Earning money can be challenging. But it sounds fascinating when someone says you can make money by doing nothing. Yes, it’s possible, but the previous statement only tells part of the story. If you study money a little closer, then you will learn there are two types of income:
- Active income
- Passive income
However, if you want to earn, then learn the difference between both kinds, as these are different for various reasons. So, let’s try to understand the concept by defining the definition first:
What is a passive income? Difference b/w active & passive income:
Turning an active income into a passive one requires serious efforts, but rewards could be huge. The other name of passive income is unearned income, and it’s defined as:
“An income that requires minimal work to generate and maintain. It is an income that you don’t earn from a traditional employer.”
But the active income is the opposite of this concept, requiring full-time work to earn money. Both types of income require work; the only difference is when the work happens. For instance, if someone is writing ten blog posts every month to earn money. On the other hand, one person is writing those ten blogs for their website and earning money through monetization. So, passive income is a hustle if you want to make more by putting in little effort.
Examples of passive income:
Earlier, we discussed that passive income is generated automatically and provides money with no or minimal effort. Here are the following ideas or examples that can be used to earn passive income:
|Drop shipping store||Affiliate marketing||Social media influencer|
|Rental income||Sell digital products||Start YouTube channel|
|Teaching courses||Invest in the stock market||Buy bonds|
Apart from this, there are many other ways, like selling a book, lending money, getting royalties, etc., to make money. On the other hand, salaries, sales commissions, tips, and bonuses are a few examples of active income.
How to turn an active income source into passive income?
After reading about passive income, I know many of you want to build this source of income. Everyone wants to earn by doing nothing or minimal work. So, if you are in the same boat, then follow these tips and turn your active source of income into a passive one:
Plan your exit strategy:
Before starting anything new, it’s crucial to plan the exit strategy. If you are doing something, then at some time, you will have to leave it for other commitments. However, in this situation, your plan should be ready as it’s the best way to maintain this source of income. In this situation, you can follow these ideas that you can use to convert that active source of income into a passive one:
- Try to arrange an authorizing arrangement.
- Pass the work to a relative
- Put up your business for auction at the commercial center
- Sell the rights of your protected innovations
If you apply these ideas, your hustle will not directly depend on you, and it will be easier for you to fulfill other responsibilities. You can even hire a team to handle complex tasks.
Bundle up a package:
There are plenty of payment methods that you can choose to get wages. Many people work on hourly wages. But there are more suitable methods than this because your income will be active. So, try to sign bundle packages and collective contracts. In this way, you can allocate time and give the saved time to learn something new or to build another side hustle.
Automate the tasks:
It’s another best tip to turn active income into a passive one. Technology has made so much progress that we can do almost everything automatically. For instance, you will be swamped with work if you are self-employed. Thus, in this situation, you can take the help of automated software and tools like a pay stub generator. This way, your work will be reduced, and you can do many things in less time. In addition, in the extra time, you can think of more ways to generate more income.
Don’t make it all about YOU:
I hope you have seen many examples where owners use their names in the business. This way, they are making it all about themselves and not focusing on brand building. However, selling your expertise and building a generic brand name is best. People who build generational wealth focus on brand building and earn money even when they aren’t actively involved in business activities. So, if you are making this mistake, then in the future, it will be tough to convert active income into passive.
Help customers find you:
You will get business if it’s easier for potential customers to find you. For instance, if you are a fantastic writer but customers need help finding you, there is no point in your expertise. If you are helping customers to reach you, then it’s a significant milestone. After this step, you can convert this active source of income into a passive one. Here are the ways that you can use to help customers to find your business:
- Build a website
- Publish ads in a publication
- Ask previous customers for referrals
Most importantly, you can build a LinkedIn page to attract potential customers. Those already earning have a spark; they only need to learn to chase dreams and transform themselves. So, always follow your passion and do something that fires you up. It’s the first step that will help you to feel passionate about your work. A passive income source will help you create an additional source of income, financial freedom, that later helps reduce stress.