If you want to achieve financial freedom but you were not born a millionaire, nor are you a Hollywood star or a world-class footballer, you need to start generating passive income .
Note that most people only receive active income. And that puts them in one of two situations:
- They are employed 40 hours a week in exchange for a salary. In other words, they sell their time for money until they retire.
- They have their own business . In this case, they bill according to the number of clients they get, so in practice they are also trading their time for money. And they usually work more than 40 hours a week!
Fortunately, there is another increasingly popular way of life. A way in which you do not have to sell your time, because you create an asset that works for you and generates money on automatic pilot .
I am one of these people. It all started when, after several years without promotions or salary increases in the multinational where I worked, I created an affiliate to try to get additional income.
I did it without any knowledge of programming, design or business strategy. But just a year later, that website made me earn more than 7,000 dollars in a month in a totally passive way .
Although in recent weeks I had only dedicated a couple of hours, that website continued to work 24 hours a day for me, getting visits and generating commissions without me having to do anything else.
What is passive income?
Before we get into the matter, let’s agree on what we mean by passive income .
Passive income is income that is generated automatically without involving an additional investment in time or money.
Once you have started them, they continue to provide you with money without having to dedicate more resources to them. This way you earn income while doing other things, be it work, travel or even sleep.
Types of income
Knowing the three types of income that exist will allow you to assess the advantages of liabilities.
- Income for time: are those where you exchange your time for money. Most people have jobs of this type, where they pay you a salary of X money a month. The problem is that this greatly reduces your ability to generate income, since you are limited by the time you have .
- Income by result: they do not depend directly on the time spent, but on the results achieved. Many commercial or self-employment jobs are like this: If you own a shoe store, you will earn more money based on the number of shoes you sell, regardless of how long it took you to do so.
- Passive income: they can depend on the results, but they do not require you to dedicate more time or effort to continue generating money. They do it on autopilot.
Within passive income, there are two types. Some unattainable for most mortals, and others that you can achieve with some effort:
- The first are those in which your own money makes you money . Think about interest on a bank account or dividends on stocks. The problem? You need to have a good start-up capital for the income to be significant.
- The second does not depend on the money you have. They are what you get after creating a product or service that lasts over time and becomes an automatic source of income.
A good example of the latter would be writing a book: once it’s published, you don’t have to do anything but wait for people to buy it.
The Internet has opened up a new world of possibilities for passive income. Unlike what happened a few years ago, today you can achieve passive income with little investment or computer skills .
As you will see below, there are so many forms of monetization that with a computer and an Internet connection it is possible to create multiple sources of passive income at any time and place. You do not need anything else.
Passive income is your best option if you want to earn extra money per month, obtain an automatic salary that allows you to leave your job, or you want to ensure a good retirement.
The best formulas to generate passive income
1. Affiliate Marketing
With affiliate marketing, companies pay you for each sale that you refer to them through your website.
The most common strategy is to create a website where you publish analysis and recommendations of a type of product. For each client that you send them through your links, the seller will give you a commission.
The process is the following:
- Sign up for affiliate programs. There are many affiliate platforms (like Shareasale or Awin.) But the best known is Amazon Affiliates.
- Create the web page. Follow a tutorial on Youtube and you can do this in less than 15 minutes.
- Write the analyzes and comparisons. You can pay a copywriter to do it, but it is better to write them at first to expand your knowledge.
- Rank your website in search engines. It will be more or less difficult depending on the competition you have; If it is high, you will need to invest time and some money to make your website more visible.
An example would be to create a coffee maker website where you would publish your analysis, linking to your page on Amazon for readers who would like to buy one.
When people searched for reviews or comparisons of coffee makers on Google, they would find your website, read your article and click on the affiliate link. When you buy the coffee maker, Amazon would give you a percentage of the sale.
It is a very passive system because once your analysis is receiving visits, your website will start generating money 24 hours a day. I still remember the thrill of getting up every morning to see how much money I had made during the day before!
2. Sell passive courses or services on a blog
For me, this is the BEST way to earn passive money. Because in addition to its economic potential, it will help you to fulfill yourself personally and professionally .
