Passive income is a buzzword these days. It’s banded around by people with big ideas saying things like, “I’d like to create a passive income”…almost as though it’s a carrot dangling there online just waiting for them to grab.
Passive income is a pretty bizarre concept when you think about it. It’s basically a source of income that you don’t have to work for, however, in order to reap these benefits; you will have to work exceptionally hard to create the systems which will deliver it. So, when all is said and done, passive income is an awesome deal, however, in the vast majority of cases there is a hell of a lot of groundwork and preparation involved before that “free money” starts coming in.
Anyone that tells you that you can make a passive income instantly or without any hard work is outright lying to you. You’re going to have to work your backside off to achieve the dream.
- Passive Income Through Stock Dividends
Some companies pay dividends when you buy a share of their company. Say you decide to buy into a relatively new company like Snapchat, the chances are that they won’t have any spare money, therefore, you won’t earn a dividend. When you buy this stock, you do it with the hope/faith/belief that in the future it will hold more value. Let’s say you buy it today for $10, with the hope that it will be worth $100 in the future, that would be a pretty good deal by all accounts.
More mature companies such as Ford, Apple, or AT&T will obviously have less growth potential. There is a limit to how many people on the planet that will have a necessity for a truck or choose to buy an iPhone. Therefore, it’s quite clear that both Ford and Apple and many other well-known companies such as these have already penetrated the majority of markets worldwide to one degree or another. Therefore, although the stock might still grow, it won’t do so as quickly as newer companies such as Chipotle or Twitter. To give incentives to potential investors, these companies offer a dividend.
The percentages will typically range from less than 1% to over 10%, however, the majority of companies that you will have heard of will fall between 1% and 6%.
I will openly admit that maths is not my strong point so I’m not going to give you the full low-down here on the exact returns, however, I am confident in telling you that you do need a hell of a lot of money to create a legitimate income using this method. In order to earn modest returns, you would absolutely need close to a million dollars in the bank to even earn something like $30,000 USD per year. I found an online example where to get to $500 per month in income you would need $240,000 with a 2.5% dividend rate.
That’s pretty much money for free! However, this is only going to work out if you are already stonking rich or have a million dollars saved up to just leave sitting around in the bank, which not many people do.
Dividend income is a pretty decent earner. However, once again the catch is that you need cash available in the first place in order to make cash. Get Rich With Dividends is a great book to use as a resource if you have cash available and would like to know more on the topic.
This is also a brilliant way to earn passive income. The earning potential is limitless. Buy to let can be extremely lucrative if done properly. It’s a good idea to let a property management company take care of your tenants, this way the only thing you have to do is collect a paycheck at the end of each month. Obviously, by hiring a property management company you will be giving up some potential income, however, it means that you won’t have to fix toilets at in the middle of the night or deal with any issues while you’re on vacation.
The difference between the mortgage payment and the rent is passive income. If your mortgage, including taxes and insurance cost you $900, but the rent is $1500, then you will be earning $600 per month in income.
Well, that’s not entirely true, because you would still have to pay for the property management company, any repairs on the property and any service charges, however, I think you get the general idea of how passive income through real estate works. You purchase the house, get someone else to pay rent that equals more than your house payment and all of that profit goes into your pocket.
This is quite clearly another strategy that takes money to make money. You will obviously need a cash deposit to buy a house in the first place. It you don’t have the funds to do this then you can’t exactly reap the rewards of “passive” real estate income.
However, there are options to negotiate this little funding hurdles in real estate, but I’m not qualified to talk about them. A great resource to help you with this is BiggerPockets. There are options out there to get cash for a down payment, however you will have to devote time to researching about the real estate industry. You can’t simply expect to jump in and make a fortune. It takes time and persistence to succeed in the industry.
Peer to Peer Lending
Sorry to be the bearer of bad news, but this is another method of passive income that requires money in order to earn money. Peer to Peer lending is a really new concept, and extremely interesting way to make your money work for you. Websites such as Lending Club, Prosper, and BitBond allow users to upload their needs for loans, and you, as an investor, can decide who you would like to invest in. You can get much higher rates than in the stock market most of the time, and you can diversify your lending based on projects, people, or loan risk.
If you take a look on BitBond you will quickly see the vast arrays of lending opportunities, from people needing to relocate to a new city for a job, to someone looking to start family businesses. It really is quite remarkable.
However, once again, you do need to have some cash available to lend in order to reap the rewards of peer to peer lending. This really isn’t a method of passive income that I’m familiar with, but, it could be something that interests you.
