Hey Alison! thanks for taking the time to check out the post! I specifically outlined the post so it would follow a specific structure. This is so readers know what to expect and it helps with the flow of the piece. I’ve actually just finished up a (shortened) PDF version of the post that includes a bonus idea not mentioned here. I’ll be adding this to the post shortly! You’re right on the ebook suggestion — could easily have been made into one. I noticed that you linked to it from the millionaire blog post, thank you so much. Kimberly and I really appreciate the mention.
Most credit card companies offer sign-up bonuses to entice you to open a credit account with them. As long as you don’t spend money just to hit the minimum balance and always pay your balance on time, this can have a minimal impact on your credit score while earning you hundreds – or even thousands – of dollars a year. Some of the best travel credit cards offer 100,000 points to new accounts when you meet reasonable spending requirements.
In Eric Reis’s The Lean Startup, a fantastic book about how today’s entrepreneurs and startup companies are approaching the way they create and innovate, Eric talks about how vital it is to use validated learning and scientific experimentation to be able to steer a company in the right direction. In other words, to use customer feedback and quantified data analysis (of real, non-vanity metrics) from a minimal viable product to make decisions and pivot a business one way or another. https://i.ytimg.com/vi/WYVJ_E2Wqa4/maxresdefault.jpg
What I’m doing: I view passive income as funny money to keep myself sane during this long journey. I estimate 2-10 years to get to my goal depending on how active I am. The dollars created are just points one can accumulate. I’ve made passive income goals for each passive income type and check in at least once a year like I am now to make sure I’m on track. Passive income is also carefully managed to minimize tax liability. When you can build a buffer for a buffer, you are then free to take more risks.
The great part about creating truly passive income is the money comes in every month without you having to sell your investment or worry about running out of money when you retire. The returns are also better for me with rental properties, because my cash flow is producing about a 20 percent cash on cash return and that does not even include equity pay down on my loans or appreciation. The appreciation on my rental properties is a bonus for me, while stock market investors are depending on it.

Not really. I love my speed reading courses, I’m passionate about them. I loved working on apps to help small businesses kick more ass. Sure, it’s not as “sexy” as running a full time startup with dozens of employees, but that’s not the point. The point is to make enough money to be able to take risks and do what I want. Plus, if I’ve proven anything, it’s that you can turn these projects into full time if they become interesting enough to you.
Which all goes back to my point – since companies change in a lot of unpredictable ways, it makes more sense for passive income to just ride the market by investing in a Total Domestic Stock Market, Total Bond Market, and Total International index funds, with allocations that depend on your goals and time horizon. For income, withdraw 4% or less, depending on what research you believe, and you’ve got a pretty low risk strategy.

1 Would you choose WordPress as an easy-start blogging/website content management system? The only thing I know about it is that it exists, I’ve been told by friends who have WP it’s easy to set-up and maintain and I’ve since read lots of info on the Net which reiterates this claim. I believe I read in a reply you wrote to another community member who commented on another post of yours you recommend WP. Is this correct, Chris? Or did I just make that up?

That strategy seems waaaayyyy less risky than actively picking stocks of supposedly “reliable” stocks that issue dividends, which could be cut at any time due to shifting industry trends and company performance. Dividend investing feels like an overly complex old-school way of investing that doesn’t have a very strong intellectual basis compared to index investing.


3. Start as soon as possible. Building a livable passive-income stream takes a tremendously long time, largely because of declining interest rates since the late 1980s. Gone are the days of making a 5%-plus return on a short-term CD or savings account. Today, the best 12-month CD is at 2.5%, and the best money-market rate is about 1.85%, which is not bad, considering such rates were below 0.5% just a couple of years ago. Know that every $100 you save can generate at least $2.5 in passive income.
* I use Personal Capital to track all my finances in one place. It’s much easier to use their free software to follow 28 accounts on one platform than to log into various accounts to check my balances. They’ve also got great tools for x-raying your portfolio for excessive fees, recommending a more optimized asset allocation, and planning for retirement with their Retirement Planner.
CD Interest Income: I only have one CD account left in the amount of $185,000 paying 3%. It expires at the end of 2018 and I’ll have to figure out what to do with it. After selling my SF rental house in mid-2017 for 30X annual rent, I’m left with about $500,000 in cash after investing ~$2,200,000. The best CD today is the CIT Bank 12-month CD at 2.5%. That’s pretty darn good because just a couple years ago, such a CD was less than 0.5%. The yield curve is flattening, meaning folks should take advantage of shorter duration CDs.
Case Schiller only tracks price appreciation of RE. RE as rental investment vehicle is measured primarily on rental yield or cap rate or some other measure. Price appreciation in that scenario is only a secondary means of growth, and arguably should be ignored as a predictor of returns when deciding on whether or not to invest in rentals. More important key performance indicators for rentals are net operating income and cash ROI. Appreciation, if it occurs, is a bonus.
WordPress themes aren’t the only things for sale through the Envato Market. You can also sell stock photos through PhotoDune, stock footage through VideoHive, sound clips through AudioJungle, anything graphic related though GraphicRiver, web and app development resources through CodeCanyon, and 3D elements through 3dOcean. There are a huge amount of options here for anyone with the skills to create resources.
Now that you’ve chosen your market, find a way to start sharing your message, whether it’s a blog or podcast or Youtube channel, or whatever platform makes the most sense for your target market. Flynn says this is where you’ll start to build a fan base — and collect subscriber emails. You don’t need to get the whole world to follow you to make this work out financially. Wired cofounder Kevin Kelly wrote an article about 1,000 True Fans, which basically says that if you have 1,000 people paying you $100 a year, that’s a $100,000 a year. “You don’t need to serve everybody,”  says Flynn. 

