One of the topics on this blog is making money online and specifically, on making passive income online. But what is the big deal with passive income? Passive income is awesome because it gives you the best of everything. Time, money, and freedom.
In this article, I’ll explain what passive income is to me so you know if it’s a good fit for you. And I’ll also show you how to start and grow any kind of passive income business you prefer.
- What Passive Income Is (to Me)
- The Formula for Making Decisions That Build Passive Income for You
- What Passive Income Is NOT
- Not every money-making idea is passive income
- Is Passive Income Hard to Create?
- How to Build Passive Income Streams (Steps)
- 1. List your passions and true interests
- 2. Make a list of potential passive income businesses
- 3. Choosing a profitable passive income business
- 4. Planning your passive income business
- 5. Add value to your target audience
- 6. Put your business in front of your target audience
- 7. Make money → passive income
- Do this to start building passive income now
What Passive Income Is (to Me)
Passive income is owning a money-making system that requires a bit of dedication in the beginning, but then requires minimal effort to maintain and provides recurring income.
To build passive income, you want to work a reasonable amount of time growing a profitable business, until it gets to the point where money just keeps coming in, with some little maintenance and with ease.
From experience, I’ll tell you that if you knew the amazing change in lifestyle that passive income will give you, even that bit of work upfront to build your passive income business will be enjoyable. You’ll be 100% absorbed by the project because you’ll know and feel you’re doing the right thing.
(You can check out this post too for a general overview of my philosophy of making money online.)
Passive income examples
Let’s calibrate the type of passive income business you prefer. The following are no-brainer popular business models that create passive income. For example, you could…
- Write a book series that will be interesting and relevant for many generations.
- Record an online course that many people buy, then you just have to update it once in a while, answer some student questions, etc.
- Create a video game. Once it’s up online in the app or game store, it makes money for you 24/7.
- You develop and license software that other companies pay you to use.
- You create an Onlyfans account (I’m not encouraging you to, but let’s be honest and mature, there are millions of people into it. I just want to show a broad spectrum of options).
- Buy stocks that grow above inflation rates long-term and pay you a dividend. This is not a business per see, but investing (long-term) can be a rewarding source of passive income.
- Build a website with relevant, timeless advice where you can leverage affiliate marketing and that you can steadily grow at your own pace. You’re on one of these now… ?
And many more ideas of course.
Passive income workflow
In the beginning of any passive income project (and in the beginning of your passive income journey in general), you’ll spend more time working on it than later on.
That’s normal because you’re creating and setting everything up from scratch, and adjusting to a new relationship between work and money. But pretty soon, you find you have to work less and less, and money just keeps coming in.
Eventually, this becomes your default way of relating to work and money.
Work becomes effortless, especially if you actually enjoy your business itself. That is why it’s best to choose a passive income business where you can do what you love –really.
My point with this is not to bash against the non-passive forms of income. I simply want to give you clarity so you can choose your preferred options. You decide what you want.
Example of Choosing a Passive Income Project
I’ll show you my mindset when starting a new passive income project with an example.
Let’s say you want to create a video game –or write a book, or an affiliate marketing blog… whatever you like.
Imagine the following two polar opposite options. See which one you prefer:
- You create a fun, casual, simple video game. The game will be engaging, fun, and well built, but nothing too complex or groundbreaking. You design it and build the parts you are good at. The rest, outsource it. Once finished, you focus on promoting it. The game gets some traction and starts to give you around $2 000 per month steadily. You don’t have to do much except for some basic “maintenance”. For example, solving some bugs users might find or adding features with the potential to make even more money.
- You create a fun, casual, simple video game… But wait… “What if I do it in 3D? I’ve heard that the freemium model does very well too, so I should add these new pay-to-unlock features… In that case, I should make it around 30 levels instead of 10… Oh man, I should make it a series and hire this guy for the soundtrack! I could start a YouTube channel to tease it and promote it! Then add this, and add that…!” Very soon, you are working nonstop, probably have to hire a team, and most importantly, you will be working full time long after its release because of the big project you’ve embarked upon. And that’s great! If it goes well, instead of making $2 000 per month, you’ll be making $20 000 or $200 000.
