Updated 03/18/2017: Added more details and updated our passive income experiment with new results!
In 2009, we wanted to test some of our theories on passive income, but we wanted to do it differently than creating a stock portfolio and leaving it. We settled upon the idea of writing articles for a website and watching the income that came in from the advertising. Before we get to the experiment, let’s talk about passive income.
What Is Passive Income?
Passive income is money that you earn with little or no input from you beyond setting the asset up. Example of passive income include:
- Stock Dividends
- Interest on Savings and CDs
- And a method that I did an experiment with (detailed further below)
Passive Income is the Secret the Average Person Doesn’t Know
When people think of income, they think of jobs. Lots of people think that the only way to achieve true wealth is through get rich quick schemes. Here is the secret about them: THEY DON’T WORK. Wealth is a slow accumulation barring the occasional lotto winner. What you can do is EARN passive income, and use that money to earn more for you (perhaps start a business?). It starts out with a trickle of passive income, but can turn into an all out tidal wave if you do it correctly!
How Do Most People Treat Their Income?
Many people get units of money (Paychecks, Rent Payments, Etc.) and they immediately allocate it for some sort of spending. What this has effectively done is killed the earning power of that money. Had that money been placed into a CD, a bond, or some other investment vehicle it would have been given an infinite, essentially, earning potential. Your dividends and your interest would then be considered your passive income (because you didn’t have to do anything to earn it).
How Do You Build Passive Income?
The best way to start is by getting your finances in order.
- Make a Budget (Learn more about Envelope Budgeting)
- Create an emergency fund.
- Eliminate debt.
- Then begin investing your freed up money.
This sounds easy and simplistic, but some of those steps will be very difficult. You probably won’t be able to invest a lot of money either. That’s OK! Don’t worry about dumping huge sums of money into an investment. Even a few dollars here and there will add up. That’s how apps like the Acorns investment app manage investment:
Passive Income Experiment 8 Years Later
In 2009, we started an experiment where we signed up for Hubpages, which is an article writing website. We wrote about 50 articles and have left them. Update as of 2017, those articles have earned us over $550!
Passive Income Earnings Screenshot
Here is a screenshot of the Hubpages Earnings section for proof:
I would’ve provided a screenshot of the “Lifetime Earnings” according to Hubpages, but their data cut off at 2013. They reliably make us between 30 and 50 cents a day, currently. There were some lulls where the income would die down, but the average over the 4 years comes out to about 20 cents a day. Yeah, I’m not retiring from this income, but I haven’t published anything on the account in years. It just keeps earning money. It didn’t cost us a thing to start the account up, and we have now earned hundreds in passive income, and will continue to earn that money! We can then take the earnings and invest them (which we do, in other business ventures).
This compounds our passive income. When you can take passive money that you’ve really done nothing to earn, and invest it, you are going to begin to build that tidal wave of money. When you take your passive income and spend it – you’ve made that tidal wave into a bucket of water and dumped it on yourself, and that is not nearly as impressive!