What is passive income? The Essential Information You Need in 2023 |

If you've been around THE INTERNET, you've probably encountered the term "passive income. The idea of earning money without actually working is very exciting as well, and it's frequently used in Internet marketing. You may have seen "passive income" advertisements on Facebook and Instagram.

In this post in this article, we'll discuss "what is passive income," and will discuss its benefits and pitfalls-plus give you some real-life tips on making passive income. We'll also share 45 passive income ideas, offering something for every person.

If you want more support for building a community on the internet Join OUR Mighty Community for free as well as meet new and experienced community leaders! We'd love to have you join us. Register for free!

((toc))

What exactly is passive income?

Define passive income

The term "passive income" refers to revenue earned with no significant effort and energy or the time to accumulate or sustain in the majority of cases, it's created by assets that produce cash flows. Passive income can be made with or without attention or effort by individuals, and there are numerous catchy words to explain the concept (e.g. "making money even while you're sleeping" or "put your cash to work for you ").

If you're looking to know the most important factor in earning passive income, everything boils down to one word: ownership. It is essential to possess a cashflowing investment or stake the stake in a cashflowing asset for an income that is passive.

There are a few exceptions to this, but most passive income still requires certain work. The work can be fairly hands-free (e.g. an interest payment from your retirement account) or may require a lot of effort upfront before an income stream is created (i.e. developing a membership site).

The importance of passive income

The creation of passive income streams is the foundation for building lasting wealth. When you exchange your hourly labor for money and you face a number of difficulties. 1. It's only possible to work for as long as you're fit and able. 2. You can only earn so much per hour-eventually your labor is bound to a certain value, no matter the level of expertise you possess.

Passive income is a solution to this challenge by separating the hours you work and your earnings.

That's why "stop trading your time in exchange for cash" isn't just a slogan or catch phrase. It's a key ingredient to creating wealth. And everyone needs to do it. It's because having an income that is passive can also shield you from most common thing that occurs to everyone eventually or in the future: you'll be not healthy enough to trade your labor in exchange for a paycheck.

Example:

• Modern retirement is built on passive income. The money you save is a small portion of your salary (and when you're lucky, the employer will match it) up to the point that your investments generate enough income you won't need to be working anymore.      
  
• In the case of businesses that are in the business of passive income, it can aid in scaling and create the financial security. As an example, suppose your business owns your office and leases a space to another business, it creates a cushion of revenue that has no connection to the product or service you sell.    
  

It's important for everyone to figure out ways to earn passive income that fit their wealth goals and personality.

Advantages of passive income

Financial freedom: Sooner or later, financial freedom requires passive income. Traditionally, most people waited until retirement to achieve this. Yet, more and more individuals are challenging this narrative and creating financial freedom at younger ages. That was the entire point for FIRE, or the Financial Independence Retire Early (FIRE) movement. People made investments and saved massive amounts of their earned income in order to create money to retire on.

Diversification: Having all your eggs in the same basket could be risky. Utilizing different streams of passive income to diversify your income can ensure stability even if one source does not work.

Freedom of time: "Stop selling your time for money" is the phrase used to describe passive income, but this is the truth. If you're able to generate an income that is passive that you are able to enjoy freedom to do what you'd like. Many people prefer to lie on the beaches however a large number of individuals use their money to get ready to pursue a career that they enjoy or start an enterprise that is their passion.

Wealth accumulation: When you earn more than the expenses you incur, you've found the recipe for building wealth. The more passive income you can earn, the better opportunity you have to build wealth.

Passive income examples

Rental Income When you own an investment property and you receive rent from it, this is a passive income source. Some people also invest in Real Estate Investment Trusts, which could be another option to earn rent income, but without having the property.        
       

Stocks: Owning stocks or preferred shares in companies is a tried and tested source of an income stream that is passive. This income could result from dividends regularly given to shareholders, or by selling the stocks at a greater price. This works for individual stocks or groups of shares (index funds)        
       

Royalties: They're not as common to collect royalties, however collecting them on artistic creations is passive income too. In the case of Michael Jackson, for instance, his music catalog brings in about $44 million in annual revenues following his demise.        
       