If you prefer model #2, that is awesome. But this website is not about that.
This website is mainly about creating avenues of recurring passive income, because it gives you the freedom to do what you prefer –maybe even that bigger project.
In this sense, passive income was a game-changer for me.
Most people don’t enjoy that freedom. But if you feel ready, supported and very passionate about a project, I encourage you to do that instead!
Eventually, many people (myself included) actually combine those two models: money easily flowing in + bigger projects and other ventures.
This blog is about making financial stability normal. Making money with ease so you feel free to do whatever you want.
So at some point, I had to detach myself from a typical job mentality. Going from employee to employer (or one-man business). From consumer to producer. From buyer to marketer.
And in particular, I wanted to have the business mindset that most easily creates passive income.
The Formula for Making Decisions That Build Passive Income for You
Making money online, and in particular, passive income, is not about talent or skill. It simply requires making decisions that are aligned with this mindset.
When faced with any business decision, ask yourself:
Which choice helps me build more passive income with ease?
and also, you might think the following is not very relevant, but it is:
Am I passionate about this? Do I like doing this?
Because I like to keep it simple and with my own happiness in mind. And it works!
Let’s break it down, starting with the first question: Which choice helps me build more passive income with ease?
Decision example #1
Continuing with the video game example (as any other example), imagine you are deciding between these options:
- Getting a job at a company that develops video games → This choice, by itself, does not help you create passive income.
- Creating your own video game → This choice does help you create passive income.
In this case, it is very obvious. Although you could argue something like: “maybe you could get a job, earn money right away and invest it into something else”.
In my opinion that is flawed logic. What ends up happening is that you keep postponing what you really want.
The choice of getting a job, by itself, does not create passive income. You want to get into the mindset as soon as possible, instead of looking for excuses and perfect conditions.
Even if you just start with a little project that generates $100/month of passive income, that is awesome. Because you already know what it’s all about. You have the mindset and get how it works. You understand its potential, and that you only have to 10X that to earn $1 000/month. Or 100X it, and make $10 000. 🙂
Decision example #2
Now, let’s think of a less obvious decision. Imagine you already built and released your video game (or book, site, blog…) It’s doing fine, but you are exploring new ways to make more money:
- Adding more levels to the game to make it more attractive, for free.
- Add new features and content that users need to pay to unlock.
- Translate it into Spanish and Chinese.
In this case, the decision is a bit trickier. What I would personally choose is to translate it first. Why? A translation is a relatively simple process that yields a big return. It doesn’t require complex development and makes your game available to many millions of potential players more.
Low risk, low effort, high reward.
You can argue that one of the other choices could yield better results or that you like it better. This gets subjective, especially if you know your market very well. But this subtlety is not my point here.
I’m not saying one is good and the others are wrong. You can eventually do all of the other things (new features, levels, etc.) if you want to.
I’m giving you a simple rule of thumb to be productive when creating passive income.
The idea is to choose to do first the actions that are easiest and potentially more beneficial. The actions that create more passive income and cost you the least time, effort, and money.
Make these decisions first:
And leave the most unclear actions for when your project is already set up and running. Making money, that is. 🙂
Years ago I didn’t follow this rule. No wonder I didn’t get good results.
I spent way too much time with unproductive actions. Or things that can make a difference but in the long-term. E.g. tweaking website design, trying out optimization tools, learning to do stuff I didn’t really need… Instead of working on the meat on potatoes of the business, which is always very clear and straightforward:
- creating a valuable something (e.g. content, app, tool, game, etc.)
- putting it in front of your target audience
- and monetizing it.
Any action that directly improves any of these steps impacts your business positively.
Mind you, those three points or steps have to be balanced.
If you add a lot of value but don’t monetize it, you don’t make money. If you have a ton of traffic but your content or offers suck, it’s the same.
