Passive Income
You could say the Holy Grail of maximizing the ratio of income earned to time expended is passive income. In its simplest form, passive income is when money comes in regardless of whether you are asleep, on vacation, or in a coma. Its close cousin is semi-passive income which is when money comes in all on its own, but you have to do a little bit of work now and then to keep it coming.
The best examples of purely passive income are:
Interest on bank deposits or similar;
Dividends on equities (stocks);
Royalties on published books or music or software;
Income from a website that automatically sells an electronic product or service.The best examples of semi-passive income are:
Rent from property;
An investment in a business where you are a silent (not involved) partner;
Almost fully automated businesses, especially web based.From a lifestyle point of view, you should be aiming to derive as much passive and semi-passive income as possible, for the simple reason that it preserves your most valuable asset your time.
Take a couple of minutes to think about and write down in the space below how your current hobby, passion or business interest could be made into an opportunity for passive or semi-passive income.
More Money, More Time
Most people associate their time with their ability to make money i.e. If I work harder I will make more. We have to stop thinking like that and start to recognize that the best way to maximize making money but minimize time spent is to:
Plan everything out at the start.
Spend some time at the beginning.
Make money for a long period thereafter without putting in any (or very little) time.Lets take a couple of simple examples:
1. You decide to buy a rental property. All of the hard work is done at the beginning. You spend some weeks finding the best property, you negotiate, you do the legal stuff, perhaps you do some renovations, find great tenants, draw up the contracts, and then the bulk of the work is done. You then collect the rent.
2. You decide to set up a website with great content for mountain bikers. You do the research on websites, you find great content, you pay someone to build the site for you, you find some advertisers or use Google Ads, and the hard work is done. You then collect the advertising revenue.
Most of us started out as employees, whether it was a paper round or a summer job or a graduate position. We have been programmed to believe that the way to earn more is to work more. Even salaried positions have an implication that the more senior you are the more hours you have to work. This is the opposite of the way an entrepreneur has to think.
Once again, take a moment to stop and think about how you have been socialized to believe that your income is dependent on the time you expend. Then specifically reject that model and start brainstorming ways you can turn your passion into:
Making a Plan;
Doing some hard work at the beginning;
Setting up an income stream that requires little or no oversight.