manager. You enjoy your job and earn well. You will receive a monthly secured salary that results in a hourly income of 30 dollars. But you also have a passive income stream: an affiliate network. You’ve spend four years to build this network, and now it finally has become passive. You spend one hour a day to maintain the network and this results in a hourly income of 150 dollar. That is a 150 dollar a day, making it 4500 dollars extra per month.
The beauty of passive income
That is the beauty of passive income: you earn significantly more money per hour, with spending significantly less time and energy on it. A man who finds himself in situation B has many more options compared to situation A. A financial educated man understands that the long-term mindset of a Happy Investor will bring him true financial freedom in another five years. This man, who is financially educated and follows the way-of-living of the Happy Investors, will use the extra 150 day to invest in building more assets. This man will get rick quickly, ensuring financial freedom so that he can use his time and energy for more value-added activities than work! If you want to become this man, you should read our article about how to achieve financial freedom.
Passive income ideas
By now you understand the fundamental concept of a passive income stream. We will continue our journey by discovering forms of passive income streams. Luckily for us, there are several ways of passive income streams for recurring income.
We are going to describe only the best forms of passive income streams that can generate sustainable recurring income on the long-term. We are not interested in bullshit such as clicking on e-mail links or filling in questionnaires for 50 cents. That isn’t even passive income! Happy Investors think BIG, and ACT upon it.
True passive income streams with actual money making capability can be found below. If you want to learn more in detail about one of these passive incomes streams of below, then you should go to our article about 7 effective ideas of passive income ideas. In that article we make a deep-dive in each passive income stream about what it encompasses, how to make it work, and the best advises on how to make it a true success (instead of wasting your time).
Types of passive income ideas:
- Automated business
- Drop shipment as passive income stream
- Build a Blog channel and apply Affiliate Marketing
- Invest your money (learn about growth stocks, dividend stocks, bonds, alternative such as crypto’s, marijuana and gold). Money makes money
- Start a Youtube channel and share valuable video content
- Start an Influencer Channel about your passion
- Real Estate (long-term investing method)
If you want to learn more about passive income ideas (what is it, how does it works, how to make it a success, …) then read our deep-dive article about 7 effective types of passive income ideas.
Very important with passive income streams is the challenge of scale-ability. How can you scale your business without spending more of your own time on it? Organizational design for automation is the key answer for this scale-ability challenge. In our last chapter we are going to explain you how to build a sustainable passive income stream for long-term monthly cash flow.
How to make passive income?
The long introduction is necessary before you can build a passive income. Think about it: how can you build something if you do not understand what it is and how it works? Hence our long introduction. But now, in this chapter, we will finally learn about how to build passive income streams.
In general there are three phases. Phase 1 is about determining your favorite passive income method and to set goals. In phase 2 you need to get started and work on your goals. In the final phase, we will have to turn our residual income into a passive one.
Phase 1: Choose your favorite passive income idea and set goals
To achieve your goals we will need to have focus, dedication and consistent effort. Therefor we can’t just start building on all passive income ideas at once. We have to pick just one. So pick your favorite passive income and set clear goals on what you want to achieve with them. The time frame is up to you, but make sure you stretch and challenge yourself.
In the starting phase there are a few crucial factors that have to be considered:
- Choose your favorite passive income that is connected to your strengths
- Define your 5-year, one-year, monthly and weekly goals.
- Determine the resource or capabilities you need to achieve the goals.
- Organizational design
Combine passive income with your biggest strengths
When choosing our favorite passive income it is necessary that this is not just randomly chosen. We strongly advice you to choose a passive income stream that is very close to your biggest strengths. Other passive income streams might have bigger growth and profit potential in your perception, but this should be ignored. Stay with your strengths, and stay within your interest. If you don’t like something, it is very hard to achieve your goals. If you don’t know how to do it, there will be more challenges on the road. To achieve your goals, motivation and skills are crucial.