And because I titled this section with the word “Formula” ? if you want to actually measure and compare your options, here it is:
If you wonder “what should I do next?” you can use this formula. Assign the values, compare between a few options and choose the best one.
No need to get technical about it, though. Just apply common sense to understand if any action is aligned with passive income or not.
Passion and joy
Notice that I also added the following questions to the decision-making process: Am I passionate about this? Do I like doing this? And I added an Enjoyment factor to the formula. This is important.
If some option seems super obvious, easy and rewarding, but you really dislike it, I would focus on the next best one –at least for now. This is to your benefit, because if you’re having a hard time working on something, you’re not going to do your best job at it.
In general, I would just encourage you to do what feels most natural and you are most enthusiastic about. ?
What Passive Income Is NOT
Typically, you have these 3 types of people preaching and teaching passive income:
#1. Content writers hired by companies.
Content writers write about whatever topic they are asked to on the spot. Good ones research before writing. Maybe they even love writing! But in general, they have absolutely no clue of what passive income really is. Their work/life situation is very different from it.
They can imagine it, but they don’t know what life is like with money coming in passively. You need knowledge from actual direct experience.
Would you get dietary advice from someone who is and has always been pretty out of shape? Or from someone who was out of shape, got really healthy and fit and stayed that way?
They don’t have the drive, passion or mindset to create automated income sources. So, they can’t really teach it.
#2. Entrepreneurs who may be making a lot of money, but do not walk their talk.
Entrepreneurs in general have a drive, creativity and freedom towards work that others don’t have. And good online entrepreneurs make a killing. Great if you decide to be one of them!
However, many sites that teach passive income in reality work differently. They make money from launching campaigns, working full time, offering services, etc.
Again, not a passive income type of experience.
#3. Entrepreneurs who are making money for the most part from passive income sources.
If you want to enjoy a passive income lifestyle, I’ll show you how.
I’m not setting myself apart from the crowd like I’m special –although that’s good marketing positioning. I’m being 100% honest.
I focus purely on strategies to build a diversified portfolio of passive income streams.
If you want to earn passive income, you need the mindset that creates it. Your focus should be on building systems that work for you.
Building a business that works for you
You are focused on your own goals to make money online. So what do you want your business to be?
You need a deep, clear desire to be free from time, location, and money constraints. If you have that desire too, you have to align with like-minded people.
That rules out the people who get paid by the hour or by the project. And that also rules out those who run businesses with a different strategy. You can still be friends with them ?? and learn a ton. ? And maybe in the future, you’ll end up using those strategies!
Only having the weekend off is not passive income. Working 10 hours/day prepping for a launch that requires constant attention, is not passive income.
Passive income is doing something you really enjoy, with ease, and letting the money come in even if you’re not on top of it 24/7.
But why do I emphasize such a simple concept many of you knew already?
Not every money-making idea is passive income
I find so many passive income ideas online where I immediately think: “no… no, no, no, no, no!” ? Check this out. For example:
- Passive income is not anything that’s easy money. I just saw an article that presents “sell your plasma” as passive income. WTF! I don’t care if it’s passive income or not (it isn’t). A side “hustle” where you exchange something directly for money, is not passive income. Plus that particular example, for money, doesn’t resonate with me at all.
- The following is not the literal definition, but we’ll find it useful in practice: passive income is not anything that I honestly dislike or am very uncomfortable doing. Why? Upfront, you’ll need to put in the work. Then, it requires less work, and easier, but still some work. I don’t want to work on things that I dislike, especially when there are many options I do enjoy. As a principle. For life.
- Passive income is not calling my business “Passive Income whatever” but then working on it 60 hours a week. Even if I would make more that way, it is a different approach. For example, now that I’m starting with this site, I work on it around 2-3 days a week. What about the rest of the days? I’m with other projects or just busy doing other things.
Of course, there are degrees to this. Just for the sake of clarity, let’s keep it simple.
Practical rule of thumb
In my mind, the practical definition of passive income would be something like this:
Creating passive income means finding a simple* business idea that works for you, and growing it step by step, at your own pace. It can be a fast pace too! but it should be your pace.
