Author Topic: Passive Income Streams  (Read 15435 times)

HeidiO

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Passive Income Streams
« on: March 23, 2012, 04:38:09 PM »
What have you done to create passive income streams, and how successful is it?  I am always interested to hear what people have done, or plan to do.  MLM's are not my thing.  Grew up w/ a get rich quick dad that loved them, so I am very wary.  Other than rentals, I haven't done anything yet.  I have thought of writing an ebook, and maybe blogging.  I am not computer inclined, although I like to take classes and I have considered taking a class to learn some programming so I could make an app, or something of that nature.

vwDavid

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Re: Passive Income Streams
« Reply #1 on: March 23, 2012, 05:05:30 PM »
What is an MLM?

Parizade

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Re: Passive Income Streams
« Reply #2 on: March 23, 2012, 05:09:07 PM »
multi-level marketing/pyramid schemes, like Amway

http://en.wikipedia.org/wiki/Multi-level_marketing

sol

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Re: Passive Income Streams
« Reply #3 on: March 23, 2012, 05:10:38 PM »
My advice for people looking to build passive income is to build a diversified investment portfolio.  Very few of the alternatives will offer you so much return for so little work.  Think of it as loaning your money to successful and profitable corporations, which will use your money to make more money, some of which they share with you in the form of dividends and rising share prices.

arebelspy

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Re: Passive Income Streams
« Reply #4 on: March 23, 2012, 08:53:57 PM »
My advice for people looking to build passive income is to build a diversified investment portfolio.  Very few of the alternatives will offer you so much return for so little work.  Think of it as loaning your money to successful and profitable corporations, which will use your money to make more money, some of which they share with you in the form of dividends and rising share prices.

+1.

Passive income streams get a lot of hype, because it sounds good.  But what those people blogging about passive income streams are really making their money is on selling information about passive income streams.

Most of the passive income streams touted (blogs, ebooks, etc.) will take so much work, and never pay off.  If, instead, you put that extra work into earning cash via a second job or something like that (not passive at all), you could take the cash you earned and convert it to a passive source of income via sol's advice, quoted above.

/puts on flamesuit, cause I know many here have read the same hype I have about passive income streams, and will vehemently defend the idea.
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shedinator

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Re: Passive Income Streams
« Reply #5 on: March 23, 2012, 09:09:29 PM »
What have you done to create passive income streams, and how successful is it?  I am always interested to hear what people have done, or plan to do.  MLM's are not my thing.  Grew up w/ a get rich quick dad that loved them, so I am very wary.  Other than rentals, I haven't done anything yet.  I have thought of writing an ebook, and maybe blogging.  I am not computer inclined, although I like to take classes and I have considered taking a class to learn some programming so I could make an app, or something of that nature.

But none of these are really passive income. In every instance, you're being paid for a good or service you produce. Maybe if you got a few levels up in an MLM scheme, you could see a decent income coming from your cut of your subordinate's production, but how is that really any different than a manager receiving a monthly bonus for his/her team's production?

As for writing, or creating an app... the vast majority of creative products pay less than minimum wage when averaged out over the amount of time it took to create the thing. I have several friends/colleagues who are accomplished authors. You have probably never heard of any of them (well, maybe you've heard of one of them), because while they are respected in their fields, have schedules full of speaking engagements and symposiums, and produce at least one book every year, only one of them has "Written his Barnes and Noble book." And believe you me, these guys do not see their royalty checks, however large or small, as passive income. They worked for every penny they earned. Maybe J K Rowling feels that the royalties she gets for the first Harry Potter book this year count as passive. Maybe Stephen King feels that way about Kujo. Maybe they don't. But going into creative fields in hopes of generating passive income is really not the best financial strategy. If your goal is to produce something of which you can be proud, by all means devote some time to writing. If your goal is income, you'd probably do better devoting that time to minimum wage work and investing 100% of it.

cparlette

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Re: Passive Income Streams
« Reply #6 on: March 24, 2012, 01:02:15 PM »
My most successful passive income stream so far is my e-books. I've got a few of them on Amazon (gotta love those Kindles!) - despite their low prices, the combined sales are enough to pay for my student loans and half of my rent, and that's on a bad month. I write about subjects I know a lot about (see Warren Buffett's concept of "circle of competence") and I try to keep it short, concise and informative. It only took me a couple of days of nonstop writing to finish each e-book. All I have to do now is sit back and relax. :^D

Could you explain why you feel that your e-book income is passive? I understand that you don't have to do more work (unless you do some marketing), but you did have to do work to produce them. Do you value your work at a certain level, and anything you bring in above that amount is considered passive? I'm trying to wrap my head around this notion, but as far as I can tell, you are being paid for a product which you created. I guess my understanding of passive income is income that requires no work, rather than income received for work already done...

I'm also curious how much money your books are providing; At least on Amazon, I can get them both for free (I have a kindle and a Prime membership). I can see where they rank overall in various categories, but I don't see information about how many copies you've sold, etc. Would you be willing to give some insight on how many sell, what your cut is, etc?