In our opinion the mindset is the upmost important. Hence our community name: the Happy Investors Mindset (H.I.M.). When you have the right mindset, you will feel this burden to achieve your goals. It will become part of life. Yet, always keep in mind that money is just a resource to a happier life. Do not let it control you. Control the passive income, and make sure that it will create more time for you to spend with family.
Organizational design: design for passive income
One topic that has to be addressed separately for emphasis is the organizational design. It is crucial important that from moment one you will design your adventure to become a passive income stream. We do not design it to become merely an residual income. It has to become passive. The passive factor is crucial, because it will imply significantly less working time on it!
To be very clear: in the begin you should work just as hard, or even harder, as with building a new business or any other income stream. There is no easy way. And it requires business knowledge as well. However, the goal is to make it passive. So at a certain point, you should be able to work less and still be able to scale your business. Make sure you design the organization to be passive. In your goal, you must not become the bottleneck. You might not be part of it at all. Remove yourself from the process. Hire people or fully automate processes with current technologies. Start with this design in mind, that is very important.
In reality this means that we need more time to make significant profit out of our passive income. This is because you will have to buy automation technologies, or perhaps you have to hire people. Employees allow you to scale the business, and do all the work for you, but as a consequence your margins will be smaller. On the other hand: having to much employees will increase risk, effort and time consumption for managing. Hence we prefer to use technology automation whenever possible to replace humans.
An example of building a passive income
A short example can be to make passive income with blogging. In this case you have affinity with internet, and you are interested in the world of content. You have certain strengths that fit close to building a passive income stream via blogging. For instance you are very focused and will consistently write every day one article that is relevant to your niche segment. You also have some skills with internet marketing, and interest in affiliate marketing. This sounds as a solid basis. It can surely be improved by learning, and it should be, but for now it is a good starting point.
You’ve set the goal that within 5 years from now you want to have 50.000+ monthly visitors. Now you’ve set the big goal, break it down to smaller pieces. Write down your yearly goals. Once in place, you can write your quarterly and monthly goals for the first year, and even your weekly goals. Do not think this is a paper exercise. Clear goals will keep you focused. Also, make sure that you think about different ways to achieve the goals. Be creative, and then focus.
In our module how to achieve goals we will learn you how fundamental and LIFE CHANGING goal setting actually is. And we propose a method to do this properly, if you are willing to do it.
Phase 2: Getting Started. Just do it and build your passive income!
Phase 2 is the most difficult phase. Many humans fail here, because their believe is not strong enough. It is not about your knowledge, your skills, or even your IQ. It is about perseverance and discipline. A man with a higher IQ will perhaps get better results, but everyone can make their passive income. The only relevant question is: are you willing to give everything it takes? But do not get afraid now. Reaching your goal is easier than you might think. Yes, this is true even for very big dreams. In our course about How to Achieve Your Goals, we learn people the most effective way to achieve any goals they have. You have to believe it. You have to believe that it is possible. Because it is possible.
Advice on generating passive income
In this phase we strongly advice three consideration points:
- Take small baby steps, one at a time.
- Discipline yourself for consistent work, every single day.
- Find for creative ways to make money with your startup business
- Never give up, success is at the end of failure.
To many people think that success happens in a relative small time period. This is bullshit. Success only occurs after a very long period of consistent hard work. Remind yourself, that every successful person had to work immensely hard in the background, before they could display their success to the rest of is. Success won’t come overnight. Accept this fact, and you will start with the right expectations.
Big goals and dreams are achieved with small steps. Taking small baby steps every single day will eventually get you further then taking big leaps once a month. Look at your big goals that you’ve set in phase 1. Break them up into weekly and daily goals. Work on your daily goals that are consistent with the five-year goal. Take small baby steps, one day at a time. And we can promise you the following: when you will look back after a year of baby steps, you will recognize impressive progress.