You achieve financial freedom when it gives you enough money to stop working for other people if you wish. Then, you can pursue any other project. You can repeat the same formula with another business idea or grow your existing one.* When I say “simple” I mean it should be a business idea that’s easy to understand and explain.
And if you stick to doing things that way, you’ll create a portfolio of passive income streams that bring you an abundant inflow of money.
And life becomes pretty awesome. 🙂
Is Passive Income Hard to Create?
As a general rule, it is not different than any other work you could do. You don’t have to be special or talented. You just need common sense.
The key is to choose the right actions for your business, as we saw with the passive income formula. As they say: work smart, not hard.
What some people find hard is getting into the mindset. Your work will be mainly dedicated to building systems that make money for you. You have to see that as normal.
So, instead of working 9 to 5 for a paycheck, you’ll dedicate your time to create a site like this one, write a book, develop a game, etc.
What all of this means is that first, you have to detach yourself from the typical “instant reward” mentality most people have. That mindset keeps them working at a job with the dangling carrot of a paycheck every month.
I really mean it when I say this is not “us vs them”. If someone wants to have a regular job, by all means leave him be. People have different motivations, it’s all great.
But if you have the desire to enjoy passive income, you have to break free from those beliefs.
Having the Right Beliefs
You have to believe in what you’re doing and keep going even if you don’t get paid right away.
Making money is not rocket science and everyone who sticks to it eventually gets traction and makes it.
People forget their dreams because they’ve been trained by society that they can’t achieve them. Never quitting is important because eventually, they will be able to undo that negative training.
A good recipe for sticking to it is being passionate about the project you choose. Or you could be passionate about how your life is going to change.
Instead of forgetting your dreams, fuel your passion by thinking positively about them. Every hour dedicated to a passive income business is getting you closer to financial (and personal) freedom. Imagine you are earning your current salary plus…
- a lot more free time,
- working whenever it feels right to you,
- choosing your working location,
- earning more when you want to by improving your current money-making system or creating a new one.
Don’t stress about whatever situation you’re currently in. Just relax into it and get to work on your passive income business.
You work better when you feel balanced
In order to keep going and be successful long-term, you have to be confident and driven but enjoy the process in the now. I find these principles very useful:
- Don’t postpone your happiness to that moment when you achieve your goal. Relax about it all.
- Do what you love and are enthusiastic about. It will make everything much easier.
- Take action and track your progress regularly.
- Reward yourself for good progress and milestones. Pick something you really enjoy and fully enjoy that reward.
As with any other job, you simply follow the required steps and achieve a result.
But unlike any other job, your work will snowball in your favor in the long term. Your passive income business will grow. You’ll be able to work less and enjoy more and more money coming in.
I’ll dedicate more time to improving your mindset and very good strategies to overcome any obstacles –which also can be applied to other things in life. But for now, let’s continue with the first steps:
How to Build Passive Income Streams (Steps)
If you’re looking for specific ideas to create passive income, check out this post. Here, I’ll cover the general steps to get you started:
- List your passions and true interests.
- Make a list of potentially profitable passive income businesses around those passions/interests/knowledge.
- Choose the one that most easily falls into your lap.
- Plan your passive income business and set it up.
- Create something valuable.
- Put it in front of your target audience.
- Sell them or recommend them more value (where you make money).
Let’s understand each step in more detail. I’ll explain it in simple terms, not to overload you, but enough for you to start taking action. You have to actually take action on them. Otherwise, it all will stay just a mental idea.
Right now, in just a few minutes, you can take action up to step 3. I encourage you to, because it’ll make a difference in your life already! Let’s go:
1. List your passions and true interests
This is pretty straightforward. At this stage, simply make a shortlist of the things you enjoy doing the most.
Don’t get ahead of yourself to step 2, thinking if they can be profitable. Effortlessly list them down.
You can make a lot of money from your passions. You just have to turn them into something valuable for an eager audience.
