A regular income stream requires constant input of time and effort to generate money. In simple words, you trade your time for money. That means that if you stop working, you stop earning. Clearly, relying solely on your passive income streams isn’t so smart. Just think about it. What happens when you’re suddenly unable to work? You won’t have a source of income!
What is passive income?
In contrast, passive income refers to money that you continually get from a one-time investment. Usually, passive income streams don’t require the investor to monitor or adjust his or her holdings. There are many ways that you can generate passive income.
SEE ALSO: Kenya’s shilling hits new record low
However, it takes a large upfront investment of time and even money at the outset to set up a good passive income stream. In many cases, it isn’t guaranteed that your investment will bear the expected fruits. You could easily end up putting all the work and fail to generate a respectable amount of cashflow. It takes patience to see a decent amount of money from most passive income streams.
But once your passive income streams mature, you can relax and watch your money come in. Passive income gives you the freedom to use your time as you see fit, it reduces stress and anxiety related to your financial future, provides a platform for financial stability and growth, and allows you to pursue interests without thinking about bills.
How to create passive income streams
There are numerous passive income ideas that you can explore – a quick Google search will give you plenty of ideas to work with. You can generate passive income from investing in Real Estate Investment Trusts (REITs), writing an e-book or creating an online course, or being a private lender.
If you don’t how to get started, here are some easy steps to follow:
SEE ALSO: Most overlooked truths on money, business
1. Select an idea
The first step is to pick an idea that is suitable for you. Consider your personal situation, both financially and otherwise. For instance, if you have a good amount of money to invest, real estate, dividend stocks or business investments might be a great idea.
If you don’t have money to invest, ideas that require time investment are a good place to start. For instance, you can tap into your area of expertise and create an online course, build a blog, or write an e-book.
You will notice that most passive income streams still require some involvement, especially at the beginning. For example, if you are investing in real estate, you will have to be involved in the construction phase, looking for tenants, and maintaining the property. If you choose to create a blog, you will have to keep it constantly updated with fresh content.
2. Set goals
SEE ALSO: The only five money principles you need to know
Just like with any other financial endeavor, set clear goals regarding your passive income investments. Write your goals on your personal diary or your financial planning notebook. Studies have shown that writing your goals down on paper is far more powerful than just setting them in your mind. People who tend to set their goal in their mind are more likely to fail at achieving them.
Before setting goals, understand that it might take some time before your passive income investment starts bearing fruit. Therefore, your goals should be realistic. Research on how much you can expect to make with your selected passive income and set SMART goals. SMART is an acronym that stands for Specific, Measurable, Achievable, Realistic, and Timely.
3. Plan your steps
How will you get from point A of your investment to point B? You have to have a clear plan in place on how to achieve your passive income goals. Which actions do you need to take? What is the long-term plan? For example, you might use the income from one passive income stream to build yet another one. After you have built several reliable passive streams of income, you might choose to eventually quit your day job. But this will take a lot of time and effort, so don’t be in a hurry to quit your 9 to 5 just yet.
Just like with your goals, write down your plan. This will help you figure things out more clearly. With consistent action, you are set to bring your dream into reality.
4. Join a community
It is easy to get discouraged when you don’t have a community to support and encourage you. Fortunately, there are many online groups where like-minded individuals congregate to share their experiences and knowledge. You will find these groups on platforms such as Facebook, LinkedIn, Telegram, and Whatsapp. If you’re keen to learn, there’s plenty of financial wisdom to be gleaned from such groups.
To get the best out of such groups, don’t be afraid to speak up and ask for advice. Also share on what you’ve learned to help others.
5. Find a mentor
Figuring things out on your own is possible, but the process will be much easier and faster with a mentor. A mentor will help you avoid or overcome stumbling blocks in your path to having lucrative passive income streams.
Finding a good mentor is tricky but if you’re active in investment-oriented groups online, you will spot some financially successful people who don’t mind helping you learn the ropes.
However, don’t trust just anyone who portrays financial success on social media. Many of them are just faking and you might fall into the hands of fraudsters. For this reason, it is best to find people in your industry who you can trust to mentor you.
6. Scale your investments
Once you’ve found passive income streams that work, make sure that you scale up to reap maximum returns. Anything from e-books, online courses, dividend stocks, to real estate can be scaled up. Research on ways to scale up your investments and implement the knowledge. With commitment and persistence, over time you will have a comfortable passive income to rely on.