Affiliate Marketing: It's less common now, but at the height of the blogging craze, many people earned income from affiliate marketing. This was when you placed products in your blog and earned a fee for those who purchased. Influencers can earn money through similar concepts, usually making money by promoting their followers' merchandise.        
       

Licenses/IP: If your company is an inventor who patents the technology you're able to licence it to businesses which produce it. If you have the intellectual property rights, you can collect an income from this.        
       

A membership-based community: Not many people realize that an online community with paying members could be an excellent revenue stream that is passive. Community growth is quick, they don't need a lot of effort to maintain, and thanks to members-generated content and AI automation it's possible to earn an income from a large community, which takes only some time each week to run.        
       

Online classes: If you offer an audio-only course through your blog or in your community, you can generate passive income by selling the sale.        
       

Active Income vs. Passive. Active Income

    The definition and distinctions

What's the difference between active and passive income?

Technically, active income requires working regularly to obtain, while passive income can be defined as income generated without regular work.

But this isn't really the reality. Almost no income is truly passive. A degree of work goes to earn any kind of income earned in a capitalist society. But, in contrast to passive income that requires little to the effort of earning an income, active income can be earned by hands-on work that takes a lot of time and energy--think wages and tips.

Passive income provides an disproportionate amount of return for the hours worked to obtain it.

The secret work behind passive income

There are almost no income streams that actually take zero work. For example:

• If you've renovated a house yourself to flip and then sell and earn a profit, you've earned a steady income through the effort and time active work--you put into the remodeling.        
  
• If you remodel the house in order to let it in the future, you've created an income stream passively through the rent that comes in each month.        
  

Which of these takes work? It's easy to answer... Both are!

The TRUTH is, literally each passive stream of income one can make requires you to put something in: either investing the time or cash. Investing money is the closest you could get to a real passive income. For instance, if you choose to invest in a cheap index fund you can hypothetically allow it to grow for several years. Yet, most investors do research on their investments, and spend in the least a little bit of time to balance their portfolio.

And if you're building investments to earn an income that is passive, it'll require even more effort. Beginning an online blog. The launch of a course. Cleaning up and the listing of a rental. It's not easy to be passive.

It's the difference that's important to note, with several of the income streams that passive people talk about (e.g. blogging, courses online, dropshipping), the labor is done in advance and the payback is substantial relative to the work involved. This means that you spend more labor up-front setting them up, but then less in order to sustain it.

These are the hidden costs of labor in a variety of common "passive income" instances:

• Owning rental units: Hidden labor costs include finding and buying the property, as well as dealing with problems with maintenance and tenants and covering the costs if the property is vacant; cleaning and repairing in between tenants. You can hire other people to do this work and manage the process, but it requires time!    
  
• Starting a blog: There are hidden labor costs associated with creating the blog, developing the style; locating and the cost of hosting (ongoing) and creating blog content, and keeping it up to date; learning how to drive traffic; setting up the monetization process; managing relationships with advertisers and affiliates as well as dealing with malicious attacks as well as other issues! This "passive income" option requires a lot of effort!    
  
• Licensing IP: Hidden costs of labor include learning the field or a technology; finding a unique solution; checking if it exists elsewhere; improving and testing, securing your IP (with lawyers) and getting a buyer, handling licensing agreements, and even suing if someone violates you IP Rights.      
  

As you can see, the definition of an income that is passive, such as "it isn't a labor-intensive process," none of these can be considered passive. These could provide an oversized return for your time.

The web and passive income

One reason that everyone knows about passive income is that it's because of the internet. Thank you internet.

You've probably experienced a guru telling that you must be earning money sleeping through making a digital item which will bring you an income that is passive.

What is the reason why we hear more and more about passive income now with the rise of the web? What is the reason for thousands of users trying to make passive income online?

Here's what the internet did in reality. was able to do.

The internet and the technological advancements that came with it automated things that traditional enterprises had to devote hours on. Digital businesses don't need the things traditional businesses need like warehouses, fulfillment facilities, shipping, product development as well as other such things. The majority of these vital tasks of business can be performed virtually and even automatized.

This means that in many situations, when we talk about the passive income model, we're talking about the liberty and the scale that digital businesses can offer.