Creating Business Systems
Perhaps the most intimidating, however, possibly the most cost effective way to create passive income for yourself is to build a business system that allows you to make money without any work (or very little work). This would entail building a business that has employees or contractors carrying out all of the work, and you reaping the income that the business creates.
A prime example of this would be an Esty shop selling jewelry. You find a supplier in China selling jewelry, you can drop ship the jewelry to a person in the USA who will take custom orders from Etsy for engraving, then have them ship out your product. You buy the jewelry, you arrange the shipping and the store, but everyone else in the chain is charged with doing the work. This is how drop shipping works.
This is just a typical example that I have thought of from the top of my head, however it is one that would require some money to buy inventory. But online, there are a vast arrays of opportunities for creating an online business that require very little money.
The trade off is that you have to put in a lot of time to set up the system, especially if you are a newbie without business or web experience.
In this post I’m going to talk specifically about one business system that can create truly passive income (eventually). You have to put in a lot of groundwork in the beginning, but as you grow your business you can spend less time doing the work as you pay people to replace you.
I have created a decently passive stream of income through affiliate marketing.
Not everyone is familiar with affiliate marketing, but I think it’s a really cool way to earn money online because it’s accessible to even beginners. With affiliate marketing, it’s completely possible to start out as a starry-eyed newbie without a clue in the world and build your business to generate six figures at your own pace, and according to your own interests.
The world of online affiliate income is vast, so we’re going to spend this post talking about how to create passive income online through an affiliate marketing blog.
Why Affiliate Marketing Creates PASSIVE Income
If you create a business, you have to run the business in order to make money! Even the smartest CEOs in the world earning multi-million dollar salaries are working their butts off. No, they don’t have to slog to work at 6AM to flip burgers or sell clothes, but they are in the office every day strategising, organising, and delegating. That is NOT passive income. That’s owning a business.
Is passive income from a business a myth? No. Affiliate marketing is as close as it gets!
Since the internet never sleeps, your affiliate website is never “closed”. It’s online 24/7 getting traffic from Google. Whether you’re sleeping, or on vacation, or just taking the weekend off, your website is online earning money.
It’s not easy to get to that point. An affiliate website doesn’t start earning instantly! It could take six months, a year, or more than two years to start earning passive affiliate income. You have to build the foundation first, and that takes a lot of work.
How Affiliate Marketing Works
You could say that affiliate marketing is simply work based on commission. It is like working and only getting paid per sale.
However, online, you have the advantage of creating your own store.
You can design this store in any way you want. You have the responsibility of buying the domain, creating the content, driving the traffic to your website, and ultimately choosing how you want to sell the product and what product you want to sell.
One product can be sold in so many different ways. You could market a barbecue to a new dad that just bought his first house, or a college kid that wants to have parties on the weekends, or a girl that wants to buy a grill for her dad, or a retired guy that wants to chill out and finally enjoy life.
What about the girls? Girls can also barbecue? Therefore, this is a fantastic website concept, and a potentially fab way to sell a barbecue. Don’t forget about the obsessed “meat enthusiast” too.
It is your blog, your website, your business and so you have the freedom to choose how and who you want to pitch the product to. The end game is getting people to buy the product so that you get a percentage of the sale.
Affiliate Marketing Styles
There are a variety of different way in which you can make money through affiliate marketing and you will find that some of these are more passive in nature than others.
Organic Traffic: This basically means you build a website, create content for that site and get traffic from Google. The articles you publish will get ranked in Google. People will then read your articles and click on your links to products you promote and make a purchase.
Paid Traffic: Some people believe in the idea that If you pay for traffic to your site, then it’s OK to have a much smaller website and less content, this is a myth. The only reason you don’t rely on volume of content is because you are paying for traffic to be driven to your site.
For example, you can notify Google Adwords that you would like to pay $0.30 per click to your page. If you get 10 clicks, that mean $3.00 you will pay for traffic. Assuming you have an affiliate link on that particular page that gets you $20 per sale, you will make money!
Pay $3 to earn $20, in effect $17 profit.
However, often times sales don’t come quite that easily, but that gives you a general idea of how things works.
CPA: Meaning cost per action. With this, you don’t make an actual sale, but you do get paid when someone does something. You’ll usually only receive a small amount of money for this, however the actions are usually simple like signing up for an email list or a free trial.
So perhaps you would be paid $0.50 per email sign up rather than $40 per sale. The individual who has signed up pays zero, you get paid, and the company now has a positive lead that they act upon and target with emails to make sales.
You will never know if the company makes $1000 from that lead or $0.
