How To Live On Passive Income And Make More Money Than When You Work 40 Hours A Week
How To Live On Passive Income And Make More Money Than When You Work 40 Hours A Week
Do you dream of a better life, but you are not
famous or the heir of a millionaire businessman? Well, you have to
start generating passive income, my friend, as soon as possible.
Most people live without passive
income. Your situation is always one of these two:
1.
They work 40 (or more) hours a week: they need to cover their expenses and they
work for someone else 8-10 hours a day. They do not choose what to do or
when to do it.
2.
They have their own business: Online and offline business owners work even
harder. They have to deal with the company, the employees, the customers
and a long list of possible problems.
What if there was another way to work? A
way of working in which time was not the main variable. In which the money
goes into your pocket without you even having to attend to it.
That
Way Of Working Is Called Passive Income Generation
There is a phrase that I love in the world of
work, and that says:
“Do not become irreplaceable. Because if
they can't find you a substitute, they won't be able to give you a promotion
either.”
This truth also applies to the world of entrepreneurs. For
you a promotion could mean the benefit of earning more by working less. You
will tell me that once you gain a certain reputation, you can increase prices
without losing sales.
But you also can't double your prices every year without losing
your customers, right?
We are always in the same way, until you get out of the way of
generating direct income from your business, it will have a natural ceiling
(the hours that you can bill yourself).
In addition, the growth that you are going to experience will be
rather slow, because instead of worrying about generating more income, you will
be focused on delivering the services sold to your clients.
So, are you interested in starting to generate income from home
automatically or do you prefer to continue selling your time in exchange for an
hourly rate?
If you choose option 1, keep reading.
What
is passive income?
THE ABCS OF
MONEY GENERATION
There are 3 types of income:
1.
Time income: You go to work, you do 8 hours. They
pay you €10/hour. This is how you charge. You trade your time for a
fee.
2.
Income by result: In this model, the more you sell or produce,
the more you earn. If you get it in 4 hours, because you are very good,
while your colleagues need 8 hours, then better for you.
3.
Passive income: This income is the result of systems that
you have put in place to generate money without having to get involved in the
process. In many cases, passive income requires technology to automate
operational processes. But the most common way to do this is to put people
to work on your system. The owner of a business that does not appear in
the operations, collects dividends every year that are passive.
Passive
Income Is Income That Are Received Without The Need For Your Physical Presence
Or Direct Action
That is to say, they are income that requires
you to start something (sell an info-product, rent a place, and collect
copyright) and that once created generate income almost without the need for you
to do anything.
In other words, passive income encompasses
all income that does not require an active participation of the person (rather
a minimum participation), leaving aside the portfolio income (dividends, financial
interests, etc.).
For that reason, if what you want is to earn more money, work
less and ensure a good retirement, then it is time for you to start
creating income streams that do not require great dedication.
For example, in my case I generate passive income thanks to the
sale of different products through my sales funnels, which work 100%
automatically with Facebook Ads and auto-responders.
If you are starting your business or if you already have one
running, the sooner you start thinking about changing your business model to
one that requires less time, the sooner you will reach the grail of financial
freedom. And
all thanks to the generation of passive income.
The
benefits of passive income
Well, what good is passive income? Why are they so sought
after and what are the reasons why they attract so much bloggers? Well,
for three very simple reasons:
1.
You earn more by working less: no one wants to work 40 hours a week for
life. If there is a way to earn the same by working half, that will be
what we want. And that's what you get with passive income: generate income
even if you are sitting on the couch at home watching television.
2.
Opportunity to create your own lifestyle:
whether you are an employee or
freelance, if you offer services you will be "tied" to schedules,
deadlines and clients. With passive income, if you've created it the
right way , you can choose how to live, where to live, and what to do with
your life. You are not tied to anything or anyone.
3.
Freedom: beyond creating your own lifestyle,
passive income gives you the freedom of not having to answer to others except
your own clients.
All three benefits are closely related to living "no strings
attached" and living the life you really want. There's no more. Although
you will not be able to live sitting watching your bank account grow, you will
be able to obtain a freedom that no employee can have.
Types
of passive income
To better understand the model, we are going to review the two basic types
of passive income, and also a third
modality that, although not technically passive income,
can become a key strategy to earn more by working less.
RESIDUAL INCOME
It is an income that occurs over time and comes
from work done only once. I give you some examples so that
you understand it better:
- An insurance salesperson, who receives an annual commission
when his client renews the previously acquired policy.
- A direct sales rep who gets paid a commission every time
their direct customer orders a product again.
- A Fitness teacher who produces a video that is sold in
different gyms. With every sale, you charge commissions.
- A marketing consultant who developed an ebook on sales
techniques and receives a commission on each copy sold online.
- A photographer who puts his images in a digital catalog for
sale online (iStockPhoto or similar). Every time a customer downloads
their photos, they receive a commission for them.
