A few months ago, I wrote a series on creating passive income. Since then, my company has been created and we started to make a few buck here and there. However, creating a passive income machine takes time and consistency. When you are sitting on your desktop taking notes and thinking about your project, you are only at the very beginning of a long process before you actually earn your first passive dollar!
We are not 100% passive
I always found the expression “passive income” hard to define. Technically, it should be described as a source of income requiring no attention from its holder. You wait and you get paid. However, which kind of income could meet 100% this characteristic? None! Even dividend investing requires research to pick the right stocks and time to follow-up the evolution of your investment. Real estate properties require maintenance, administration and renters management. Blogs? This is where I am; blogging in the bus every single morning to make sure I am ahead in my posting schedule. Each night I answer emails to readers, submit article to carnivals and read other blogs to keep me up to date.
Based on this premise, I based my “passive income” definition on the following: it’s an alternative source of income where your earnings are not linked to an hourly rate but rather on its capacity of creating wealth.
Passive income is probably the best kind of income you can make as it is still going in your pocket when you don’t actually work. However, this is the kind of income that requires the most effort and time to build. Even getting dividend income is a pain; how much money you need to put aside before getting $500 a month from your stocks? If you are smart enough to buy BMO that gives a 6% dividend return, you would need $100,000 to create such passive income. Then you get to the second step of passive income: how to make that first 100k?
Real estate properties and companies present the same problem; you need a lot of time and effort before you can withdraw your very first dollar. While our internet company is less passive than these methods, it also requires less time to produce income. I would guess that there is a positive correlation between the level of passive income versus the time required before getting money back.
Even though we created M35 back in March, I still didn’t cash in any money yet? Is it because I can’t make money off internet? Definitely not! The problem is, again, laziness. The company is setup, websites are making a few bucks BUT we took a lot of time to setup our accounting and share structure. Therefore, we didn’t want to cash in money when we didn’t know what was optimal according to our situation. The worst part is that it’s not that complicated, we were just too busy doing other stuff and since the money was deposited into a company account, the rest didn’t matter much to us.
So if you want to earn passive income, you will have to setup a well defined plan, work hard and be patient. If you are persistent in your efforts, you will surely make passive income one day!
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