Social: You can also use affiliate links on social media. You don’t actually need a website, but you do need a following!
How you feel about this will obviously depend on how you feel about social media. You might be excited or this could fill you with trepidation and fear….LOL.
It is also common to place affiliate links on Twitter and Facebook. You could build a Facebook fan page for your favorite video game, then put affiliate links to gamer gear.
Alternatively, you could start a Twitter account about travel, and tweet affiliate links for plane tickets, hotels, and travel packages.
However, please be very cautious and take note that social media is not very passive at all! You will have to be active daily. It will be essential to be constantly posting pictures, updates, and socialising in order to grow your account. Links posted once disappear in a matter of minutes and will likely never be seen again. This really is food for thought.
It’s also important at this point to mention YouTube. A lot of people get paid with Google Adsense (ads within the videos), however, you can also put links within the video description. In doing this, your viewers need to click the link in the description, and then you will be paid for each sale!
This is the case with both tutorials and product reviews. YouTube absolutely fits into the category of passive income as videos stay online years after you publish them and can potentially get hundreds of thousands of views within a short amount of time (although, as you know it’s usually the sublime and the ridiculous that get fast views).
Do I Need A Website To Do Affiliate Marketing?
I would say yes. You could go 100% video or 100% social media, however, if you would be losing out on a lot more money by not having a website.
The social and video arenas aren’t really my thing so I can’t really cover too much there. The method I am most comfortable with and the strategy that I do use is that of writing articles on my website, and I think most people will be able to understand and implement this strategy.
Appearing on video can often be a big fear for many people and social media is not exactly “passive” in the sense that you will have to be publish new content daily to remain relevant and to get traffic to your links.
If you choose to go down the route of paid advertising then you will have to prepare yourself for a lot of day-to-day work, testing ads, creating new ones, and removing ones that are no longer profitable. Also, make sure that you aware of the start up costs involved to pay for the ads.
With a blog-style website you can start for very cheap, and once your ranked in Google, it’s common to keep your place there for many years. This really is a passive income.
Therefore, in order to create a passive income online, we will narrow our focus to building an affiliate website that gets traffic from Google through writing articles.
Affiliate Blogging Content Main Concepts
When you break down creating an affiliate blog for income, it’s actually pretty easy to visualise. Choosing a topic can be tricky, however, I would always say pick something that you have a personal interest in if you plan on doing all the work, writing and content creation yourself.
If it’s your plan to pay for someone else to do the writing and content creation then it’s a good idea to take advantage of this and do a good bit of research into what’s popular or what gets the highest commissions. However, for your first website, having a personal interest is pretty important to remain consistent in publishing content.
Earning a passive income isn’t something that will happen instantly just because you’ve chosen to do it, and there will most definitely times when you will get quite frustrated at your site. If you’re a guy blogging about outfits for the Mother of the Bride, then you’ll more than likely give up. However, If you’re writing articles about beers from all over the world or the latest gadgets, or whatever your personal interests are, then you’ll probably have more drive to continue the creating content without income.
Below are examples of some common styles of articles.
- Top 5 Articles
Choose the top five products in a category. It’s good to get really granular within your topics. Choosing Top 5 protein powders isn’t a great idea because this is too broad.
However, you could write a post covering the top 5 whey protein powders and then these could be compared to the top 5 vegetarian protein powders or even to the top 5 vegetarian non-soy protein powders. Can you see how this would work better?
Clearly, each kind of protein has an appeal or offers some benefits to different types of people. It’s possible to write of Top 5 posts for a single topic. The opportunities are limitless.
- Product Reviews
Something else that is relatively easy to do is to buy a product, try it out and then write a review of that product. On occasion, you might even find that you have enough prior knowledge of the product that you don’t even have to buy it and try it again.
If you were to take the advice given above, it would be easy enough for you to research a a particular protein powder, discuss the flavours the company produces, and then talk about what other reviewers have to say about the taste and solubility with water.
You will of course be able to leverage expert research to review products without the need to purchase them yourself, however, buying the product does add a hell of a lot of credibility to your review.
Tutorials are very helpful to many people and you can make them as in depth as you like. This is a particularly great way to gain both authority and trust from any visitors to your website.
You could potentially do a tutorial on how to gain muscle with a home gym. At the end of the exercise tutorial, you mention that you always drink a protein shake after your workout.
This is a perfect opportunity for you to link to a review of your favorite protein powder, or place an affiliate link and earn money from that.
- Keywords (Information-Based)
This concept can be slightly more difficult to get if you are not familiar with writing online, however, there are tools you can use to research what people are searching for.