With experience, you’ll be able to explore new business opportunities outside your comfort zone. But for now, it’ll be easier to start making money –passive income– from your current interests.
2. Make a list of potential passive income businesses
For each of your interests, list multiple ways to make passive income. Again, keep it effortless and straightforward. The next step will be choosing one of those. But now, you’re simply brainstorming.
For example, let’s say your passions are playing guitar and knitting (that’d be fun :D). One passive income idea could be writing a book. So, add writing a book to both “playing guitar”, and “knitting”.
Here are some popular passive income business ideas to get you started:
- Writing and publishing a book.
- Affiliate marketing.
- Building (and monetizing) an audience on social media.
- Making money from ads (your own blog, YouTube, creating a useful site, developing a free app, etc.)
- Digital downloads (plugins, themes, web templates, apps, games, etc.)
- Licensing/selling music, beats, stock photo, stock video, etc.
- Selling (video) courses online.
- Paid membership sites.
- Getting (crowd)funded on Patreon.
As you can see, some of them are easy to combine. For example, you could…
- sell your own ebook on Gumroad, or…
- publish it and sell it on Amazon, in Kindle and paperback formats, or…
- have your own blog and monetize it in different ways, including selling your book on it.
Don’t stress about all of that at this stage though. If one idea or combination really stands out to you, simply jot it down too.
You can also search online how other people are making money with similar passions and interests. This is simply for inspiration, to find what resonates with you. No need to compare yourself to them or try to copy them.
3. Choosing a profitable passive income business
Now you have a list of potential passive income businesses. Go through the list and highlight 1 to 5 that really stand out to you.
Then, strikethrough those that don’t interest you that much. You can leave the ones you’re not sure about.
Now you have a shortlist with the most relevant ones – for you.
You can directly choose one of those, but I suggest you sleep on it. The next day, the best choice for you will stand out even more.
Your goal is to pick one of the businesses and start with it. You can follow any process, ask around, estimate potential profits, etc.
My favorite method is to imagine myself doing that thing. I want to see if it makes business sense and if it feels good. The details most likely will vary as I move forward, but I know it’s worth going down that route.
4. Planning your passive income business
This stage should have two outcomes:
- a motivating vision that drives you forward. These are your long-term goals and a strategy to achieve them.
- practical, actionable tasks to take action now.
Think about (or better yet, write down) all of the different aspects that you love about your passive income lifestyle. Take your time. That will get you 100% into the vibe of whatever goal you set. I do that at least once a month.
Then, write down a few sentences that summarize your goal. Be bold, specific and clear about it. For example:
“I want to make $5 000/month from passive income working less than 10 hours/week. I want to love and enjoy what I do. Deadline: a year from now.” —That is a well-defined goal.
A bad goal is “I want to make some extra money” because it’s not very specific. Undefined ideas tend not to motivate.
It’s important to note this: when I mention deadlines and specifics I am not encouraging you to try to force them into being. What if you realize you really want $6 000/month? What if you are 10 months into your project and only at 50% of your goal? If you rush it your work will suffer and you can burn yourself out.
Deadlines and specific goals help you move in your desired direction. You should take them seriously because they help you focus on your goals and measure your progress. And they’re a fantastic reason to celebrate when you achieve them! ??
I’m also starting out with this blog and I use this very method. I’ll write an entire post on this topic if you want to know how to set goals properly.
5. Add value to your target audience
This is the stage where you create the main value proposition of your business.
This will vary depending on what your business is. In any case, however, you should keep this in mind: your target audience.
You can’t create stuff in a vacuum, throw it at the wall and hope it sticks. 😀 You have to create something for them.
For example, on this blog, I’m always writing with a mental picture of my readers. They want…
- a clear path to make a lot of money with ease and live freely.
- honest info, no BS.
- they want to be motivated to get the work done.
- And they want clearly laid-out steps to actually go take action.
I encourage you to make a similar list for your audience. This is the idea of creating a user persona. But no need to get technical because if your business is based on a passion of yours, you’re already familiar with what they like. It’s important not to filter only the stuff you subjectively like.