Passive income: challenges and threats

If you're looking to create a passive income stream, it's important to understand the dangers and threats that come with the passive stream of income. There are several things points to think about:

• Investments or initial efforts: There is NO passive income source which doesn't require an investment upfront. Every single passive income source will require an investment of either money or time (or both ).    
  
• It is not guaranteed. for that initial time and money investment, nothing is 100% guaranteed. There is no business coach or positive mindset mantra to change this. markets fall, products fail and competition can eat the lunch you eat... No investment is without risk.    
  
• Some actors are not so good on the web and IRL you'll see individuals who offer poor investing advice, an "easy six-figure plan of action," a get rich quick promise. Passive income is amazing and is highly sought-after, but some users are ready to pounce on other people's hunger.    
  
• Monitoring and maintenance: Go ask any blog owner whether their revenue is completely passive. They'll inform you that they're constantly updating their information to ensure that they are able to deal with any modifications to the Google algorithm, which can hurt their bottom line. Each type of passive income needs at minimum some oversight and upkeep.    
  

46 Ideas for passive income

Remember, every passive income plan involves costs, whether it's in time or cash. While you review the options below, pick those that match your skills and your goals. Be aware that ALL of them come with advantages and disadvantages. Don't make any the investment decision without conducting research and consulting professionals:

    digital business to build

• Communities: Online communities be a great source of an income that is passive, typically via a mix of dues for membership as well as other digital products. The average community earns $27-33/mo per person of recurring revenues and can scale with user-generated content as well as AI tools that require little effort from the hosts.    
  
• Courses Selling an online (pre-recorded) course can be a fantastic way to generate money from passive sources, or you can offer a co-ed course (live teaching) and sell copies of the course after!    
  
• Coaching programs: Selling coaching 1:1 or group coaching courses make an excellent passive income. You can prepare a portion or the entire program in advance. the program.    
  
• Downloads from digital media: Sell a premium swipe file or PDF that users are able to purchase for download.      
  

• Premium content: Sell exclusive or gated content via blogs or on a membership site.    
  
• Newsletters: Add a paid newsletter to your mailing list, or include a newsletter that is paid on your membership website or your community.    
  
• Printables: Create coloring books, wall art, or pretty much anything your customers can print themselves and sell it online (e.g. Etsy).    
  
• Blogs: Create a blog and monetize it by advertising or affiliates.      
  
• Ebooks: Write an ebook and sell the ebook on your site or Amazon.      
  
• YouTube Channels: Make and monetize the YouTube Channel. YouTube Channel.    
  
• Social Media: monetize your social media followers with anything including influencer marketing or a community app!    
  
• Software Develop or buy software that can be purchased on a single or monthly membership subscription.      
  
• Print products: Designs that can be sold and shipped without you manufacturing (e.g. selling t-shirts using Printify)    
  
• Develop apps: Create or purchase your own app and monetize it.    
  
• Extensions and plugins for software Create tools that could be integrated with an internet browser (e.g. Grammarly).    
  
• E-commerce store: An ecommerce store for your website or Amazon (could be dropshipping for increased flexibility).    
  
• Stock photos: For photographers, selling images on Adobe Stock as well as Shutterstock will bring in a few dollars by the licensing.      
  
• WordPress themes Create WordPress themes, and then sell them on a marketplace such as Envato or Code Canyon.      
  
• 3-D model: Design 3D models and then sell these through Turboquid or Shapeway.      
  
• Adobe Presets Create pre-sets or templates for Adobe applications and then sell the templates.        
  
• Fonts: Make fonts, then sell them through a website like So Fontsy.      
  
• Digital experiences like Roblox games, in-app purchases there's an abundance of experiences and games which can be made monetizable.      
  

    The Investments

• Dividend stock: Individual stocks from established companies that regularly pay dividends (payout of profits towards investors).      
  
• Dividend ETFs: baskets comprised of stock (index funds) with a focus on high dividend returns.      
  
• Mutual funds or ETFs (also known as mutual funds): Bundles of stocks that follow markets (e.g. an index linked to the S&P 500)    
  
• Equity growth stocks: investing in companies with high growth potential.      
  
• High yield savings accounts and CDs: Investments that guarantee interest return.      
  