By your definition of passive income, I can't think of anything that is actually passive income.  Everything I can think of requires some work to be done ahead of time.  Even dividend returns required you to do the work that generated the income that you used to purchase dividend stocks.  In my mind, the idea of passive income is that you did the work up front, then continue getting paid for it after you've stopped doing the work.  Do you have any examples of income streams that don't require work at some point?

sol

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Re: Passive Income Streams
« Reply #7 on: March 24, 2012, 02:39:02 PM »
Do you have any examples of income streams that don't require work at some point?

Inheritance.


HeidiO

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Re: Passive Income Streams
« Reply #8 on: March 24, 2012, 03:55:55 PM »
   Some inheritances are a lot of work!  This year I didn't get an inheritance because the last 14 years I decided not to work for it.  I am fine with my decision - I am lucky enough to not have to fake something for financial gain, but I did get written out of the will, along with several other family members.
   I think of a passive income stream as something you invest in, either in the form of work or money, then get paid for over a long time period, without continual input.  I am glad to see people's opinions on this.  I've read many books that focus on this, and I haven't seen many options that make sense in my circumstance.
Heidi


shedinator

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Re: Passive Income Streams
« Reply #9 on: March 24, 2012, 09:52:46 PM »
By your definition of passive income, I can't think of anything that is actually passive income.  Everything I can think of requires some work to be done ahead of time.  Even dividend returns required you to do the work that generated the income that you used to purchase dividend stocks.  In my mind, the idea of passive income is that you did the work up front, then continue getting paid for it after you've stopped doing the work.

I don't think that's an accurate representation of what I said. The difference I was attempting to draw was betwen earned income (money received for products or services rendered) and unearned (passive) income. While it may be considered arbitrary by others, I think the tax code currently has it right when it comes to defining earned vs. unearned. According to the SSA Capital Gains and Rent are not earned income. Royalties, on the other hand, are. I'm pretty sure it's the same for the IRS (royalties are a schedule C income, right?).

arebelspy

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Re: Passive Income Streams
« Reply #10 on: March 25, 2012, 09:44:02 AM »
Passive income, as typically defined by the "Gurus" trying to sell you something, is generally receiving money regularly that requires no ongoing work.

I think you're right though, shed, in that it is misleading that you did have to put in a lot of work up front.  They like to gloss over the fact that you're really just getting paid for work you did in the past.

But I'm assumingmost people talking about passive income think of that definition.

(And then stretch it by including rental income, which may only require a small amount of work, or even including blogging, which can require a large amount of ongoing work.)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

sol

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Re: Passive Income Streams
« Reply #11 on: March 25, 2012, 10:33:36 AM »
I think the term "passive income" might be a marketing gimmick because it makes people think of "free money for no work".  I suspect many online charlatans have adopted the term solely for this get-rich-quick emotional response that it generates in the unsuspecting.  Like "ooooh he's going to teach me how to make money without doing anything!  I'll pay for that!"

The only way I can think of to generate income without doing anything at all is to earn interest on interest.  To earn interest in the first place you have to work to make money to invest, but once that investment starts earning interest, the interest also goes to work for you passively earning more interest.

shedinator

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Re: Passive Income Streams
« Reply #12 on: March 25, 2012, 01:22:24 PM »
I think the term "passive income" might be a marketing gimmick because it makes people think of "free money for no work".  I suspect many online charlatans have adopted the term solely for this get-rich-quick emotional response that it generates in the unsuspecting.  Like "ooooh he's going to teach me how to make money without doing anything!  I'll pay for that!"

The only way I can think of to generate income without doing anything at all is to earn interest on interest.  To earn interest in the first place you have to work to make money to invest, but once that investment starts earning interest, the interest also goes to work for you passively earning more interest.

Right. I choose to put a portion of my earnings in an index fund, while other choose to put theirs in a savings account, or to spend it entirely. It takes me no more work to have money automatically deposited in my retirement accounts than it takes them to have it put in their checking accounts. Yet last month my net worth increased several hundred dollars simply because of where I chose to put my money. It's hard to get more passive than that.

I think you can divide rental income into earned and passive aspects. If you invest in a rental, and make a profit from it after all related expenses are covered, it's passive income. You could have a portion of the rent go automatically to a property manager's salary, and have to do 0 work to receive the surplus. Or, you could hire yourself as property manager, pay yourself a nice wage to do the work, and be generating earned income and passive income from the same source.

The only other source of income, besides an inheritance, that could be considered passive would be alimony (some would say child support, but raising a child is not exactly a passive pursuit, and you have to be participating in the child raising to receive child support), or structured settlements.

shedinator

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Re: Passive Income Streams
« Reply #13 on: March 25, 2012, 01:25:37 PM »
oh, I almost forgot lottery winnings. Those are usually payed out over a period of 20-30 years :)

arebelspy

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Re: Passive Income Streams
« Reply #14 on: March 25, 2012, 10:52:39 PM »
MODERATOR NOTE: Split off discussion of eBook Passive Income into its own separate thread, here: https://forum.mrmoneymustache.com/ask-a-mustachian/ebook-passive-income/
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

CookerS101

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Re: Passive Income Streams
« Reply #15 on: January 10, 2013, 02:01:33 AM »
I am also searching for passive income streams..i'm not up for MLM..are there any other ideas you guys want to share?