'Passive income' and how you can earn it
One of the popular phrases you’ll hear in personal finance circles these days is “passive income.” If you want to retire or retire early, if you want to really grow your wealth, you’ve got to develop some strategies to earn passive income.
That’s what lots of people are saying, anyway.
The concept is fabulous: Passive income is money that rolls in at all hours of the day, even while you’re sleeping, and doesn’t require much work to earn or maintain.
Who wouldn’t want several different streams of passive income?
The truth is, however, passive income usually occurs only after a great deal of work and time have been put in.
For example, one of the most commonly touted methods of earning passive income is to start a blog. Blogs actually do offer quite a few different methods of earning money.
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The usual strategies involve running ads, selling your own products, or becoming an affiliate seller of other people’s products.
All of these methods are legitimate, but it is hard to get to the point where your income from a blog is substantial.
For one thing, you’ve got to figure out where you will get your content. Will you write it yourself? If not, you’ve got to pay someone else to write it for you.
Once you’ve got your content, how will you attract readers? You’ve got to stand out from the hundreds of other blogs that address politics, losing weight, the workplace, money, relationships, parenting, etc. If you don’t, you’ll never get the traffic that results in earnings.
Another way to earn passive income that is promoted a lot is writing a book. Just write a book, then sit back and watch that money roll in!
Okay sure, maybe if you’re John Grisham.
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What about the rest of us who have never written a book before?
I’ve seen firsthand how much work goes into writing a novel: My wife will have her first book published by Tyndale in January.
If her novel sells a ton of copies, and there is absolutely no guarantee this will happen, some people will call her an overnight success. Nothing could be further from the truth.
She has put in hundreds and hundreds of hours of work over the past six years writing, editing, reading about writing, listening to podcasts about writing, trying to get an agent, building a website, attending writer’s conferences, etc.
She may or may not receive regular royalty payments someday — some authors never do. If she does, however, from that point on the book will finally be a source of passive income.
Another source of passive income you’ll see talked about is YouTube. To make money on YouTube, first create a bunch of interesting, educational, funny, and/or engaging videos. Then you can allow ads to be run on your videos. You’ll get paid a set amount for each ad.
Many people have made a career from their YouTube channel, so this is possible. Before you go out and purchase a bunch of high-end recording equipment though, know that YouTube has a few criteria you must meet before you can monetize your channel.
First, unless you meet special conditions, all the content on your channel must be owned by you. So in other words, you can’t upload the Beatles’ greatest hits and make money from the ads on those videos.
Second, you must have accumulated more than 1,000 subscribers to your YouTube channel.
And third, viewers must have watched at least 4,000 hours of your videos in the last year.
Those last two requirements present a pretty high barrier to entry to earning money with YouTube.
I hope you noticed a common theme in all of these possible sources of passive income: time and work. Doesn’t sound very passive does it?
But don’t let me discourage you from giving any of them a try. If you’ve got the talent and interest in one of those strategies, give it your best shot. Just be ready to invest a lot of time and work long before you earn any “passive” income from your efforts.
In my next column, I’ll write about one of the easiest and proven ways to earn true passive income.
Dave Kinzer is a music teacher and a financial coach in Springfield. Contact him at www.davekinzer.com. His column will appear here every other Wednesday.
This article originally appeared on State Journal-Register: 'Passive income' and how you can earn it
