The Smart Passive Income Guide (2015)

Chapter 1: Do what Successful people do



Making a passive income is something that many people dream about. They have heard stories about how passive income earners are able to just sit back and make money with very little work. And this is where a lot of people end up getting stuck; they believe these stories and are not prepared for all of the actual work they need to put in to make the money they want. This first chapter is going to spend some time exploring the idea of passive income, explaining who can make a passive income, and identifying some of the traits that you will find in those who are successful in making a passive income.



What is Passive Income?



To start this guidebook, we need to look at what exactly a passive income is in order to understand what is being discussed. A passive income is one that is received on a pretty regular basis, but one that is not going to require as much effort in order to maintain it. This does not mean that no work is going to be involved and, especially in the beginning, you will be putting in more work than many people do for their regular incomes; you will also be taking a big risk. And even when the income is secured, you will still need to put in the work. Many people think that passive incomes just involve a few hours of work and that is it for them to start making their millions. This is where they are going to fail and run into issues because they are not prepared for all of the hard work. At the same time, a passive income is different from a regular income in the sense that the money is not earned through your constant, active participation in a particular form of labor or service.


According to the IRS, passive income is defined as coming from just two sources, even though it is possible to earn it from other sources as well; these are just categorized under other sources when it comes to tax time. The two sources are trade activities in which the person does not materially participate and from rental activity. Other governmental institutions recognize passive income as the income that is obtained with capital growth. Either way, the money you make from passive income is still going to be taxable just like other income sources you come across.



There are many different types of income that could be classified as passive income. Some examples include:



Any income that you make off of your property. This could include rent from apartments, several units, or even your home; farming; or leasing out your land.


Earnings that you might get from a business where you are not directly involved as the owner. You might own the business, but someone else is running the business and dealing with its day-to-day running.


Interest that you make from your bank account. Usually this is not going to be high enough to be taxable because you will be lucky if you make a few dollars from the transaction. There are a few banks that offer higher rates and if you invest wisely, it is possible to make more. 


Royalties—this can be from a patent, publishing a book, making a software product or other intellectual property, or even writing a song. You might have put in the work to produce the piece, but you are not actually doing work while the money is being made, so it is considered passive income.


Earnings from posting advertisements. This is kind of a confusing one. To do this you need to own a website where interesting stories, pictures, and other information is posted. If you have a large enough following, other businesses may pay you to put an advertisement about them up. You will have to keep up the content of your website, but you will not be doing any work on the advertisements, so you are making a passive income.


Interest that comes from sources such as bonds or stocks. These can offer you a lot of good income if you make good choices about them, but there is always the possibility that you might suddenly lose a lot of money in the process as well.



Any of these can be considered passive income. As you can see, you are still going to need to put in quite a bit of work in order to make this kind of income. Yes, you can make money off of royalty checks, but you would have to put in the work to write a book, find a publisher, and market the book in order to make any money. You can make a good income from rental properties, but you have to worry about filling the buildings, cleaning them, upkeep, and going around and purchasing new properties if you would want more income. It is all going to take some work! Overall, it is the method of getting the money, as well as what happens when you get the money, that will determine if it is a passive income or not.



Who Can Make Passive Incomes?




In all honesty, anyone can make a passive income, but a lot of people are just not suited to the risk, hard work, and the time that needs to be committed in order to be successful. Many people who attempt to earn a passive income find that they fail with it because they are just not prepared to do the work or invest the money. They think that just a little bit of their time will be sufficient in order to get the money that they deserve, so that they can go sailing around the world and live the life of the rich and famous. While this is a nice little dream, it really is not a reality.


