Passive income is the goal for a lot of want-to-be-entrepreneurs (sometimes called by the godawful name, wantrepreneurs). Instead of slaving away for someone else, trading your precious time for a few dollars an hour, you’re able to lounge on the beach in the sun with a mojito while cash flows into your bank account.
If you’ve been keeping up with this series, you know that passive income is a lot more complicated than that. It takes time, effort and creativity to put together something that is going to bring you in enough money to pay for the mojito, let alone the flights and beach-side hotel.
One of the best ways to increase your passive income earnings is by branching out into other areas. Rather than investing all your energy in one single idea, having a few smaller ones can be more successful. Let’s look at why and how to start putting multiple streams of passive income together.
If you haven’t read the previous lessons, now is the time to do it. (I’m going to assume anyone reading this has a pretty good knowledge of the ins and outs of passive income.) The previous lessons are:
- What is Passive Income and How Does it Actually Work?
- How to Stop Trading Your Time For Money.
- How to Quickly Start to Make Passive Income.
- 15+ Quick, Easy Ways to Start Generating Passive Income.
- 8 Best Ways to Make Passive Income Online in 2017.
- How to Evaluate Your Passive Income Ideas For Opportunities.
They cover everything from the very basics of passive income, through some ideas that work, to the specifics of working out what ideas are good and bad.
Ready to learn how to create multiple income streams? Now, let’s dive in.
Small Passive Income is Easy(-ish); Big Passive Income is Hard
Making a small bit of money from passive income is relatively easy. You still need to put the time and work into it, but it’s quite possible to build a blog that brings in a few hundred dollars a month from ads and affiliate schemes or sell some stock photos through PhotoDune that bring in a similar amount. It’s a lot harder to build a site or dominate a stock photo site enough to bring in $5000 a month.
If you’ve got a good idea, you should be able to get it to about $500 a month in recurring revenue in a couple of months. In the grand scheme of things, that’s not a lot of money. However, if once you have one thing bringing you in $500, you spend your next couple of months working on another, you’ll now have $1000 a month in flowing into your bank account. You could double down on your first idea, but growing it from $500 to $1000 can require a lot of effort.
With a few hundred dollars here and a few hundred dollars there, your monthly revenue will start to stack up. There are plenty of people with dozens of different streams of passive income. They don’t need every one to be a massive success if together, the streams are enough to support their lifestyle.
A Diverse Portfolio is a Safe(-er) Portfolio
The world of passive income isn’t particularly stable. You’re often at the mercy of large multi-national corporations. If they change something, you’ve absolutely no recourse.
In a traditional job, firing someone is generally a bit of effort; unless someone is truly incompetent the hassle of finding and training a replacement outweighs the benefit of letting them go. In Europe, you even need a real reason to fire someone; if you don’t have one, they can sue for unfair dismissal. It's not the same with passive income, it has no job security.
In the past few months, Amazon has cut their affiliate rates in a lot of categories, Apple has cut their affiliate rate for in-app purchases, and YouTube ad revenues are tanking after a string of bad publicity and new tools that allow advertisers more control over the kind of videos their ads appear before. The people relying on only one of these passive income streams just took a significant, involuntary pay cut. Not fun!
If you’ve got multiple streams of passive income you’re not entirely safe from these sort of situations, but you are at least somewhat insulated. No one program is likely to make up more than a portion of your revenue. If an affiliate scheme cuts their rates by 20% and makes up 30% of your income, in real terms you only take a 6% hit; but anyone relying solely on the program takes the full 20% hit.
Passive Income Generates Free Time, Use It
The whole point of passive income is to disconnect income from time so you’re free to do the things you want to do. If you value your mental health, this really shouldn’t mean endless hours viewing GIFs on Reddit.
Hanging out with your family and friends, getting outside, exercising, reading, playing console games and watching Master of None on Netflix are all great ways to use it, but they can’t keep you going forever. At some point, your friends will have to work, it will rain, you’ll need to rest, or you’ll finish your book, game or series. For most people, work is what gives their life structure and, to some degree, meaning.
