Where Does Passive Income Lead?

I want you to start thinking about how your life would be impacted if you took the time to create some streams of passive income. Suppose you succeed. What then?

What would your life be like if you were receiving an extra $100 per month in passive income? What about an extra $500? $2500? $10K? 50K?

At what point do you shift from that wouldn’t make much difference to that would be nice? Then when do you think, That would really take off some pressure?

What amount nudges you into I could live off of that amount? Then when do you think, Wow… I could really upgrade my lifestyle with that?

And if you want to think beyond that, where do you start thinking, Hmmm… I wonder what I’d do if I earned that much without having to do anything? What would I actually do with my time then?

It may surprise you that one of the reasons people avoid earning passive income is the fear that arises from being confronted with that last question. People often spend so much of their lives distracted by the daily grind of work, bills, and social obligations that they rarely give much thought to the bigger questions. Suppose you actually do succeed here in a big way? Then what?

If your end game looks bleak, empty, and meaningless, that’s going to hold you back. You’ll sabotage yourself before you get very far.

While you ponder that, be sure to check this out.

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Passive Income Vs. Active Income

Suppose you’re a writer. One way to earn active income would be to get a job writing for a magazine or newspaper. You could get paid to write articles which your employer publishes and owns. You would receive a wage from your employer for the service you provide. If you stop writing in this scenario, you’ll stop getting paid.

Now suppose you offer your writing skills as an independent contractor. You market and sell your services to people and businesses. You do this on a “work for hire” basis, getting paid for each job you complete. This is also active income. If you stop working, your income ceases.

Now suppose you write a book and sign a publishing deal with a book publisher. The publisher gets your book into bookstores and also sells it online. They send you royalty checks twice a year based on sales of the book. You receive a percentage of what they receive for every copy sold. Five years later you’re still receiving checks from them. Your royalties are passive income. Even if you stop working after your book is published, you’ll continue to receive royalty payments for the book that did get published. You could potentially continue to receive these payments for the rest of your life. Your book may eventually be purchased by people who aren’t even born yet.

Notice that in each scenario, your underlying career is essentially the same. You’re still the same writer. You’re just using different strategies for earning income. You could even apply all three strategies simultaneously, working at a regular job, doing contract work on the side, and also writing a book and getting it published.

At any time you’re free to use active income, passive income, or hybrid strategies — or any combo of these you wish. You don’t have to quit your active income job to set up streams of passive income. For some people this is easier, however, since a regular job can chew up a lot of time, making it harder to find the time to create passive income.

Sometimes you can even get paid to create your streams of passive income. For instance, our writer may receive an advance for his/her book from the publisher. So not only does this writer earn long-term passive income, but s/he also gets paid to set it up.

While you ponder that, be sure to check this out.

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Using Your Creativity to Create Passive Income

Intellectual property is a nice choice for creative people because it’s so flexible. You can create a piece of property once and then license/sell it in many different forms.

I also love that you don’t need a lot of money to create intellectual property. I wrote my best selling computer game when I was dead broke. Its budget was basically $0. It didn’t cost me anything to write my book either. You can create a great deal of content for free.

However, because the barrier to entry is so low, it means that lots of people are going to attempt this. The vast majority won’t be any good, but this does create a crowding effect. Even if you’re good at what you do, it may take some time to separate yourself from the mosh pit of wannabes, especially in the eyes of people you’d like to work with.

When you create something, try not to wrap your self-esteem around it. In the beginning you’re probably going to suck. That’s okay. Everyone but Mozart sucks initially. Keep practicing and honing your skills, and you’ll get better.

I love doing creative work, so I’ve created a great deal of intellectual property, including software, several computer games, game characters, a book, articles, podcasts, newsletters, logos, speeches, workshops, poetry, signs, music, artwork, and more.

Being creative isn’t enough if you want to turn your creations into income streams. Selling, licensing, and deal-making are important skills as well, and I suggest that you try to respect these roles as much as you respect the content creation side. If you’re unwilling to develop those related skill sets, then give some serious thought to partnering up with someone who can perform those roles. If you can convince them of your creative genius, it’s a great opportunity for them as well. It certainly worked out well for Steve Jobs acting as dealmaker for Steve Wozniak in the early days of Apple Computer.

