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The IRS defines passive
income as income from "trade or business
activities in which you do not materially
participate". Traditional sources are
dividend/interest income from investments,
rental income and royalties from books.
When you perform work and
get paid for it, no matter how well you're paid,
that's not passive income. That is trading
time for money. I realized a few
years ago that unless I charged a gazillion
dollars for my services, that my income would be
capped by the number of hours I worked. So I got
busy creating income alternatives beyond
coaching and training.
If you own a business but
are not working in the business, the
income you receive from that business is
passive. In the 4-Hour Work Week,
Tim Ferris describes ways in which you can
create income that require little or no effort
on your part. You may work in the
beginning, but the key is to set up systems so
the business works without your involvement.
Here are some of my online
favorites.
1. Information products
(books, CDs, home study programs) can be sources
of passive income. They do require work
for their creation, but once done, fulfillment
(delivery) of the products can be outsourced.
If you're in business, you have some expertise
that can be turned into a book, CD or DVD that
people will purchase. When you sell them
online instead of 'hawking' them personally,
you're getting paid on-goingly for work you did
perhaps years ago.
2. Affiliate programs
(where you sell someone else's products or
services for a share of the revenue) are also
opportunities for passive income. Again,
you may have to set up websites and traffic
generation strategies to make those products &
services visible to others, but once done, ka-ching!
3. Network marketing
programs have made many people thousand-aires
and even millionaires. There remains a
slight stigma in some people's minds about
pyramid schemes. But most multi-level and
network marketing programs these days present
legitimate products and services that people are
buying and consuming.
The key here is to get in
early with an offer you believe in, particularly
one that is 'consumable' where clients buy
something every month without you having to sell
it to them. It could take a couple of
years of dedicated effort to build up a
clientele and train a 'downline' so that they'll
work the business without you. But it's
possible to do.
4. Licensing
involves creating intellectual property (like
books, systems, processes, etc.), protecting
them with trademarks and patents and then
selling rights to others to market the products
for you. If you have (which you do)
expertise in your field, you can create
information products and systems that you can
license to others.
Kim Kiyosaki shared some
startling statistics in her talk at NAWBO.
She said "58% of Boomer women have less that
$10K set aside for retirement. Yikes!
It's not too late.
But don't wait. Take action now. Do
a little research. Find something that you can
get behind. Devote at least 10% of your time
each week building passive income streams and
stop trading your time for money before you run
out of time.
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