- The owner of a restaurant or a business, who managed to grow
enough to hire a manager who is in charge of taking it forward: he has
created it, he has set it up, and now that it works, he places a manager
and recovers his time to dedicate yourself to new projects. The owner
can continue to receive a salary, such as consulting/advisory services,
and thus have a source of residual income.
Well, you will realize that
there are many and very diverse types of activity that can generate residual income. You may get money
for new sales to the same customers as always; it may happen that new
customers appear.
But in both cases, it is not necessary to be behind the business
(as can happen with the sale of ebooks), or you can simply demand a small
personal contact, as could happen with the insurance salesperson, who once a
year reminds you your client about the renewal and asks if they want to keep the
same coverage.
Notice how different this modality of residual
income is from that of recurring income, which
defines what an active income would
be.
Recurring income is what requires you to be permanently active,
such as a consulting job, graphic design, writing, or any other type of
service.
You must dedicate hours and hours, day after
day, week after week, to be able to charge your clients for your services.
Although this type of income offers you greater stability, since
you can have a clear visibility of your income in the short / medium term, it
has against demanding work hours.
You
are selling hours for money, and this definitely limits your income to your
personal production capacity. Your
business has a ceiling: your available hours per week. It also has another negative aspect, if you are sick or on vacation, you no longer
generate income.
In both cases, the only way to leverage your business will
be to hire more staff with the consequences that this
has on the fixed expenses of your business and your personal
peace of mind.
LEVERAGED INCOME
The income
Leveraged will allow leverage the work of others who generate
income for you. Here are some examples of leveraged
income:
- The author of an ebook who sells his product through an
affiliate network that is responsible for promoting it
- The manager of a sales team who receives commissions for the
income generated by the people on his team
- A contractor who earns on a small margin from work performed
by subcontractors
- Launch a franchise of your business model, to allow other
entrepreneurs to set it up in their city
As you can see, here there are also different models for different
types of businesses. And note that leveraged
income can also be residual income. If
you achieve the combination of both, you will be on the right track.
ACTIVE LEVERAGED INCOME
This is the third alternative I was talking about. Perhaps it
goes a bit out of the passive income scheme since it demands your participation
directly. But it has the good that it will allow you to generate more
income the more people you attract. In general, it is achieved with
convening events such as:
- A training course or a specialization seminar
- A conference or a convention
- A recital or concert
- Night parties or events
Naturally, they all demand direct participation from you, and if
you have never organized an event, you will discover by doing so that it is
many hours of work. But your earning potential is much higher than if you
worked for someone who pays you by the hour.
Just think of filling a convention room with a thousand people who
pay you 20 euros to listen to a specialist, and you will see that you will have
perfectly covered the rental, promotion, security and other costs, and you
still have a good margin. Perhaps the simplest thing for a company to
start with active leveraged income is to set up a training course.
How
to generate passive income?
DO YOU HAVE CAPITAL?
If you already have a capital saved, everything is easier for you.
- With 1 million of capital, you can get a return of 4% net, investing in the markets. They are € 40,000 per year. For many people, earning €40k/year without having to work would be an almost perfect life. And this income is completely passive. You can work with bots that realign your investment portfolio without doing anything. Literally nothing.
- More of the same, with a real estate capital. If you
have 3 apartments for rent in Madrid or Barcelona, it is likely that you will get € 2000 clean per month. It is another
source of passive income.
In both cases, it is easier to generate these passive income,
because you already have these assets.
So… What to do if you don't have capital, be it Cash or Real
Estate, right now?
If
You Do Not Have Capital, You Will Have To Create Assets, Without Money
Well yeah, you don't have a choice, sorry.
Entrepreneurship is the best way to create
capital
There are 2 different paths:
1.
The traditional company, of a lifetime: you can set up a traditional company, go to
the bank to ask for financing, rent and reform a premises and hire dozens of
employees. In 20 years, if everything goes well, you can become a passive
income manager. It will take 20 years, because these types of traditional
businesses operate with a reduced operating margin, and even smaller net
profits.
2.
The online business: or you can decide to create a much
smaller asset, with hardly any initial investment required. A business
that is almost all profit, because you have no physical or personal structure,
and automate everything you can.
And that is where passive income online businesses make
all their sense.
And if we talk about the "technique"
of generating passive income, the system is usually the following:
1.
Create or buy something that can be sold with
hardly any modifications: you can create a course,
book, guide, product or buy a house, invest in assets, etc. They are
elements that, with a minimum of maintenance (periodic updates), independently
generate income after an initial work.
2.
Create a funnel to attract public to your product: unless
you are in a traditional model, to be able to passively generate income online,
you will need to attract people to your product. There you can use the
blog, guest posting, Facebook Ads, Google Ads and a thousand other tools.
3.
Provide a minimum of customer service: even
if it is passive, this does not mean that you do not have to serve your
customers. Except for very specific products, from time to time you will
have to talk to your client or automate that relationship with an
autoresponder.
4.
Update your product: your
product will expire sooner or later, regardless of the sector. It is up to
you to update it and continue to occupy your market share or let it die.
It doesn't seem difficult, does it?
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