Let’s talk about the reality of what it’s like to create streams of passive income and how it compares to working at a regular job. What I’ll share here may surprise you.

With a typical job, you’re more or less directly trading your working hours for dollars. You may receive an hourly wage, a salary, and/or bonuses for the time you put in at work. Your ongoing pay depends on your continued presence at work. If you stop working, your paycheck stops as well.

With passive income you’ll often get paid nothing at first. Initially you work to create and/or leverage a system that generates a flow of income long-term. Once your new income stream is launched and the passive phase begins, you may not have to work very much at all beyond that to maintain the stream.

Passive income is one strategy among many for earning money. It doesn’t necessarily dictate any particular choice of careers. You can do many different types of work and use passive income strategies to monetize your work.

While you ponder that, be sure to check this out.

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The Ins and Outs of Passive Income Deals

When I ran my computer games business during the 90s, I knew how to create a game, but I didn’t know how to get them published. My first method was to go to Comp USA, look at a bunch of game boxes, and get the addresses of as many publishers as I could. Then I snail-mailed a letter of introduction to dozens of them. Maybe 3 or 4 wrote or called back. None of those inquires resulted in deals, however. This was a rather naive shotgun approach but not very well targeted. I even got at least one in-person meeting this way, but it was clear the publisher wasn’t a good match for the kinds of games I wanted to write.

Eventually I got introduced to a game agency by some other contact. Game agents act as brokers between game developers and game publishers, helping to create deals. I met with them and liked the idea of working with them. They helped me figure out what kinds of games to develop based on market trends, they set up meetings with publishers and helped me try to secure and negotiate deals. If they could get me a deal, they would get a percentage of whatever revenue I received, so it was no money out of pocket for me.

Usually I met publishers at conferences like E3 or the Game Developers Conference, but sometimes I flew to their offices. My agent set up these meetings. Fortunately E3 was in L.A. where I lived, except for a few stupid years when they moved it to Atlanta, so that was convenient. I remember some sleepless nights preparing last minute demo updates for these conferences.

For me this approach was hit and miss. I landed some deals this way, but they weren’t good deals. Some money came in ($120K in advances), but no games ever got published and released. I can’t fully blame the agent for this. Suffice it to say there are a some truly bad apples in game publishing. The recent conflict between Activision and the Call of Duty developers reminds me of the kind of crap I had to deal with back then.

Be Cautious

That said, I later did some nicely lucrative game licensing deals, but I learned to be very selective about which publishers I worked with. When it comes to licensing, it can be more important to avoid bad deals than it is to land good ones. If you’re going to get into this form of income generation, it can really pay off, but you may be risking a bloody nose now and then.

My best advice for evaluating a potential licensing partner is to do your homework. Get in touch with people who’ve worked with that potential partner, and ask if they’re willing to share their experiences. Listen to what they say, and take it to heart.

I once did this when a game publisher approached me for a licensing deal. Their website had a list of developers they’d worked with in the past. I emailed all those developers (about 6 of them), and they all wrote back. Without exception what they told me was very specific and very negative. None of those developers had seen a dime in royalties. This publisher was ripping them off, selling their games in other countries and paying them nothing. Needless to say, I never worked with them, and I shared what I learned with other developers I knew to make sure they avoided this trap.

Dealmaking

Once you get good at licensing, you can generate new revenue streams by acting as a dealmaker. This may seem daunting if you’ve never done it before, but with practice it can be a lot of fun. You can get paid to act as a matchmaker.

Many years ago I licensed a computer game from a small game developer, including the right to re-license it. I published and sold the game through my own company, but I also turned around and re-licensed it to another publisher. This generated an extra stream of royalties, which I split with the developer as we had previously agreed. Could the developer have done this deal on his own? Maybe… but it would have taken him a lot longer. It was easy for me to close this deal quickly because I already had the connection with the right publisher.