• Bonds issued by the government: Investments that (usually) offer guaranteed returns and are issued by government agencies.        
  
• Commercial Bonds: Investments with a guaranteed rate of interest (issued by businesses).      
  
• Real Estate Investment Trusts Invest in real estate and benefit from rents without the need to buy homes.      
  
• Stocks with preferred status: Specialty stocks which can be accompanied by priority dividends-often offered to employees.      
  
• the 401 K account: Not an investment specific type however, it is a kind of account where employers match investments.      
  

    Real estate

• Residential rental properties: Owned rental units that are benefited by tenants' renting out their rent.      
  
• Commercial rental properties: Commercial buildings that collect rent from commercial landlords.      
  
• Short-term rentals: Prioritize the higher yield, short-term rentals (e.g. Airbnb)    
  

    Ownership passive income

• Royalty trusts: Give income based on extraction rights (e.g. gas and oil ).    
  
• Intellectual property: The payment of royalties by an organization that uses IP that is protected (e.g. patents and music catalogs etc. )      
  
• Franchises businesses who add new locations through taking the name of an existing company and copying it. The proprietor of the new business will pay franchise costs to the original owner.      
  
• Content syndication: Someone pays you royalty fees to make use of your content that you've made.      
  

    Other passive income ideas

• Peer-toPeer Lending: You lend your money online to someone who requires it, and then pay the interest.      
  
• investing into local businesses: Using your cash to support local businesses (either as equity or interest).      
  
• Crowdfunded business investment: A option to fund a business without the markets.      
  
• Peer-to-peer car rental: List your vehicle on a carshare site and earn the moment someone hires it.      
  
• vending machines: Own as well as stock vending machines, and get paid from the earnings.      
  
• Washing cars A computerized car wash is a local enterprise which can operate without supervision and with a minimum of control.      
  
• Laundromat Laundromat can be a passive business that can work while you're away.      
  

Passive income Strategies

Long-Term Strategies vs. Short-Term Strategies

For many the passive income is a matter of patience and time. For example, if you're investing into the market or setting up a blog, it could be months, or perhaps years of work before you can see the results.

As you're thinking about what kind of income stream you'd like to build, you must be realistic regarding your timeframe and the date you can expect to see the benefits of your effort and your money.

Diversification

As we mentioned in the beginning, but diversifying your passive income sources and techniques could be an excellent strategy!

Consistency

There are many passive income sources out there. You can pretty easily get lost in "the most suitable alternative." However, sometimes your greatest success lies in staying focused until you have figured it out. (Definitely read Martinus Evans' story in case you've never done so! It's awe-inspiring. )

Celebrate the boring

It's a sexy thing to possess, however when it comes down to developing streams of passive income, it's not as attractive. Putting in the hours. Plotting out the program. Saving the money to invest. Informing your local community every week. These small steps taken repeatedly over time that result in success, not the flashes in the pans.

Realizing opportunities

It's sometimes difficult to discern the best way to approach an opportunity however, when everybody is on the same groupwagon, it's possible that opportunity is oversaturated. Warren Buffet has a saying: "be fearful when others are greedy and greedy when others are fearful ."

The point is, assessing real passive income opportunities takes wisdom and sometimes it involves ignoring the place where everyone else is running and using your intellect to find legitimate opportunities.

Play to your strengths

If the most popular passive income plan is to sell NFTs doesn't mean that's what you should do. Find a passive income stream that you are passionate about and interested in, that fits with your natural strengths. If you're good at giving classes, you should consider launching a course. If you're great in crunching numbers, and evaluating possibilities, perhaps you should spend some of your time investing.

Be prepared to pivot

The importance of consistency is in the details however, so is knowing the right time to leave if you notice something doesn't work. If something you tried hasn't worked after you've given an attempt, it might not be for you.

Know your legals

The passive income can be compared to any other income-if you don't tell the government of it you'll be in trouble. Take the time to establish the legal and tax system to safeguard yourself and your investments, and stay in good standing with the IRS!

Ready to get started?

If you're ready to get started creating passive income streams, make use of Mighty! You can build and sell memberships, courses with premium content so much more. Mighty is the only platform that you require to start an online business that is successful, and it's available for free in 14 days!

 Start Free Trial Free Trial