The Benefits of Passive Income
There are many benefits to creating passive income rather than earned, or active income. First, let's define passive income. Passive income is income that keeps coming after the work is already done. For example, if you create an information product, such as an ebook, it takes you a certain amount of time to actually create the material and package it. But once that is done, you can sell that same product over and over again, without having to rewrite it or work for that income each time.
The biggest benefit to creating passive income is in, believe it or not, taxes. Not many people realize that if you are self-employed (a sole proprietor or partnership), not only do you pay income taxes, but you also pay self-employment taxes, which adds up to another 17% or so, depending on what state you reside in. Passive income, however, such as rental income, is exempt from the self-employment tax. Think of the money you would save in taxes if you could convert most of your income to passive income!
Of course there are ways around this, if you form a corporation of some sort, taxes are handled a little differently and you can usually avoid the self-employment tax. That information is a little too in-depth to get into here so it is best saved for a later, separate discussion. So, what are the other benefits of passive income? Well, of course the most obvious, the fact that you do the work only once but get paid again and again and again!
Passive income maximizes your time and frees you up to focus on other interests. After you do the work and market your product, you can continue to collect income while you spend time pursuing other goals. Passive income is also a fantastic retirement strategy. If you pick the right kind of passive pursuits, you may be able to continue to see revenue from work you did twenty years ago while you are well into your retirement.
Even the smallest amounts of passive income can be an excellent supplement to your regular income. Say you have a day job earning $50,000 per year. You can afford to pay your bills, but think it would be nice to have a couple hundred extra dollars each month to invest. If you can come up with a strategy or product that will give you $200 extra dollars each month, you can have your extra investment money without having to work a part-time job at Wal-Mart in the evenings and on weekends (who wants to do that anyway?).
So what types of things can create passive income? The most obvious are rental income and creating an information product that can be sold repeatedly. If you lack the know-how to create an e-book, you could hire a ghostwriter to create it for you. Using a ghostwriter means someone writes it for you, but your name appears as the author! That means that not only do you now have a great product to sell, but you are positioning yourself as an expert in your field, which paves the way for additional income from future product sales.
You could also create a business and hire others to run it for you, while you sit back and collect the profits. That type of passive income can require a little more up-front work on your part, but can also pay handsomely in the end. Insurance agents and financial consultants and brokers can also create passive income - their customers often keep paying monthly or yearly for work that these folks have done just once. The downside to this, is that you need to be available to do additional work for these clients if they need you.
A final alternative is to create an informative website and run ads on it - this will create what is, in a sense, passive income, although it is a good idea to make sure that all your information is up to date and interesting to keep visitors coming back. If you don't have the time to properly maintain your site and keep your content fresh, consider hiring a copywriter to update your content regularly. Not only will the money you invest in hiring a copywriter free up your time, but professional content and copy means more sales and therefore more revenue in the long run.
Of course, this list is not all-inclusive, there are many other creative ways you can create passive income, but this should be enough to get your creative juices flowing so you can come up with a super passive income strategy as unique as you are.
Angela Stringfellow is a professional copywriter, designer and marketing communications consultant. Visit her website at www.stringfellowcreative.com for fresh marketing information and ideas, free articles, resources for aspiring writers, or to inquire about services. Initial consultations are always free.
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