Notice in this case that I didn’t create or own the game, and I didn’t own the other publisher’s business or sales outlets. I just put the deal together, which generated income for the publisher and the developer — and for me as well. So please note that you can create streams of passive income from intellectual property even if you don’t own the property or the sales platform. You can get a cut of the action for being the dealmaker, and deservedly so.

For several years I’ve worked with a guy who helps me find good joint venture deals. He’s well connected in the personal development field and seems to spend most of his working time on the phone. He knows people who have great products and services. And he knows people who have sizable audiences like me. He connects one with the other, helps massage the deals into place, and enjoys a share of the revenue created by these deals. These income streams have paid off his mortgage. He didn’t receive any special training for this, but through life experience he discovered that he was good at introducing people to each other, and he found a great way to turn that into multiple streams of income. On top of that, he recorded and produced his own music album, and he’ll begin selling that soon as well. The deals I’ve done with him thus far have generated revenue for me well into the six figure range. Note that he gets paid not for the introductions (i.e. not a finder’s fee); he gets paid a small percentage of revenue from each deal he helps to close.

If someone brought you an easy-to-close deal that earned you an extra $1000 per month, would you be willing to pay them $100 per month from that revenue stream for doing the legwork?

Some people are so good at dealmaking that they can generate millions in passive income with just a few phone calls. There’s real value in connecting two or more people or businesses that can synergize their resources, if only they knew of each others’ existence.

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Intellectual Property Part 2

Even though we speak of selling intellectual property products like ebooks and videos, what we’re really doing is licensing them. The information within isn’t actually being sold since no transfer of rights occurs. What’s being sold is a license to use that information, and often the license is limited to a specific purpose. You might also sell the physical media that stores the information, like a CD or DVD.

Licensing is more obvious with software which often includes a license agreement. You may have to agree to its terms in order to use the software.

In a broader sense, you can license your intellectual property to other entities, who can then exploit it to generate revenue, and depending on how you structure the deal, you can earn a cut of that revenue stream. This is what happens when you sign a publishing deal with a book publisher. They sell the book, and you receive royalties from the sales.

Some companies make millions from licensing their intellectual property for various uses. Look at the thousands of products with Disney characters on them, for instance. Disney earns a bundle in licensing fees for those products. Could you create the next Mickey Mouse?

Here are some more examples of what you can do with intellectual property:

  • Design a t-shirt, and license your design to a t-shirt company in exchange for a small cut of the sales
  • Take some scenic photographs, and license them to a postcard publisher
  • Record some relaxing music, and license it to people who sell meditation audio programs
  • Write a new iPad or iPhone app, and sell it through iTunes
  • Write an ebook, and sell it through Amazon.com
  • Invent a cartoon character, and license it to a toy company to create stuffed animals

I have a friend who is an artist, and many years ago she licensed the artwork from some of her paintings to a greeting card company. She earned royalties from the sales of those greeting cards.

Don’t let the word licensing scare you. Licensing simply means “giving permission.” Normally when you license work you created, you and the other party will sign a contract to spell out the terms. You can have a lawyer draft one for you, find boilerplate agreements online, or create your own.

Licensing Agreements

I paid lawyers to draft my first few licensing agreements, and once I became familiar with the key terms, I could easily write my own agreements, using what the lawyers created as a reference. Depending on the complexity of the agreement, it would cost me anywhere from several hundred dollars to a few thousand dollars to have a lawyer draft it for me. I would only do this if the deal was likely to generate more than enough income to cover the legal fees.

If I have a complicated licensing deal to negotiate, or if there are contract terms I’m not familiar with, then I’ll consult with a lawyer to handle the tricky bits. I used a lawyer to help out with my book deal in 2007, which cost me $2000. She helped me negotiate for better terms in some parts of the agreement, which I feel more than made up for the cost of her services.

Legal bills can add up quickly, but for deals where a lot of money is involved, the professional help can be well worth the expense.

