How to Develop Passive Income

Published on Jan 31 2011 // Written By // How To Guide

If you want to become less reliant on a single source of income, such as a traditional job, it is important to begin developing passive income. Passive income represents cash inflows that come as the result of putting something on “automatic”. Instead of being actively involved in earning money, you set up a system so that the money is working for you. Developing passive income does take some time to set up, but once you get things going, it doesn’t take much time to maintain the system.

Ways to Earn Passive Income

If you are going to earn passive income, you will need to have a plan. It is important to consider the real possibilities of earning passive income. Think about what you can do, and what makes the most sense for you. Here are some ideas for developing passive income:

  • Dividend investing: Carefully consider stocks that pay regular dividends. You can either invest a lump sum, or you can build your income stream over time with smaller, more affordable investments.
  • Other investing: It is also possible to do other types of investing in a reasonably passive manner. P2P lending, currency trading and bond investing can all result in income. However, as with all investing, you have to be aware that you could lose money.
  • Create something: Some people write and sell ebooks. Others write novels or nonfiction and either publish themselves, or get someone to publish for them. Music can also be a source of royalty income. It is also possible to take photos, and earn money on royalties through a stock photo web site. If you are creative, it is possible to find a way to turn it into a royalty stream.
  • Start something: Start a web site. It takes some time and effort to get going, but once you are established, you can earn income from advertising and affiliates. After a while, a couple hours a week is all you need to maintain the site.

Be realistic in your expectations. Developing passive income isn’t about suddenly becoming rich. It usually takes active work to develop a system that allows you to begin earning passive income. Figure out how much money you need to make it work (monthly investing, web hosting, supplies, etc.), and then work to maximize that money’s value.

Also, devote some time to it. Put in a little time each day to developing your passive income. You will be able to build your system little by little. Over time, you will have another income stream — one that is independent of your day job.

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About

Miranda is a journalistically trained freelance writer and professional blogger working from home. She is a contributor for several personal finance web sites. You can also find her at The AllBusiness Personal Finance Corner

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