What Is Passive Income & How Can You Make Money From It? + Examples And Tips
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| What Is Passive Income & How Can You Make Money From It? + Examples And Tips |
In the following, you will learn what passive income is all about and how you can earn money with it permanently.
I also show examples and give practical tips.
What Is Passive Income?
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| What Is Passive Income & How Can You Make Money From It? + Examples And Tips |
You can define 3 different types of income.
On the one hand, this would be active income. This is usually the case with salaried employees. You work and you get money for it. This also applies to many self-employed and freelancers. A web designer creates a website and gets paid to do it. If he wants to earn more money, he has to build more websites.
Furthermore, one speaks of the portfolio income. This originally meant investment income from securities/shares or income from Font shares. This can also be seen as a sub-category of passive income.
Passive income is defined as the fact that you invest in work once and then you regularly earn money without having to do anything. Whereby one is usually a little less precise here and assumes that there will be little work later.
Passive income is the dream of many self-employed people and a good opportunity to build up other stable sources of income in addition to project-related income.
Examples Of Passive Income
To clarify, a few practical examples of passive income, not just from the Internet.
- Writer
The writer is a good example. He writes a book and then he can make money from it in the long run. Of course, there are not only successful authors, but if you are successful, your books will still bring you good money many years after they were published. - Musician
It looks similar to musicians. There are also many successful bands here who are still earning very good money with their back catalog (old albums) today. - Landlord
As a landlord, it is of course the case that you already have work, even later. Nevertheless, it is usually the case that an initial investment brings in money in the long term through rent. - Web Designer
But the already mentioned web designer can also generate passive income. By offering additional hosting or selling ready-made website templates, for example, he ensures passive income. - Website Operator
Now we are creating the link to independence on the internet. Website owners compare a little with writers. Bloggers and website operators also publish content that will be read years later thanks to Google and Co. and, for example, generate permanent money through the integration of AdSense or affiliate links.
So in practice, you can earn money later without doing anything. Earning money in my sleep is of course not the rule, even if I make money here on the blog at night through affiliate links and the like. :-)
1: n Relationship = Passive Income
The crux of the whole thing is Formula 1: n
1: n means that I don't do an order for a customer (that would be 1: 1), but that I create something available to many “customers”.
So instead of writing texts for a customer, for example, one publishes texts in book form or on the Internet.
It is often the case, however, that “1: 1” work brings significantly higher income at the beginning. “1: n” work usually brings in less at the beginning, but often more over a longer time.
In the diagram, I have shown it schematically. You can see the sum of the total income for active and passive work.
The active work (blue line) is rewarded by the customer right at the beginning and you may have further small income shortly afterward. But then the total amount of income for this work is reached.
Passive income (red line) starts low. Often it also takes a while to earn money through such preliminary work. However, you will later earn money with it permanently, so that the total amount will keep increasing. That is passive income.
The longer you can monetize a job once you have done it (e.g. as long as an older article still gets visitors from Google), the more rewarding it becomes.
Why Should You Build A Passive Income?
As a self-employed person, I have had an experience that I am sure many other start-ups share with me.
When I was still an employee, the same amount regularly came into my account as a salary. It was comforting and trustworthy.
When I was self-employed, things suddenly changed. I worked on a project basis. As a result, there were months when a lot of bills were being paid, but there were also months when I was barely able to issue bills.
These fluctuations in income prompted me to build up additional stable sources of income relatively early on. Such a stable source of income is this blog, among other things, but also my niche websites. Of course, I put a lot of work into this, but the work of the last 15 years is of course now also paying off.
The advantages of passive income are therefore diverse:
- You get reasonably regular income.
- Once it's up and running, it works without a lot of automation work.
- One can build up more and more passive sources of income.
- The total income can thus rise significantly above what you can earn with 1: 1 work.
However, I am not advocating 1: 1 work for customers here. Many self-employed and freelancers have earned a very good reputation and earn very, very good money with customer orders.
However, many are just getting by and who get into bad problems in slightly worse times.
For me, the combination of active and passive income turned out to be the best variant in the first years of my self-employment, to be able to make a living from it and to calm my nerves. Now I only live from my websites and my eBook.
Passive Income On The Internet
As described above, there are many ways to make money on the web. Be it a website or a blog, be it an eBook or the sale of WordPress themes, etc.
There are many business models, and everyone can find ways to build a passive income.
It is certainly not easy, does not work overnight, and requires a lot of work, but once you have built up passive income, living as a self-employed person is much more relaxed and you have less stress.
How Can You Make Money With Passive Income?
There are a lot of things to be aware of and there are many different ways to achieve passive income.
In this series of articles, I'll cover many different ways to build passive income.
Self-Check
It's worth thinking about how much money you would still make if you stopped working tomorrow.
Many people will be worried about this knowledge because illness or the like can cause partial or complete failures. Passive income is very helpful here.
In addition, I don't want to lie down on the beach or work at all, but it's just more pleasant not to have to work as much overtime as when I started my own business.
If you have any questions about passive income or want to describe your experiences, just leave a comment.
Related Video: What Is Passive Income & How Can You Make Money From It? + Examples And Tips
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