Under no circumstances should any information from this blog be used as replacement for professional financial advice. DollarSprout.com is owned by VTX Capital, LLC and neither are licensed by or affiliated with any third-party marks on this website and third parties do not endorse, authorize, or sponsor our content except where clearly disclosed.DollarSprout.com is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.
Teachable and Udemy are two of many, but these are the most prevalent, and they’re both intuitive and user-friendly. With Teachable, you have more control over your pricing and the look and feel of your course, but you don’t get a built-in audience. Instead you have to do all the marketing yourself. Udemy has a built-in base of students, but you don’t have as much control and they take more of your revenue.
Another option: Consider starting your own real estate investment group. This is a great way to team together with other small investors, either via pooling your money together or simply by learning from eachother. According to Joseph Hogue, CFA from PeerFinance101.com, “The common bond in all real estate investing groups is that you help each other compete against the big money players to get the best returns.”
Question: You mention receiving $200k of passive income a year, but your chart shows half of that coming from real estate holdings, and reading between the lines it appears that you hold mortgages against those holdings. Then you conclude that $200k/yr of passive income should be enough to live comfortably anywhere in the world. So are you subtracting your real estate expenses (taxes, insurance, mortgage payments, maintenance, remote property management company fees, etc.) when you report your passive income from those properties? Really I think it’s the net (after taxes and everything) that tells us what is left over to “spend” on living, right? When I set up my spreadsheet to retire early at age 47, I calculated the after-tax income I would need to live. Then I compared that to my income streams (estimating tax on the taxable income streams) to measure the surplus/shortfall. Also some good advice from GoCurryCracker: If you can minimize your taxes so you’re in the 15% tax bracket, you can possibly receive tax-free long term capital gains. I agree with your philosophy that time is more important than money as we age. I am not sure I agree with a philosophy that is fixated on needing such a large income, and would rather minimize taxes if it’s all the same on the happiness meter. Furthermore, having 20 plus income sources in the name of diversification adds stress and requires more management (TIME!). I think this is fine for those of us while young, as we have the energy to work hard. But as time becomes more important, the extra headache of managing, planning, and buying/selling our assets becomes a resented hindrance on par with the resentment we felt when working for an employer and fighting traffic each day to go to a job we hated. Every thing we own in actuality owns us, by virtue of its demands on our time and affections, and that includes investments. It also includes our home, and is a good reason for downsizing. As long as we have food on our table, a roof over our heads, and clothes on our bodies, what more do we need? I think we need to consider freeing ourselves from the weight of the chains of managing too many ventures. Personally, I plan on investing in no more than 5 simultaneous ventures ever, with the exception of some IRAs that I just plan to let sit for the next 20 years (and therefore no thought or anxiety required).
I wouldn't think of a high yield savings account as a source of passive income but your savings should be getting something (less like Seinfeld syndication residuals and more like a commercial jingle residuals!). It won't make you rich but it's nice if your baseline, risk-free rate of return on cash is 1% or more. The best high yield savings accounts (or money market accounts) offer higher interest rate and there is absolutely no risk. CIT Bank currently leads the pack with the highest interest rate.
“Where a lot of people mess up is they try to build a business or create a product that serves everybody, and by trying to serve everybody, you serve nobody. You have to specialize and niche down and find a market with a pain point that you, based on your experience, based on your education and based on your passion, can help,” he says. Your earnings will directly reflect how well you serve that particular audience, and the more your message resonates with them, the more opportunities you’ll have to sell to them.
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Those who choose to focus on passive income will need either family money, funds from investors, or the nerve to borrow large sums by taking on debt to fund the purchase of assets. Consider someone who takes out substantial bank loans to build an apartment building or buy rental houses. Although this can turn a very small amount of equity into a large cash flow stream, it is not without risk. When using borrowed money, the margin of safety is much smaller because you can’t absorb the same degree of setback before defaulting and finding you balance sheet obliterated. https://i1.wp.com/www.nextnaijaentrepreneur.com/wp-content/uploads/passive-income.jpg?fit
It’s a (mostly) short term, higher risk, higher reward place to invest cash that has a low correlation with the stock market, but is far more passive than buying and managing properties, has more opportunity for diversification than private placements (minimums of 5-10K, rather than 100K), and most of the equity offerings (and all of the debt offerings) provide monthly or quarterly incomes. Unlike a REIT, you can choose exactly which projects you wish to invest in.