I realized a long time ago that having more money didn’t make me any happier. No matter how much income I generate with affiliation, I love the work I do with my blogs.
The idea is to create a blog where you write content on a topic that you like and master (productivity, emotional intelligence, travel, seduction, etc.), position yourself as an expert, create a passive product and sell it.
A passive product could be a pdf course , a video course with recorded classes, a book, or an area of the blog exclusively for subscribers .
That is, anything that you can create once and forget about it, and that costs you the same to sell one than two hundred.
You may find it difficult to position yourself as an authority on a topic, but I assure you that it is not so much. The secret is to hyperspecialize in a very specific target audience; This way you reduce the number of direct competitors.
For example, you could create a blog about study skills for Spaniards living abroad , or an emotional intelligence blog for newlyweds .
In my case, as I have been passionate about social intelligence since I was a teenager, I created a blog with tips and resources for introverts who want to improve their social relationships.
3. Sell courses on platforms
If the idea of creating an online course appeals to you but you don’t want to spend months creating content for your blog, you can always publish it on a training platform.
These websites already receive thousands of visits a day from people looking for training courses, and the key is to create one that meets the demand and expectations of users.
The difference compared to selling a course on your own blog is that on Udemy you will have to adjust its price quite a bit (the vast majority of courses that are sold cost less than 50 dollars), so you will have to sell more to invoice a significant amount.
4. Sell your creations on marketplaces
If you have any technical skills such as composing music, programming or photography, you also have the possibility of turning it into a recurring income using platforms that act as a marketplace .
The idea is simple: you associate with one of these websites and they include your work in their product directories. Every time someone buys a license to use your content, you take a commission that is usually between 30% and 60% .
The negative part that in photography and melodies there is a lot of competition and if you are not a professional in the field it will be difficult for you to stand out. In addition, the prices (and therefore the commissions) are usually low.
Although there is more and more offer, the market for WordPress templates and plugins is not so saturated and creating them is not as complicated as it may seem. There are very good guides and free courses where you can learn the programming languages HTML, CSS and PHP.
These are some of the most popular marketplaces :
- For templates or plugins you have Themeforest . It is one of the most popular platforms, where some authors have reached a turnover of more than 1 million dollars a year.
- For photography you have image banks such as Shutterstock or Fotolia , where you will receive a percentage of the subscriptions of users who download your photos.
- For music you can license your creations on Premium Beat , Audio Network or AudioJungle .
5. Publish ebooks
With the advent of the electronic format, publishing a book is no longer a utopia.
You can be lucky that a publisher is interested in your work (as it happened to me) and prints and distributes it for you, or you can also publish it yourself as an ebook on many online platforms such as Amazon.
In addition, unless the content is out of date quickly, once published it becomes a totally passive income that will continue to provide you with benefits for a long time.
To publish your book you have two options:
- Publish it with a publisher. You will probably get more diffusion and sales, but your percentage will be around 8-15% of the price of the book.
- Self-publish it. Surely you will sell less, but in return you can get to keep 70% of the sale price.
The most popular option is to self-publish a book as an ebook on Amazon . In fact, almost half of the best-selling books there are self-published. You just have to sign up for their Kindle Direct Publishing service to do so.
You can also self-publish it in print. In that case you have several options:
- Convincing a small publisher
- Pay a printer to make a print run for you
- Use a print on demand service , where the book is only printed when someone places an order, avoiding the costs of printing an edition and storing the stock. Amazon also offers this service.
The success of your book will depend on many factors: the theme, the title, the reviews of the readers and of course its quality. But once published, you no longer have to worry about anything else.
6. Rent a property
In the end, the brick is the brick, no matter how digital we are.
Not all passive income is online. A good example, due to its simplicity and ease of management, is to rent a flat or premises. Furthermore, if the location is central and the property is in good condition, the economic potential can be quite high.
The main disadvantage is that, if you are not lucky enough to own a property that you can rent, you will have to make a very high initial investment to buy it or, directly, it will be out of your reach.