Often you don’t have to draft a licensing agreement yourself since they other party may provide one. Publishers do this as a matter of course. Then you only have to review it and suggest changes. I’ve rarely signed a licensing agreement without asking for something to be changed.

If you’re broke or want to learn how to draft licensing agreements on your own, a good source for info is Nolo Press. They sell many quality books, software, and do-it-yourself legal kits.

Re-Licensing

If you create some intellectual property that can be licensed, you can even grant someone else the right to license your creation for you, usually by giving them a share of the revenue streams. For instance, my book was recently published in Polish. I didn’t handle that deal; my publisher Hay House did. I didn’t even know about it until I received two copies of the Polish edition in the mail. Hay House isn’t publishing the book in Polish though. Hay House relicensed my book to a Polish publisher, which paid Hay House for those rights, and then Hay House and I split that money in accordance with our agreement. I gave Hay House the right to relicense my book to other publishers around the globe.

What do you do if you’re a creative type who can create interesting intellectual property, but you aren’t any good at selling or licensing it? Team up with someone who can handle the selling and licensing for you.

If I had retained the global licensing rights for my book, I could have done those foreign deals myself and kept all the money. But would I have done that as well as Hay House has been doing? Maybe… maybe not. They have connections and foreign rights managers and knowledge of different markets to put those deals together. That’s why my book is in so many different languages now. If I tried to do it myself, I might have gotten some results, but it would have been much more time consuming and expensive to do it on my own, and I’m not giving up so much money to have Hay House handle this anyway.

While you ponder that, be sure to check this out.

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Passive Income from Intellectual Property

Intellectual property refers to mental creations that are associated with legally recognized rights, such as material that can be copyrighted, trademarked, or patented. This includes articles, books, music, movies, artwork, photographs, comics, software, logos, and more.

Mere ideas do not generally qualify as intellectual property. It’s the expression of the idea that’s legally protected. You cannot claim the idea of poetry as your intellectual property, but you can copyright an original poem you’ve written, which gives you certain exclusive rights to that poem.

Since intellectual property is generally easy and inexpensive to duplicate, especially when it’s in digital form, it’s a great candidate for creating streams of passive income. You can deliver value to people simply by copying and sharing some data, and this process can be automated or outsourced.

To create a piece of intellectual property may involve a good deal of work, but that work need only be done once. After that, the property can be duplicated and shared with many people. You could potentially still be generating earnings 50 years from now for a piece of intellectual property you create today.

For instance, you can write a book once and then generate income from direct sales of the book or royalties from a book publisher. You can also earn income by selling the associated movie and merchandising rights.

Self-Publishing

Once you create a piece of intellectual property, one option is to sell it yourself and see if people will buy it from you.

This works well if you have a following or can build one. For people who are just starting out, it’s going to take a while to build that following, usually years. If you’re patient and persistent, this approach can really pay off though.

I used this approach with my games business. It took time to build a following, but I eventually got there. The only real way to fail is to give up, which is of course what most people do.

One of the leverage points for self-publishing is lead generation. This means finding a way to attract people who might be interested in your product. One way to do this is with advertising, but that can be risky and costly, so I don’t recommend it for most people.

My favorite method of lead generation is to give away a lot of quality free content. With my games business, I offered free game demos and submitted them to hundreds of game and software downloads.

Note that putting up free content on a website with no traffic is not lead generation. Nobody will see it. You have to get your free stuff into people’s hands, meaning that you have to put it where there’s traffic. If you don’t have the traffic, then put your free content somewhere other than your own website. The free content can then refer people back to your website, where they can buy something from you directly.

When you generate leads, don’t let them fizzle out. Try to collect them. People often need to be exposed to an offer multiple times before they’re willing to buy anything, so if someone visits your website but doesn’t buy right away, give them other options to stay in your communication loop, such as by subscribing to your blog or newsletter or by following you on Twitter, Facebook, or Google+.

As you generate leads over time, some of them will subscribe to one of your lists, so you can still communicate with them.