The people who make a good living on passive incomes are the ones who are willing and ready to put in the hard work that is required. They are not the ones who sit back and expect the money to just be handed to them, and they are not the ones who will be duped into giving up all of their money by flashing lights and a lot of big words on a webpage. They are the ones who can think outside the box to the bigger picture, who will put in the work, and who will take the chances that no one else is willing to take in order to make a good income. They are also the ones who realize that they are never going to be able to take a break from their work, but that the reward, as well as the freedom, are so worth it. Theoretically anyone could be like this, but the truth is that most people are either not hard enough workers, have trouble thinking critically, or just do not have the ambition to get the work done in order to make the passive income that they are looking for.



How Successful People Make Passive Incomes



So now that you know a little bit more about passive incomes, you might be curious to find out who the people are that are able to successfully earn money in this way. It sounds like such a great idea, but if it were so easy to do, then everyone would be on the bandwagon hoping to make their millions. And while many people do try to get a passive income, most of them are not ready for all of the work entailed in order to be successful. When they hear about passive income, they think that they will just put in a few hours of work and then sit back while the money just rolls in. As explained above, this is just not the way that these things work, no matter how much we might wish it was. This section will look at some of the key character traits and mindsets of those who earn a successful passive income.



Go Getters



The first trait that you will notice in successful passive earners is that they are go-getters. They are not the kind of people who just sit there on the job and hope that good things will come their way, or complain when things go wrong. They are the ones who are out there getting their hands dirty, who like to work, and who are able to take control when opportunity strikes. Earning this kind of income is sometimes scary in the beginning for a lot of people because it is not always guaranteed. Many people might not like working for a boss they do not like, but they do like the predictability that comes with going to work each day and bringing home a reliable paycheck that can help support their family. This is not something that can be promised with a passive income.


This is a part of the tradeoff. Yes, you have to give up some of the predictability that you love with your regular income, but with some hard work you might be able to bring in a lot more money than you would from your old job, plus you get to be your own boss. There might be a lot of strange hours, but you would have more control over them and could make it to the big games or the concerts that you used to miss due to work. Even though the possibilities might seem wonderful, it is a big risk for a lot of people and it does not always pan out the way that it is promised. This is what keeps people at their regular jobs doing the same thing over and over again.


For those who are ready to jump in and get a passive income, this is a risk that is worth taking. They want to see the big rewards and are not worried about the risk as much as others. They will see the opportunity and they will jump right at it. They know that they will achieve the success that they want as long as they keep working hard and follow the right leads.



Independent Workers



If you are not able to work on your own without a lot of guidance and hand-holding along the way, you will find that a passive income method is not the right way for you to make money. When you are working to make a passive income, you are pretty much your own boss. This means that you do not have someone breathing down your neck telling you when the due dates are and where you need to be. You get to choose the hours and the work. Some people like this and others will find that they are lost and do not know what they are doing. If you are one of the latter, you should really stay away from this kind of work because those who are not able to keep themselves motivated and working hard will not be successful with this method.


There are some pros and cons to this kind of income source. First, you will be making your own money and will not have to share the credit with anyone else. This is appealing to some people who are tired of doing all of the work for a boss who takes all of the credit. You will also be able to keep all of the money that you earn without someone else dipping into your pockets. The issue is that when a mistake is made, you will be the one who is to blame and you will not be able to share that blame with someone else. To some people, this is hard to do and so they would rather just stick with their current job.






You have to love what you are doing and the freedom that it can give you if you are looking to be someone who is successful at passive incomes. Anyone who is looking to be an entrepreneur is going to be really passionate about the things that they are doing and this is a big reason that they are so successful in their work. When you are passionate about something, you are more likely to work hard at it. You want to see how far you can take it and you will always be able to find something new and exciting that will draw you towards the work again. Those who are working with streams of passive income are going to have a lot of the same passions as other entrepreneurs, since they will also be striking out on their own. The passion is the thing that is going to keep you moving forward, even when things get a little rough, you lose a little money, or when the work is not always that much fun.






When you are making your own passive income, you are not going to have a boss looking over your shoulder telling you what to do all of the time. You will not necessarily have clients who are telling you what they want done either. You are going to be the one who is in charge of getting the work done. While you may not get in trouble if you forget to do something or don’t finish the work, you will not make the money that you were hoping for and this can be just as bad.