To all this you have to add the repairs, possible conflicts with the tenants and the fact that ultimately you are responsible for the property.
On the contrary, its greatest advantage is that it is a very stable income .
You do not depend on the traffic to your blog, views of your videos or the number of clients. For this reason, many people who start to earn money online end up reinvesting in a property to rent.
7. Monetize a website with Adsense
One of the most popular ways to generate passive income is by using advertising to monetize web pages.
Personally, it is my unfinished business. By focusing on affiliation and blogging, I have not gotten seriously into it, but I have colleagues who are achieving spectacular results.
The idea is similar to affiliate marketing. In this case, you create a web page with information on a topic, put up ads and earn money every time a reader clicks on one of them.
This system is called PPC (Pay Per Click), and it is how the most important ad network in the world works: Google Adsense .
With Adsense, you don’t choose what type of ads appear; Google does it automatically according to the theme of your website and the profile of the reader.
That is a great advantage because this way you can show personalized ads for each reader, maximizing the money you make because it increases the chances that they will click on them.
The economic potential of Adsense depends on three things:
- The theme you have chosen. Depending on this, you will earn more or less money per click since the ads that will be displayed will be different.
- The number of visits your website has
- The percentage of those visits that click on the ads
To find out the potential of a theme, use the Keyword Planner . There you can see how many people search for information on that topic on Google and how much advertisers pay per click (you keep 40%).
For example, if you created a website about recipes , each click from readers would generate between 0.24 and 0.28 dollars and you would get 40% (approximately 0.105 dollars per click).
If 2 out of 100 readers clicked on your ads, and you had 100,000 visits per month, you would earn 210 dollars per month .
In this case the click is paid little, so to earn a good figure you would need to have a huge volume of visits.
In any case, if you create content that is not out of date quickly and monetize it with Adsense, you can make good money in a totally passive way.
8. Create a YouTube channel
Creating a YouTube channel and publishing your videos will allow you to earn passive money with advertising as they achieve views.
However, if you really want to earn a significant amount of money, you will have to dedicate time to it. Most professional YouTubers dedicate entire working hours to their channel.
How much money can you earn with YouTube?
Although some Youtubers bill millions of dollars a year, they can actually be counted on the fingers of the hands.
On average, YouTube advertising pays between 0.20 and 3 dollars for every 1,000 views of a video.
As in the case of Adsense, this figure depends on the theme of the channel. In the channels on curiosities or video games it is less, while the channels on financial topics tend to pay more per viewing.
Let’s do a calculation. Imagine that you managed to grow your channel to 100,000 subscribers, a very interesting figure.
- If you upload a video every week that achieves 75,000 views and YouTube paid you 1 dollar for every 1,000 views, your income would be approximately 300 dollars per month .
What this means is that, to earn a salary, you need to post videos regularly. For this reason, it is not a very passive system (except for viral videos or with thousands of daily searches).
In addition to advertising, there are other ways to earn income with a YouTube channel:
- Reach agreements with companies to sponsor you or advertise your videos
- Sell personalized merchandising such as t-shirts and caps with your channel logo
- Receive donations from your subscribers through Patreon
The dropshipping system allows you to generate income with an ecommerce without having to make shipments or manage stocks. Thus it becomes a totally passive method.
The idea is to create a website that acts as an online store where you will attract customers and collect orders, and partner with a manufacturer or wholesaler to take care of shipments.
There are programs that send the order data to the manufacturer in real time. This way you can get the product to the customer without your intervention being necessary.
The profit margin of dropshipping can be as high as 50%. The main disadvantage is that you are not in control of the delivery and status of the merchandise.
That means that, if the shipment does not arrive or a return has to be attended, the customers will complain to you and you will have to resolve the incident with the manufacturer.
And that can be a real headache.
For this reason it is important to work with serious and trustworthy manufacturers , who allow you to synchronize their stock with your product catalog so that discontinued or out-of-print references do not appear in your store.
Fortunately, there are platforms that put you in contact with manufacturers that work with dropshipping . Some of the best known are:
- Aliexpress – A huge Chinese platform with thousands of suppliers.