Some people really push hard on the newsletters, sending them almost daily. I typically send mine about once a month, but I’m not perfectly regular about it. I’ve sent out 4 issues so far this year. If you wish to subscribe to see what it looks like — or to see what you’re missing — you can sign up here. Of course I don’t spam people or sell their email addresses, so all you get is the newsletter, and you can easily unsubscribe by clicking a link at the bottom of any issue.

To process sales you may need a merchant account and a shopping cart. It’s been years since I shopped for a merchant account, so I don’t know what kind of deals are available today. Try Googling “merchant account” to see if you can find a decent recommendation or review site for merchant accounts. You can also process orders via PayPal if you wish; they can handle credit card orders from non-PayPal customers, and their rates are competitive.

Self-publishing is a long road. It’s definitely not a good choice for ADHD types. This is for the builders who enjoy creating something to endure.

The main advantage to self-publishing is that once you have it figured out, you’re pretty much golden. As you learn what works for you and what doesn’t, you can line up a string of repeat successes.

While you ponder that, be sure to check this out.

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Love Your Passive Income System

At this point you don’t have to commit to a particular passive income system approach just yet. You’ll eventually need to make such a commitment, but for now I want you to familiarize yourself with some options and start giving this some thought.

It’s important to cultivate a healthy relationship with the passive income system you’ll use. If you love your system, you’ll use it. If you don’t like it so much, you’ll procrastinate.

I don’t do real estate investing to generate passive income because it would bore me to tears, and I wouldn’t feel like I’m contributing much. Some people may be very passionate about real estate investing, but it’s a bad fit for my personality and values.

On the other hand, I love blogging. I love that when I have an idea, I can get it out of my head and share it with thousands of people that same day. I love that my work is permanently archived and accessible 24/7 to anyone with an Internet connection. I’m not very patient, so when I have an inspired idea, I like to share it immediately. I love the passive income system that supports my blogging because it allows me to provide a tremendous amount of value for free without feeling I have to hold back or to charge money for every little thing. I like sharing, and the system I use allows me to do that abundantly.

I don’t want you to make the mistake of adopting a passive income system that you merely tolerate. I want you to have a system that you truly appreciate. Offload the work that you don’t enjoy, so you can do more of what you love. When you do what you love, you’ll contribute more, and that’s better for everyone.

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To Buy or Not to Buy

One question that will surely come up for you in considering a passive income system is whether or not you should buy into someone else’s system, such as by paying for their knowledge or resources.

Generally I do think this is a good idea, especially when you’re first starting out, but only if you’re cautious about it. You can waste a lot of money buying low quality money-making systems from random Internet marketers. On the other hand, paying for a good system can also deliver tremendous value. You can learn in a short period of time what took someone else years or even decades of painstaking work to piece together.

I used to be a bit over-eager in paying for what seemed like premium knowledge in this area, and I wasted money on what turned out to be fluffy or outdated info. Then I cut back massively and became very stingy, which caused me to miss some easy opportunities. And finally I settled into what I feel is a more practical and realistic attitude. I’m willing to pay for systems know-how if I think I’ll be able to apply it effectively and if the info comes from a quality source. For me a quality source is someone who seems to genuinely want to help people understand and apply the methods they teach, rather than just selling low-quality info to make more money. Also, a quality system is one that’s already been proven to work under real-world conditions.

Usually when I pay for systems knowledge these days, I’m not looking to implement someone else’s system as-is. I’m simply looking for a few fresh ideas I can use to upgrade my existing systems. What are the latest and greatest ideas I might otherwise miss?

I know that when it comes to marketing, the people who sell these systems may try to push my emotional buttons and offer extra incentives to get me to buy. I do my best to ignore those sales tactics and look at the potential value more objectively.

Since I know people are going to ask me this, I’ll share a couple of specific recommendations for systems you can use to generate passive income streams online today. (Stay tuned to my “Life Lessons” email series for specifics).

I used a combination strategy when I ran my computer games business. I sold the games through my own website, but I also posted my game demos to hundreds of software and game download sites. The download sites helped drive traffic to my website, where people could buy the full versions of my games.