How you can know what your audience wants and likes
There are many ways you can align with your target audience’s needs. For example:
- directly asking your own audience when you already have one.
- keyword research.
- analyzing similar and related businesses.
- forums and social sites.
- starting with a prototype of your idea and asking for feedback.
If some of this stuff sounds really foreign to you, don’t fret. These are all very common-sense approaches to understanding what users already like. Common sense is the connecting link, so as long as you have it, you’ll be fine.
No matter what you are doing, express yourself, show your passion, give it your own touch. Simply, channel that creativity into something valuable to them.
6. Put your business in front of your target audience
Depending on your business, the way to put it in front of your audience will vary. However, I want to explain why it’s really easy to drive traffic to your passive income business. And also I want to explain what not to do.
Unless you use ad blockers and similar tools, you’re bombarded with annoying ads, popups, spam, notifications, tracking scripts, etc. (IMO cookies aren’t really bad by themselves, although I make a point by not using them at all on this blog). All of that bombarding is just marketers trying to force us to visit their sites.
I don’t know why on Earth marketers make it so complicated. (Well, actually I do know… so I guess this is just an expression of annoyance ?).
Sometimes, their sites and products are crap. But many times, they’re genuinely good products and services! And they spend money (and annoy potential buyers) with overkill bombardment marketing tactics.
If you believe in what you do, promotion is natural
When you’re confident in your passive income business, you’ll come up with effortless ways to promote it. For example:
- ads on relevant places
- offering a genuinely interesting newsletter instead of pushing it
- forums and social media
- getting interviewed about your business
- creating a YouTube channel and/or podcast about your passion
I’m not here to say “this is 100% right, that is 100% wrong”. For example, I am subscribed to a few newsletters from bloggers I like. And it’s ok to make mistakes. Perhaps you try placing ads, see it works and keep them running, or see it doesn’t work and stop. There are shades to anything.
My point is that you don’t have to use shady, pushy, or risky tactics to promote your passive income business. It is easy!
- Create a value proposition you’re confident about.
- Promote in a way that resonates with your audience and feels good and natural to you!
- Be consistent and see your audience, traffic and profits grow.
7. Make money → passive income
This stage should be planned from the beginning, although you’ll come up with many monetization strategies as you develop your business.
There are multiple ways to make money from the same product. I really like this subject and I’ll write posts about many of these ways to make money.
I suggest you focus on the simplest, tried-and-tested, most obvious way you can find to start making money relatively soon. You want to validate your business idea, get the ball rolling and see for yourself that this is not only possible, but the best thing you could be doing.
Once you see the money coming in, even if it’s not much in the beginning, you’ll be much more motivated to keep growing your business.
For example, with this blog, I started only using affiliate marketing because I like the business model and it’s easy. But I’ll probably come up with other ways to make money down the road.
Imagine you’re developing an app. Maybe you are inspired by another app that makes money with a complex freemium + subscription + flash-sales model. Great. If you know what you’re doing, go ahead. But if you’re just starting out, go easy on it. Start with a simple, proven strategy and stick to it until it makes money.
Once you’re comfortable, you’ll be able to use more complex monetization strategies as you gain experience.
Do this to start building passive income now
This concludes my overview of what passive income is and how you can create it.
Earning passive income is an awesome stepping stone to an awesome life in many ways. If you have big dreams for yourself, then having a nice bed of financial stability is fantastic because you’ll think more accurately, feel much freer, and be much more productive.
Simply reading words, even if they accurately describe how something works, doesn’t achieve much. True knowledge and results will be yours when you take action and apply these principles.
You have no excuse not to start now. The first steps are just mental, about planning stuff and writing it down. Only doubts about yourself can block you, and that is literally what planning will help you with.
Start literally right now, and enjoy the good feeling of getting into the passive income mindset. There will never be all green lights for you to go. Your choices turn the green lights on. Choose to act how you prefer, you’ll gain clarity and the next steps will be obvious to you.