- Oberlo : an American website where you will only find products that are sold through dropshipping
- DHgate – Another Chinese giant, specializing in electronics.
Amazon also offers a model very similar to dropshipping , called FBA (Fulfillment By Amazon). They are products of external sellers where the distribution and after-sales are in charge of Amazon. You will recognize them because the seller’s brand appears next to a “Fulfilled by Amazon ”.
In this case you will have to send an initial stock to Amazon to save it and make the shipments. Then, you will use a program like Woocommerce to integrate your online store with Amazon FBA and make the shipments from there.
10. Social trading
If you are attracted to the idea of generating passive income with trading but you are a newbie, social trading can be a good alternative.
It is an investment system that allows you to replicate the movements of the greatest experts in the stock market. In this way (theoretically) you increase your chances of making money.
The key to being successful is choosing well those traders that you are going to copy. For this, there are online platforms where you can see their profiles, with the percentages of successful operations and other statistics, and which also act as social networks to be able to exchange ideas.
Currently the market is dominated by two platforms:
- Ayondo : although its part of the social network is less developed, it offers a lot of statistical information on traders , making it easier for you to choose.
- eToro : one of the pioneers in social trading, it already has almost five million users so you can replicate the operations of the best.
Since the program simply copies your investments on autopilot, after choosing your “model” investors you will hardly need to do anything else.
The stock market is not very attractive to me, so I use social trading as a long-term investment with small amounts to diversify the rest of my sources of income.
Remember that in the stock market there is a lot of risk, even for the best traders , and while they can afford to lose a lot of money, most mortals cannot.
The big mistake of passive income
I have already shown you that there is another way of life. One in which you are the owner of your time and allows you to work from anywhere in the world.
However, there are very few of us who have managed to turn this utopia into a reality. And in my experience, it is due to three fundamental factors.
People don’t believe it
Anything that involves making money on autopilot on the Internet sounds like a scam or a joke, so it is not surprising that many people are suspicious of it.
I still remember when I was creating my first affiliate websites. I would meet my friends and explain my projects to them in the hope that they would accompany me in the attempt, but although many of them were fed up with their work or earned a pittance, none did.
No one believed that what he was telling them, no matter how logical it seemed, was going to give them a single dollar.
In fact, now that I earn close to 5 figures a month, they don’t ask me how I do it. They continue to think that it is not going to work for them.
Our damn mind prefers the certainty of the known, however bad it may be, to the insecurity of the unknown.
The only thing I can tell you is that once you are on the passive income bandwagon, you are continually surprised that so few people are jumping on it.
People don’t act
Then there are the people who do believe it but never end up launching their project because they fear failure, and nothing seems good enough to them.
You may spend months looking for the perfect theme for your blog or the most suitable niche for your website. But how you really learn is by doing, not by reading .
You may not have the best theme or niche, but you will only discover what really works as you work on your project. And, even if nobody talks about it, you are always in time to change your business model.
Think less. Act more.
People don’t get involved
Every so often a guru appears saying that you can create a passive business with little effort and dedicate yourself to living the rest of your days lying on a beach sipping a coconut in your hand.
Then a legion of followers usually forms around him. They follow him on Twitter, Youtube and create Telegram channels where they spend hours every day looking for tricks , formulas and plugins .
The guru begins to share success stories of his followers through social networks, giving more fuel to his aroused fans.
However, most of them end up dropping out within a few weeks. Why?
Because the guru has omitted two truths:
- Building a passive income stream requires a huge initial effort
- A passive business is never 100% passive
Don’t be blinded by promises of easy money and don’t waste your time looking for shortcuts or tricks. That does not exist. Just get to work and arm yourself with patience, because you will need it.
For all this, the best way to create a business that provides you with passive income is to do it without stress. No hurries. Otherwise you will throw in the towel when four months have passed and you still have not earned a dollar.
Don’t put all your hopes on it. Create your passive business while maintaining your current source of income; that will relieve you of the pressure of having to get immediate results.
If you do it like this, sooner or later the fruit of your effort will come. And perhaps you too will discover another way of living.