This is one of the ways that we get paid at RewardExpert. We educate our readers about the pros and cons of credit cards, why one card may be better than another, and the best ways to use your travel rewards to book your next free vacation. When you click our links and get approved, you get the same offer you would get from their website, and the bank sends us payment as a thank you for referring you to them.

WordPress themes aren’t the only things for sale through the Envato Market. You can also sell stock photos through PhotoDune, stock footage through VideoHive, sound clips through AudioJungle, anything graphic related though GraphicRiver, web and app development resources through CodeCanyon, and 3D elements through 3dOcean. There are a huge amount of options here for anyone with the skills to create resources.
Great job, note the home upsizing works only in appreciating housing markets (I’ve done a similar this in CA but it was 7 years same home to gain almost 500k profit which is around the govt cap for tax-free home profits. What a gift! Thanks booming economy and generous govt taxation on home profits). Those proceeds bought our next house cash and invested the remainder in domestic stock (which has been equally profitable).
While building apps for Apple (or Android) mobile devices can be a lucrative way to generate passive income online, it's not as easy as many people make it seem. Beside the fact that it’s hard to get your app noticed among the millions being released every year, most people expect apps to be either free or very inexpensive. In fact, a recent study found that only 11% of apps are paid for. The number of paid apps will only decline over time as more players join the market. The key, like many of the business model mentioned here, is to be strategic and creative from the very start. There are a few ways to monetize your app and keep it free for users. Examples include advertising, premium services, and sponsors.
Creating passive income is the key to retiring, especially retiring early. If you want to retire early with the stock market you will have to save a huge amount of money, because that money has to last so long and retirement calculators depend on you using your investment to fund your life. With passive income you will have income coming in as long as you own the investment, without every eating away at the principle invested. Creating passive income may take more work than investing in the stock market, but I think it is well worth the extra effort!

One of the things I'm surprised your article doesn't mention is the tax advantages of this type of investment. The depreciation and rehab costs (purchasing distressed properties) can be huge deductions to ones income taxes, which none of the others have. Then, along with the appreciation of real estate, this passive income investment outperforms the notion of maxing out my 401k as well.

We’ve discussed how to get started building passive income for financial freedom in a previous post. Now I’d like to rank the various passive income streams based on risk, return, and feasibility. The rankings are somewhat subjective, but they are born from my own real life experiences attempting to generate multiple types of passive income sources over the past 16 years.
Immediately after I graduated from business school, a lot of people began asking me what I would do, or if I’d found a job. The answer was almost always “working a few hours a week on some side projects until re-launching my startup.” Whereas this may sound like an unfortunate or undesirable outcome, really was not so bad… My gross income then — without really “working” on anything — was higher than it was when I was working 80 hour weeks running a $3M/year eCommerce company. Sure, it wasn’t glamorous, but it was all part of a strategy that would eventually lead me towards “accidentally” building a 7-figure media business that runs whether or not I show up to work this month. Let me explain…
Affiliate marketing means you sign up with a company and/or entrepreneur and sell their products. For example, if you start a tech website, you could become an affiliate of a web hosting or anti-virus software company. You can earn hundreds or even thousands of dollars each month if your website receives a decent amount of web traffic and you have thousands of email subscribers. Being an affiliate marketer takes dedication and time. You need to build traffic via your website, email marketing and social media. Is this for you? You be the judge.
Dividend investing is right up there for sure. You don’t have to charge $48. You can charge <$10 to boost sales. The internet has enabled so many creatives to publish their works at a low cost. People will surprise themselves if they try to create like when they were in school. The other reason why I have Creating Products edging out dividends is because of the much higher POTENTIAL to make a lot more money. For example, $20,000 a year in book sales requires $570,000 in dividend investments to replicate the same amount. Plus, there is capital risk. With book sales, there is a correlation with EFFORT, and you are not beholden to the whims of the markets.
Lending Club went public in 2014 and is now worth about $1.7B. They advertise P2P lending returns of over 7% for well-diversified portfolios of over 100 notes. I’ve personally been able to achieve a 7.4% annual return over the past two years in a completely passive way by investing in A and AA notes. Others have achieved a 10% annual return through relatively minimum effort.
Instead of working in the service framework, passive income necessitates that we build (or otherwise acquire) something that inherently contains value, which can then be easily and repeatedly transferred to others with little or no work. Plain and simple, we have to create or buy valuable assets, preferably ones that deliver their value automatically. There are a lot of ways to do this, but they all fall into the 3 categories above, and realistically, a lot of them look like different flavors of the same thing.
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