Your Passive Income System Preferences

My goal is to get you thinking about what kind of system you’d like to use to generate your own passive income streams. Do you want an income-generating website? Are you leaning towards having a product to sell on other people’s websites? Would you like a system that incorporates both? Or do you want to do something wildly different?

Think about your strengths. A good system will allow you to leverage your strengths while delegating the areas where you’re weakest. Are you a content machine like me where you need a system to provide an effective publishing platform and a way to monetize your work? Would you feel more comfortable selling someone else’s product or service? Does selling turn you off, and would you prefer to delegate the selling aspect as well?

When it comes to passive income systems, the key test is whether your system works in the real world. You can dream up whatever you like, but dreams aren’t streams.

A good passive income system generate results. If you’ve never created your own system from scratch, I recommend borrowing someone else’s system if you want to reach your goal quickly. Otherwise if you prefer a bigger challenge and don’t mind investing a lot more of your time and energy up front, you’re always free to roll your own.

Once you’ve had the experience of working with someone else’s system, you may decide to keep using it, you may experiment with different systems, or you may tackle the challenge of rolling your own system. There’s no right or wrong way to do it. But I’d suggest that for your first stream of passive income, it’s much easier to simply borrow and apply someone else’s system, even if you have to pay for it. A good system looks simple, but that’s because it hides so many implementation details. For passive income, this is a good thing. Handling too many details yourself throws you back into the realm of active income.

A good passive income system will normally employ many different income-generating strategies simultaneously, weaving them into a congruent tapestry. This is similar to how a computer integrates many different hardware and software components that function well as a unit.

We can also learn a lot by breaking out and studying the individual components of a passive income system, and that’s what I’ll be sharing in the weeks ahead. While I still recommend borrowing someone else’s system to get started, learning the details of how the different elements work together is still very helpful since you’ll probably want to tweak and extend what you learn from others.

While you ponder that, be sure to check this out.

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Finding the Right Passive Income System

To generate passive income, you need a way to maintain your income without having to do so much grunt work to keep it going. If you have to keep working each day to avoid seeing your income drop, then you’re earning active income, not passive income. Passive income continues to flow even when you aren’t actively working.

Many forms of passive income still require daily or weekly maintenance activities, such as fulfilling orders or handling customer service, but this doesn’t mean that you have to perform those maintenance tasks yourself. You may delegate such tasks to other people, to businesses, or to technology. For your income to be passive (meaning that you don’t have to do much to maintain your cashflow), you need to remove items from your plate, but those items still need to get done.

A passive income system is a form of delegation. What is being delegated, and to whom? How will the necessary active tasks being handled if you won’t be doing them yourself? Your passive income system must provide these answers.

I love delegating to technology because it’s fast, efficient, consistent, and inexpensive. Technology also tends to scale well, meaning that you can add more computing resources, which generally requires little more than paying for those resources. This works well for an Internet business.

Notice then that when you rely on technology to communicate, you’re already taking advantage of passive systems. Your messages pass through equipment that’s designed, built, and maintained by others. You may not be paying those people directly, but they’re working for you every day. You’re already taking advantage of these systems now. So if you currently rely on such systems for your communication needs, then why not leverage them to handle your income as well?

You can also delegate tasks to other people and to businesses to get them off your plate. In a typical affiliate deal, you may delegate the order processing, fulfillment, and customer service to another company. For example, if you use Amazon’s affiliate program to sell items, you’re effectively delegating a significant portion of the work to Amazon. From your perspective an affiliate sale may seem very passive, but that’s because Amazon provides the active labor to make your affiliate commissions possible.

Build or Borrow

To employ your own passive income system, you have several options:

  1. You can design and build your own passive income system from scratch.
  2. You can learn how other people earn passive income and try to copy their approach.
  3. You can use someone else’s system as-is (usually by paying for the privilege).
  4. You can do a combination of any of the above.

I’ve used all of these approaches at different times. I can’t offer a general recommendation for one of these above the others though. The most intelligent choice depends on a variety of factors including time constraints, budget constraints, personal strengths, and personal goals.