I used my tool Jaaxy and discovered that people are searching for the following terms:
- protein powder for weight
- hemp protein powder versus soy
- organic protein powder meal replacements
…and there are thousands more like that. Not all keywords will lead to a sale, but they can be leveraged to get traffic to your website.
Getting Traffic: Your #1 Job
Your job as an affiliate blogger is to write content for your site and this is what you will spend the vast majority of your time doing in order to get traffic. You will write and write, then stress about whether you’re doing it correctly because your just aren’t seeing the traffic that you expect.
WARNING!!! It really does take time to drive traffic to your site and build this consistently. Just imagine – if everyone that created a website could acrue 100k+ visitors to their website with no hard work and no hassle, then we would all be working online and we’d all be millionaires in no time. You have to put in the hard work to reap the reward.
You will only be successful in this industry if you are willing to put in consistent effort to improve the quality of your content over time and have an amazing work ethic that will see you through the initial ups and down.
From personal experience, I would say that you would have to write consistent good quality content for around 3-6 months before you begin to see results. Yes, it’s true, you may have to write articles for six months before you start seeing traffic results. For some people, this may just be too much. However, if you can truly see the outstanding earning power as you go along this journey then you will soon see that 6 months of hard graft is nothing really.
After all, many businesses can take years before they turn profitable. Therefore, the very idea that you can work for yourself, in your own time, and immediately become profitable after making a few sales is really quite awesome.
Of course, it can be a major blow to feel as though you’ve spent an age perfecting a blog post and then sent it to a black hole where no one will ever read it, however don’t fall into that trap! At some point, you will get rank for low competition keywords, and you had better make sure that your content is excellent!
Over the course of time, those original articles you spent an age crafting will gain strength and rank for things they were unable to rank for previously. You always have the option of going back to edit and improve on them at some later date, however, I would say that it’s better for you make a good “first impression” with Google and your first visitors.
… and this is where the life of passive income begins!
Tweaking Your Pages To Improve Earnings Incrementally
Think of the 80/20 rule, you will spend at least 80 percent of your time creating content for you blog and the other 20 percent of your time will be spent making improvements and tweaking your site to gain better conversions.
You can do this in many different ways. You have the option of changing the amount of affiliate links on your site, upgrading the images you are using, linking to alternate pages or you might even want to amend or change certain pieces of content completely.
The pain, torture and stress is almost over once you get traffic to your website. You will then have data to mess with and will be able to see results a lot faster.
When you only 10 visits a day to your site it makes it difficult to see if your articles are converting sales or not. However, when you get into the realms of having 1000 visits per day, then you can really start to see within a day or two if the changes that you have made have improved sales or decreased them.
So your path to passive income has begun. By now, you will have traffic coming to your blog every day and you will have a few sales rolling in. With more specific and targeted content and a little tweaking of you site, you will continue to improve upon sales from this point on.
You will quickly go from making one sale every 2 months, to possibly making 50 sales per day. It really can happen that quickly when you apply the correct strategies and put in the hard graft.
Bear in mind, all of the articles that you have written will remain on Google, they are online 24/7, this includes during the time that you’re asleep. You could well find yourself waking up to new sales, and new money in the bank. People are shopping online all over the world (although mostly in the US/Canada/UK).
Time To Build Your First Website For Free!
Would you like to learn the skills to do this for yourself? Would you like to be supported along the way?
I gained these skills through the Wealthy Affiliate platform. Wealthy Affiliate is an online community which focuses on giving people the skills to create their own affiliate websites online so that they can successfully earn as sustainable income from them.
Wealthy Affiliate has been around since 2005, and they have seen many changes in online marketing industry in this time. However, despite all the changes that the industry has seen, WA has grown stronger and stronger and created a robust platform built on a pay it forward attitude. They truly believe in building a legitimate business based on helping people, and because of this, they produce so many success stories, myself included.
You can join their Starter Membership for free and get a feel for the platform, this includes 10 free beginner lessons and the facility to build your first website (also free). You will have access to live chat and be able to talk to other members to see what they think, how they work and find out what they are working on too.
I’m a current member and will continue to be one as I absolutely could not rate the platform higher. I will support members as well, and help all the people that join through my link. It is common for people to pay upwards of $300 per hour for online coaching, however with Wealthy Affiliate you have access to myself and other experts for $49/month (Premium membership). You can read this full review of what’s inside Wealthy Affiliate to gain more of an insight into what you’re paying for, however, please remember that it’s free to join (no credit card needed) so if you are still skeptical create a free account and have look for yourself!
Please feel free to leave any comments below.