Just because you don’t have to work, doesn’t mean you shouldn’t. If you’ve got a project your passionate about, it won’t feel anything like a job. Even Tim Ferriss who popularised so much of the myth of passive income has written four massive books; each one was a huge undertaking that will have taken him thousands of hours. However, because it’s something he’s passionate about, it isn’t really Work with a capital "W."
Once you start making enough money with passive income that you don’t have to hustle for every dollar, it’s time to start diving into projects that really excite you. If they’re passive income projects, it’s very hard for you to go wrong. The worst case is that you spend a few months working on something you care about; the best case is that you add another stream of passive income.
The Downsides of Multiple Streams of Passive Income
Managing multiple streams of passive income is easy… if they’re all actually passive. The problem is, most passive income streams require a little bit of hands on time. To my mind, if something takes less than about two hours a day, it’s pretty passive. If you need to spend an hour or two managing inventory and responding to customers when you wake up, it doesn’t really interfere with your life. You’re free to use 90% of your day to do what you want. Obviously it’s better if something only takes an hour or two a week but for a lot of things that’s just not practical.
The problem is that, when you start adding multiple streams, you need to be a lot stricter with your definition of passive. It’s easy to keep on top of one project that takes two hours a day, but if you’ve got four that take two hours a day, you’re suddenly at your desk from nine-to-five managing things that are meant to be hands off.
Each stream also increases the likelihood of problems that you’ll need to solve. There’s always a risk that a server will go down or someone will report your content and get it removed from the platform or any of a million other little things that can interfere with your business. With one stream, you might have two or three emergencies a year that interfere with your week. With four streams, you’re looking at almost one a month on average.
This isn’t to say these issues can’t be overcome. You just need to be aware that managing multiple streams of passive income adds another level of complexity. You’ll need to be better at automating your systems to keep yourself free.
Getting Started With Multiple Streams of Passive Income
Now that we’ve looked at the advantages and disadvantages of creating multiple streams of passive income, let’s look at how to get started with them.
1. Start With One
Start with just one stream. Don’t split your attention between multiple different ideas at the same time until you have at least some passive income coming in. If you constantly lose focus and chop and change between different ideas, you’ll never get anything off the ground. Learn all about how to get a quick start:
- IncomeHow to Quickly Start to Make Passive Income (Begin Now)Harry Guinness
- Income15+ Quick, Easy Ways to Start Generating Passive IncomeHarry Guinness
2. Set a Goal
With your first stream, set a goal in either income or time. Something like $500 or three months is perfect. Work on that first stream until you reach your goal. Then evaluate whether you’re better off sticking with it or switching focus to another idea.
3. Diversify Into Similar Ideas With Different Income Streams
One of the best ways to add multiple income streams is to take your core idea and diversify into a different income stream. For example, if you run a blog that’s starting to be successful and makes money through ads and affiliate schemes, a great second stream is something like an eBook or a premium guide that dives deeper into the same subject. Both the products and the blog will complement each other as well as tap into different sources of revenue.
4. Diversify Your Existing Products
If one eBook is selling well, write a second on a similar and complementary subject. If you’ve got a gold mine, keep digging into it. There’s no reason to totally switch focus between passive income projects—unless you want to.
5. Sell Your Secrets
If you’re successfully making passive income, consider selling your secrets. It’s a truism that one of the best ways to make money online is by writing about how to make money online. Consider a premium product outlining how you successfully made money, coaching or, if you’re really successful, public speaking.
This one you have to be careful with. There are a lot of scam artists who pretend to run amazing business and sell information products to people who buy into their own self image. If you’re going to start positioning yourself as an expert, make sure you actually know what you’re talking about. Nothing will destroy your credibility quicker than someone showing you make $300 a month from your business when you’re claiming you’re making $10,000 a month.
Overall, the benefits of having multiple streams of passive income outweigh the downsides as long as you're careful about how you set things up. Once you’ve got one successful passive income project going, consider starting another. You can always come back to the first if you think of a great way to grow it.