If you’re up for a real challenge, it can be very rewarding to design and implement your own passive income system from scratch. The upside to this approach is that you invented it, so you know its inner workings, and you can customize it all you want. The downside is that this method can take a lot of work, and it may be quite a while before the first income streams start flowing. Innovation is risky. Sometimes the risk pays off. Sometimes it doesn’t.

More commonly, people borrow ideas from each other. Why reinvent the wheel? Learn what works for other people, and use similar methods for yourself. There are plenty of books and systems authored by entrepreneurs who are happy to teach you how to do what they did. Some people are willing to share details of their systems for free, while others only share this info for a fee. Even when there is a fee, buying someone else’s system can save you a tremendous amount of time and energy.

When I was trying to build some sales for my computer games during the 1990s, I bought a book called How to Sell Your Software by Bob Schenot. Bob shared the details of his system, and I was able to adapt much of his advice to my own business, which saved me a lot of time. That system would seem very dated today (it was largely pre-Internet), but it got me off to a good start in building my own direct sales system.

A seemingly inexpensive approach is to use someone else’s system as-is. An example of this is licensing your book to a book publisher or selling your book via Amazon. This may seem like a good deal since you don’t have to pay anything up front, but it can be a lot more expensive if you do well because you may have to give away a significant percentage of your sales to the system provider. This approach tends to be the easiest for getting started. System providers in this category may be very good at processing orders and handling customer service, but they usually don’t provide much marketing assistance, so it may be hard for you to get noticed with them. That said, they can do an awful lot of work for you, making your income streams very passive.

The good news is that you don’t have to understand how to build a passive income system from scratch in order to use one, just as you don’t need to know how to build a computer from scratch in order to use it.

My personal favorite is the hybrid approach. I pick up many good ideas from others, but I like to put my own spin on things and keep tweaking my passive income streams as I go. I rarely use other people’s systems as-is, often because I find their marketing methods a mismatch for my audience, so at the very least, I still need to tweak the marketing elements even if the underlying product or service is a good fit.

While you ponder that, be sure to check this out.

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Passive Income: A Long-Term Perspective

Is $10K spread out over 10 years a good paycheck for 6 months of work? No, I could easily have earned more money working at a job. I was already earning more than that from contract programming work before I wrote my first independent game.

The point of creating your first passive income stream isn’t to achieve that big payout right away. The point is to learn how to create passive income streams, so you can get better at it. Then you can create bigger streams as your skills increase. Don’t expect your first effort to be your masterpiece.

Today I can create new streams of passive income with a lot less effort than I had to exert in the 1990s. The reason I can do this is because I put in the time to learn how to do this, and I’ve continued to refine my skills over time.

Don’t worry about how big your streams are in the beginning. If you can create a $50 per month passive income stream this year, I think that’s great. And it’s so much easier to do this today than it was back in 1995 when I first started, so you have it much easier than I did. Your cell phone is probably 100 times more powerful than the computer I used back then.

Do set goals, but be patient with your progress. This is a skill that will benefit you your whole life. Even if you work on this for 10 years, there will still be plenty more to learn.

My Passive Income Goal

Since I want to keep this simple and not overcomplicate things, I’m going to set what is for me a relatively conservative goal:

I create a new stream of passive income by December 30, 2019, that generates at least $2000 per month on average and endures for a minimum of 10 years.

So this means creating a new stream that earns at least $240,000 over the next decade.

This seems like an achievable goal for me. I’ve already created multiple streams of this size and larger, so it’s not a stretch to believe that I can do it again. In this case the challenge will be to explain all the steps as I go along, which I’ve never done before. I want to keep this goal fairly basic, so I can focus on the teaching aspect.

Having a clear and specific goal helps me transition to thinking about the how. Now I can start pondering ways to do this.

This also helps me rule out what I can’t do to create this income stream. I can’t just do more public workshops or paid speaking since that’s active income. I want to set something up once and have it generate monthly income for at least a decade.

