Setting up passive income isn’t so passive—it takes a lot of upfront work. I write a lot on this blog about the beauty of passive income and how important it is but, I admit, I’m not always doing everything I could to increase it. Lately, just everyday life has gotten in the way and I’m guessing that you know what that feels like.
What I’m Not Doing–But Should Be Doing–For More Passive Income
First of all, I have this blog and want to use some of the topics from my posts as foundations for ebooks. I love to write and help people and I think I can have some books that people like you would like to read. Yet I have still to write any of the books I have in mind.
Another is switching to a better credit card. I received an application for a cash-back credit card in the mail from a reputable company that’s offering 2% on all purchases and no annual fee. Right now, I get 1.5%. I want that extra .5% because I know it will make a difference in the long run. (If you don’t believe me, check out my article Compound Interest and Passive Income: A Simple Explanation That Will Transform Your Financial Future.) I know how important it is to get the highest return possible, yet I still have yet to fill it out.
I also currently have some extra money in a checking account that doesn’t pay any interest. I want to transfer all of that money into an online savings account that pays at least 2% interest—like the ones offered by Ally or currently PNC Bank.
The third thing I’m doing wrong at the moment is that I have cash sitting in my brokerage account just waiting for me to buy more stocks with. As I wrote in my article 10 Easy Ways to Earn Passive Income (A Beginner’s Guide), money sitting in an account that doesn’t pay any interest (or barely any) is one of the worst things you can do. I know this, yet the money has been sitting there in my cash account for over two weeks.
What I’ve Been Doing Right For Passive Income
On the upside, I did start this blog. I also regularly put money into my brokerage account and have been doing that for many years. I used to just dive in to practically any stock or mutual fund but for the past several years, I learned to compare individual stocks and mutual funds regularly to find the best returns (with the least amount of risk for returns at that level). Finally, I did write an outline for an ebook I want to write and I’ll be sure to actually write the book and publish it within the next six months.
I’m also moving because I want to move to a more tech-centered area. This perhaps is the biggest action I’m taking to set up passive income. I’ll be around other techies and be able to tap into the talent I will need for additional web and e-publishing projects. So I am taking action—big action. I’ve been planning this move for awhile and being in an environment that will help me set up the lifestyle I want is definitely something I’m doing right.
My Passive Income Plan for the Future
Life does get in the way though and sometimes, there’s no going around it. I have two other gigs that I do on top of writing this blog. And then there’s the everyday stuff like keeping my place from looking like a pig sty and showering so I don’t gross people out. And sometimes—okay, every night—I actually sleep. Sometimes, I’ll even venture out to be social so I don’t turn into Gollum from Lord of the Rings.
On top of that, I’m getting ready to move cross-country. They say moving is one of the most stressful events one can go through. I agree with that. It’s hard to stay focused on all of these money moves when I’m about to uproot my entire life.
Sometimes life can deal us unexpected blows that take almost all of our attention. I’m choosing to move but I know some of you could be dealing with an illness (yours or someone you love) or other stressful situation. It’s hard to think about switching banks, choosing a mutual fund or other financial improvement if you have an unfortunate life event going on.
It helps to have a plan and I think making a list increases the chances of us taking those actions. I decided to type up some goals for increasing my returns and streams of passive income:
- put 12% of my net income into my brokerage account by the end of the year
- purchase dividend stocks with that money
- switch to that higher-paying cash back credit card
- move most of the money in my checking account to an online savings account that pays at least 2%
- write and publish my first ebook
The great thing about passive income is that it can increase exponentially once we have our systems in place. The returns we get from the dividend stocks, CD’s, rental income etc give us more money to reinvest. That money then produces even more income and the money starts to grow like a ball of snow rolling downhill.
What Do You Need to Do For More Passive Income?
Life is harder when we don’t have a plan in place. I made my plan. What about you? Have you thought about how you can make passive income?
The first step is to look at your career. I talk about how becoming an expert can increase your income dramatically in 5 Steps to a More Exciting and Lucrative Career. If you become an expert, you can make passive income through blog posts, YouTube videos, creating courses, writing ebooks, podcasts and more. If you become well-known enough, you could even license your name, logo or slogan to sell on products like tshirts, mugs etc.
Starting a business and hiring people to do the work for you and then taking a cut from that work is one of the best ways to create passive income. Let’s say you can do a work project for a client for $3,000. If you can find a person to then do the work for $1,200, you’ve just made $1,800 for simply overseeing the project. Multiply this with many projects and many employees or contractors and you will see your income grow dramatically. Although you might have to be involved to a degree for each project or business, you’re still creating a far bigger return than what you have to invest time-wise. That’s a form of passive income.
The second step is to look outside of your career to create “free money.” I suggest looking at your investment vehicles. Poor people park any extra money they have in checking and low-interest savings accounts, which ultimately makes them even poorer because inflation erodes that money over time. The rich would never do such a thing. How much interest are you earning on your investments and are there better choices out there?
Also, what kind of interest are you earning on your savings account? It should be at least 2%. And how much are you getting back on your credit card? At the very minimum, it should be an average of 1.5% for all purchases.
Everyday Life Is Tough; Not Earning Passive Income Makes It Harder
Creating multiple streams of passive income makes life easier, and that’s the whole point of it. When the only money you earn is when you show up for work, you’re making it harder on yourself to create wealth. Setting up passive income can take some effort in the beginning–sometimes a little, sometimes a lot–but the payoff will be huge in the long run.
The main thing is that you take action—and the earlier you do this, the better. Here are some things you might want to do to create passive income for yourself:
- start a business and find contractors or employees to do the work for you at a lower rate than what you can bill the client
- study stable companies that pay a healthy dividend and buy shares in those companies
- move your money to a higher-yielding savings account
- apply for a credit card that pays a higher cash-back percentage
- create digital courses, ebooks, podcasts, videos or other media that can continue to earn you money for years after you create them
- buy a rental property
- invest in bonds, CD’s or other stable investment vehicles
- use rebate shopping sites such as swagbucks.com or ebates.com when you do your online shopping
You don’t have to use all of these in order to build wealth. Even if you just pick a couple, it’s better than nothing. Personally, I like the first five the most and these will be the ones I’ll continue to focus on.
Time is of the essence so we both need to get busy! After reading this blog post, I hope you’ll go make your passive income to-do list. I’m going to stop writing and go fill out that credit card application and then start working on my ebook again. I’ll be sure to keep you posted on my progress.:)
When you’re done with your list, please feel free to email me at firstname.lastname@example.org and let me know what you came up with. I would also love to hear any ideas that I didn’t mention here. Good luck and remember, the effort you put in now can make a huge difference in your future. Au revoir, namaste and until next time!