Whether or not this is a problem is going to depend on the type of person you are. Some people love to be on their own and to be their own boss. They love how it feels when they get to do all of the work, figure things out for themselves, decide when they work and how much they make. They are motivated enough to keep on going through it all, even when they are unsure of how things will turn out. Other people might like the structure of having a boss. They might not be able to stay motivated without someone there to tell them how things work and where they should be all of the time. If you are one of the former, then making a passive income might be a smart move for you; if you are one of the latter, it is probably better if you stick with the job you are currently in.



Basic Computer Skill



This does not mean that you have to be an advanced IT person who can hack into any system and take over a government, but it sure is an advantage if you know your way around a computer and understand how it all works. The computer is going to be your best friend when it comes to making a passive income and if the idea of using one makes you break out in a sweat, it is probably best to stick with your 9 to 5 job or consider learning some computer skills. You should at least have some of the basic computer skills handy that you would have learned in school such as searching, composing notes, emailing, and browsing in order to get things started. Being able to build your own website and a few other advanced skills can also really help, depending on the form of passive income that you are going for. If you do not have any experience with using a computer, you are really putting yourself at a disadvantage.



Problem Solvers



When working for a passive income, there are going to be times when you will need to be able to get out of a tough situation and figure out the best solution. The issues that arise are going to depend on the kind of passive income stream you are going for. You need to not get caught up in the work or start to get anxious and worried when problems arise, because this is not how you will get things done. When bad things happen, you need to be able to jump up and take care of the issue the best that you can before it gets any worse.  If you are good at taking initiative and fixing issues in this way, then a passive income may be an ideal income source for you.



Can Predict the Trends



Those who are really successful with making a passive income are the ones who are able to predict what is going to happen next and what will be successful. Often those who fail with making a passive income do so because they are jumping on a trend that has actually been around for a while and money has already been made off of it. To be really successful, you need to be ahead of the game and to be able to see things in a new way in order to jump on new trends.


When it comes to many of the passive income options, it is pretty important that you are able to correctly predict how people are going to purchase things in the future and what a good idea looks like. For example, affiliate marketers might be able to guess what will sell the best over a few quarters and then make a profit, but if they guess wrongly, they will lose out on making some good money. Take a look at the trends in the market that you are going into and decide what is most likely to happen in the future ,so you can expand upon and make money from.



They Have Knowledge



Some of the people who go into passive income jobs will just naturally have a lot of knowledge, either in general or about the market they are trying to go into. This does not mean that you will not have success if you are not naturally gifted with prior knowledge. It is still possible to get some success in this stream by learning on-the-go. Either way, you need to have some knowledge in your field and to be able to see what is going to come in the future. You also need to be able to identify if something is a good idea or not. You should not be making a lot of guesses in the field you are choosing; while you might be able to get some lucky breaks, this is not a good way to run a business and you will find that you are ultimately going to fail in a big way.  Sure, you might make some mistakes, but you should be working towards building your knowledge in such a way that these mistakes are minimal.


Before you get started on a new passive income stream, you should make sure to get as much information as possible about it. If you grew up around this kind of thing, such as having parents who rented out apartment buildings and you are going into rentals, you are at an advantage. If you do not have any past experience, get out there and learn as much as you possibly can. Read online, go visit the library, talk to someone in the field, look around at available apartments in your area, and pretty much do anything that you can think of to become an expert in the field.


These are just a few of the traits that are noticeable in the people who choose to go into passive income fields. It is a great way to make some money and be your own boss, but it is not always as easy as the advertisements and other people might try to lead you to believe. You will have to have the right mindset, be willing to take some risks, and be ready to put in the hard work to see success. If these personality traits sound like you now, or may be the kind of person you are willing to put in the effort to become, then passive income may be the right choice for you!