What happens if I don’t make the deadline? Nothing. I’ll set a new deadline. The deadline is a focusing mechanism. I could create a new passive income stream within a couple weeks if I want to. And I’ll probably create other streams along the way that I don’t blog about. But for this stream, I want to take it slow and explain the process in detail, so you can follow along. But I also want to keep moving towards some kind of release. I don’t want to get stuck in perpetual idea mode.

Your Passive Income Goal

The key to goal setting is to get into the habit of setting and achieving goals. It’s not to set aggressive targets that you never reach. You can always set a bigger goal later once you achieve the original goal.

Sometimes I’ve set a big goal with a two-month deadline, and I achieved it during the first week or two. So I celebrated that. Then I set a new goal with a new deadline.

As long as the goal seems motivating to you and it helps you get into action, then I’d say it a good goal for you.

My suggestion would be to set a goal something like this:

I create a new stream of passive income by May 31, 2013, that generates at least $100 per month on average and endures for a minimum of 5 years.

I think this is a very achievable goal for most people. You don’t need your own website to earn this much.

Now some people will blow this goal out of the water; it will be way too easy for them. Other people will find it a serious challenge. Feel free to adjust the goal to something that feels good to you.

If you were to achieve the goal above, you’d put at least $6K in your pocket, but it’s not the amount that matters. The real aim is for you to learn how to create a $100 per month stream of passive income. Once you learn how to do that, you can surely do it again. Do it 10 times, and you’ll earn $60K passively.

Once you learn how to earn $100 per month in passive income — by actually doing it, not by reading about it — then it’s not that difficult to learn to create bigger streams. So instead of creating 10 streams that collectively generate $60K, you might learn how to earn that much with just one or two streams. As you continue to develop your skills in this area, you’ll discover how to earn larger sums with fewer streams and less effort. If one stream dies, you’ll also know how to replace it with a new one.

I’m pretty comfortable creating streams that earn around $50K per year. When I had third-party ads on this website several years ago, one of those streams was earning more than $100K per year. Once you get the hang of this, I think you’ll find it a fun challenge to create new streams of income and to experiment with different approaches.

If you want more long-term financial security, you won’t find it in the money or even in the streams of passive income. You’ll find it in building your own knowledge and skills. You can take away all my streams of income, my website, my assets, etc, and I’ll be able to recreate the same level of financial abundance in a relatively short period of time because I already know how to do it.

This is what I want for you as well. I want you to learn how to do this, so then you’ll always have that option available. This know-how will relieve you of much financial pressure. You won’t have to scramble to get a job to pay your bills. You can just create more passive income streams if you want more money.

Do It Now

You are NOT done reading this post until you’ve set your goal and have written it down. If you haven’t done this yet, do it right now.

Once you’ve done that, I encourage you to also post your goal in public — IF you can do this in a place where you feel that people will support and encourage you.

If you expect mostly positive support, then share your goal on your blog, your Facebook page, etc. Add some accountability and commitment like I’m doing. This can help motivate you to succeed, and you’ll inspire others to develop this skill too.

If, on the other hand, you anticipate a largely negative response if you share your goal publicly, then you have a different challenge to address. This means your life is filled with too many incompatible people. You have too much social drag. These people are only going to get in your way, so if you don’t think you can win them over, then drop them. Block them, unfriend them, etc.

If other people have a problem with your setting a goal in this area, what are they going to be like when you actually succeed? They’ll probably get worse, and then you’ll have to deal with problems like pettiness, jealousy, sarcasm, neediness, and more. Better to cut them out now and fill your life with positive support. Let them learn from your example… from a distance.

Prepare to succeed. Expect to succeed. Know that once you’ve set this goal, you’re going to achieve it. And if you’re going to achieve it, then you need to start shedding from your life whatever would otherwise get in the way of your goal. Whoever can’t handle it, drop them. This will create space to invite much better relationships with people who will support you on this path. The dead weight must be shed, so that positive support can come through.

While you ponder that, be sure to check this out.

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