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What is Passive Income

Apr 25, 2020 | Passive Income

Whether you’re following make money blogs, YouTube channels or books you will, probably quite often, come across the term ‘passive income’.

You’ll also see that our Money Boost Passive Income section has several helpful articles to find your next passive income stream and earn money while you sleep.

But what does passive income mean?

A summarised definition of passive income could be ‘The ability to earn a recurring revenue with minimal to no further input’.

Sounds too good to be true. Earn money whilst doing nothing. It’s of course though not as straight forward as this.

Usually this recurring income is made by way of owning some kind of asset. You could create or buy the asset, but this asset could have the ability to earn you further income just by owning. We’ll walk through some examples of this so you can fully get your head around.

 

 

 

An Example of Passive Income – Create a Passive Income Business

Let’s use an example of small business called Vibe Automated Software. The purpose of Vibe Automated Software is to create automated software and online tools to help automate some tasks people are doing manually.

For the business that buys the software it speeds up their operations, saves time and money and reduces manual error. So, a big benefit.

Now Vibe Software have a couple of options. They could as for a one-off purchase value for the software, or like so many software companies are doing, asking for a monthly or annual fee for a license.

Originally Vibe Automated Software would have invested the time to build and test the software, put the software in to a package to be sold. Created a website for the software to be sold from, set up the ability to take credit card payments. They would have marketed the software, promoted the software and advertised the software…. etc.

As you can see Vibe Automated Software have spent considerable time creating their asset. They method of having something that can earn them a recurring income for potentially years to come.

They may have to support the software, and provide updates, but once the software is released much of the hard work is done.

 

 

 

Another Example of Passive Income – Become a YouTube Channel and Video Creator

Admittedly the first example looks quite a complicated one, and perhaps something you wouldn’t fancy doing. Building a software company definitely isn’t for everyone.

Let’s instead look at a minimal outlay method that almost anyone can do – creating a YouTube Channel.

YouTube – which is now owned by Google – launched on Valentine’s Day 2005. Yes YouTube has been part of our lives for over 15 years now!

It started as a hub for people to share videos and grew quickly, attracting the likes of Google and other would be buyers into an acquisition frenzy. Google purchased YouTube just 18 months after launch for the tidy sum of $1.65billion. Not bad for the founders.

From all the social media platforms right now, YouTube is considered the best to explore in terms of creating an income. Some YouTubers have earned enough money to create a second income, others a full-time income and a small number of people have retired very well with £millions in the bank as a result of a very popular YouTube Channel.

YouTuber PewDiePie is considered one of the channels biggest successes. He amassed over 50million subscribers and has earned millions of dollars through advertising and endorsements.

If you can create either engagement, entertaining or how to videos – and they do well – you could earn a very nice income. The beauty of YouTube is videos uploaded today can still be found years in the future.

Some YouTubers are finding videos they uploaded 10 years ago are still earning them a monthly income through advertising.

If you have something to entertain people or educate people, why not create a video. There is no cost to do so. As soon as your channel has 1,000 or more hours of your watched videos, you can sign into the YouTube advertising option. YouTube will place videos before, during and after your video and you earn for every time an advert is watched.

If you’re interested you could check out the Money Boost’s How to Make Money with a YouTube Channel

 

 

 

Real example of Passive Income – Become a Travel Blogger and Photographer

Theory examples are great for understanding a concept, but a real-life example can work wonders for inspiration and motivation.

Who doesn’t like the idea of travelling the world to amazing places whilst writing about your experiences and sharing your travel photography. Sounds the stuff of dreams right.

Alex Outhwaite is one such young lady living the dream. She works full time as a travel vlogger (someone who creates video blogs rather than written ones). With over 130,000 subscribers on YouTube her followers literally follow her journey around the world around amazing places like Mumbai, Brazil, Pakistan, Bali and lots more.

She started her travel vlogging adventure 3 years ago with a video about her adventures in Ladakh, India quickly followed by a video in New York on where to find the very best food. Three years later and over 110 videos posted it’s reported she earns around £1,000 per month through the advertising YouTube shows on her videos.

It’s amazing how far this type of income can go in some exotic locations around the world. Enough to live and travel comfortably.

Alongside her YouTube earnings she has social media presence on Facebook, Twitter and Instagram – which on it’s on has over 50,000 subscribers and steadily growing.

Growing a social media presence EVERYWHERE is important. Although YouTube will be your primary source of income (unless you are promoting a travel book on Facebook, or a Travel Photography Course on Instagram) it’s worth noting that Facebook followers then become YouTube followers. Twitter followers become YouTube followers.

If you hook your audience in through different social media platforms you can funnel them through to YouTube where for every person who watches your videos, you earn.

Here is an example of one of Alex Outhwaite’s travel videos to give you an idea of her content:

 

To find out more visit the Alex Outhwaite YouTube Channel

 

 

How Could I Earn a Passive Income

We all have 24 hours a day. It’s how we make use of those 24 hours determines what we can achieve.

The first step toward any passive income goal is two-fold:

  1. Understand that creating a passive income takes time, money or in some cases both;
  2. Create a plan and stick to it!

These two points, especially the last, is one of the reasons many people don’t achieve the passive income they seek.

Giving up, or never starting, are the two counteracts to success out there.

You also need to decide on the type of monetary investment you want to or can make towards your passive income venture. You could buy or invest in your asset rather than create it. Some examples of these is shown below.

 

Cheap Ways to Create a Passive Income

When it comes to passive income there are two routes. The fastest route to passive income is usually by purchasing an asset. The longest, albeit cheapest route to passive income is to create your asset. Create something for yourself that has the potential to earn you a regular income.

Here are some of the cheapest methods to passive income:

  • Write a blog;
  • Write a novel by way of an eBook and distribute and sell via the Amazon Kindle Store;
  • Create a YouTube channel, create engaging videos and earn through adverts;
  • Create an Instagram channel and earn through endorsements or affiliate income;
  • Develop a course and become an instructor and sell through Udemy or Teachable;
  • Invest £100 in stocks and shares and potentially earn a small dividend payment (it will be very, very, small but every little helps);
  • Create software, an app or website plugin and earn for every purchase;

 

 

Invest to create a passive income
  • Buy to let property;
  • Buy a website with business and recurring payment – you may be able to purchase for around 18x to 24x monthly revenue, which if the website continues to earn as it is or becomes even more popular you will generate a return on investment within 2 years and each penny made after becomes passive;
  • Fine and collectible vintage wines;
  • Regular investment in stocks and shares with the aim of generating a profit, and also passive income by way of dividend payments;
  • Purchase an existing business and outsource the operations;
  • Outsource the building and further ongoing support of specific software or a mobile app based on your idea or a gap in the market;
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