Emotional discipline for success
Working on your goals every day demands for a strong (emotional) discipline. The true key to every success is consistency. Everyone who is successful, took a consistent way of working. They work consistently hard every day. The emotional aspect is very important, and be aware of this. Your emotional mindset can be positive or negative for consistently working on your goals. When you are feeling sad, or it is cold outside, or whatever potential negative emotional event may occur: you have to stay focused. Do not let emotions interfere with your goal. It is your goal, it is your passion, it is your way of living. Work on it, consistently and with small baby steps every single day!
Find creative ways to make money
One way or another, we must find ways to make profit out of our efforts. Naturally our profits will be low to zero in the early beginning. Depending on the work and skill set of the individual, we can make profits very soon. What is really important is that you keep finding creative ways to make money out of your startup business. The passive income stream might be more successful for one way of generating money than another. Thus, be creative in this and keep learning on different business models and new marketing or technology trends. We offer free content on business knowledge (click on this link).
Making profit, or perhaps even getting your first money out of your passive income idea is important. It is important for our motivation. You should expect a long pathway of hard work before you will make profit. Nevertheless, when your first money will flow into your passive business, your motivation will get a massive boost. And this is also in relation to the small baby steps. Making money comes in small baby steps as well. And the bigger you get, the more exponential the money will flow.
Never give up
We have discussed that we must take small baby steps every single day to achieve the big goals. We should keep our emotional discipline to work consistently on our goals. And this with clear focus. Then we have noticed that it is important to stay creative in finding different revenue models for our passive income.
The final advice is a classic one: never give up. Never, never, never give up as Winston Churchill would say. Oh yes, we know it is a very common advice and it is an open door. Then why do so many people quit on their passion? Please, never give up, because success is found when you are about to give up. Within your journey there suddenly will be a breakthrough. A breakthrough that can only be achieved when you do not give up and work consistently on your dreams and goals.
Phase 3: Make residual income passive by automation and control mechanisms
The final phase is to transform your startup business into passive income. This phase will be more easier when you’ve setup your business with an organizational design for passive income stream from the beginning. This is one of our advice in phase 1 above.
In general you can transform your startup business into passive income by automation and applying control mechanisms. Depending on your type of passive income stream you will need to take certain actions to make the income stream truly passive. For instance when you have started your own business, you must ensure you will not be the bottleneck on decision making nor on the value proposition. So imagine when you have a training company. A training company is not one of the types of passive income streams that we have identified. That is because it is difficult to remove yourself from the business, because the value proposition is also based on your own skills. You offer value to a customer: a training. But it is also you that sells and deliver this training. So how to turn this business into passive income?
How to turn a business into passive income
To keep it simple, there are two basic options. The first option is to hire and educate a new trainer in combination with automation tools such as a very effective planning tool, a website that acquires leads via Search Engine Optimization and Acquisition, and so on. Also, you need a control mechanism on the trainer to ensure that he or she will deliver the value proposition and in the end generates profit. A simple example of this can be a weekly or monthly report of the trainer on the amount given training and the profits that it has generated.
The second option is to quit giving a training in the physical way. Instead, you will capture your knowledge on paper and spreading it via books, e-books, blogs, articles. You could also capture your knowledge on video or a podcast. The second step is to create channels via which you can offer your knowledge to your niche segment. For instance, you have setup a sales account on Amazon and you are now selling your books to many customers for each year.
Differences between active and passive income
We have captured three different ways of generating profits via a training company. In the first way, you will give the training yourself. The second option was to hire someone to give the training. And the third option is to capture your knowledge and sell it online or via paper books. So we have three different ways.
The first option will surely allows you to generate the most profit. That is, for at least on the short term. With the second option your profit will be less, but you will need to spend less time on the business as well. So there is a trade-off between profits and time. For the third option the trade-off could be the most extreme. That is, unless you are able to sell real quality and then the money will flow in while spending minimal time on it (after you’ve worked your but off to create all the content on paper!).
With passive income ideas we desire the last option: maximum profits with minimum time effort. Keep the cash flow flowing into your business. Do spend some time on monitoring it, because passive income is never truly passive. And also you might not want to miss that big opportunity when it presents itself. Ensure continuity of the business, and ensure innovation to keep the business alive in turbulent times.
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