When most people think about making money, they only think in terms of a job. You go to work, you get paid, and maybe—if you have a little surplus—you invest for retirement.
If you follow this paradigm, you can succeed financially, but it is much more difficult. In fact, most people who take this approach end up living paycheck-to-paycheck and don’t have enough saved for retirement.
There’s a better way.
If you are going to get ahead financially, you need to understand—and fully appreciate—the difference between active and passive income. Most likely, this is not a new distinction for you, but it is an important one.
Active income is what you already know and understand. It’s what you get when someone hires you to do a job. You do the work; you get paid. But only once. In other words, the income is non-recurring.
In my world, this includes public speaking, hosting conferences, one-on-one coaching, and consulting. I do the work in exchange for a fee. I am essentially trading my time for a one-time payment. Currently, about 20 percent of my income is active income.
Passive income is just the opposite. It is what happens when customers pay you over and over again for the same work—work you only did once. In other words, it is recurring.
For me, this includes book royalties, affiliate commissions, course sales, and monthly membership fees. I am trading my time for an ongoing revenue stream. Currently, about 80 percent of my income is passive.
By the way, if you want to get technical, there is really no such thing as passive income. I still have to occasionally refresh the product, adjust the marketing, provide customer support, etc. It’s just a lot less work than active income.
When I launched out on my own two years ago this month, my goal was to create multiple streams of income. Or to be more precise, multiple streams of passive income. Currently, I have nine streams of income; six of them are passive. (I plan to write about these in another post.)
The key to financial success is to figure out how to transform your active income into passive income.
The good news is you can do this even if you have a job. In fact, it is imperative you do so if you are going to move beyond being Just Over Broke (J.O.B.) and get ahead financially.
Here are five ways you can move from producing active income to producing passive income:
- Could you turn your expertise into a product? Yes, you are an expert. There are things you know or know how to do that you take for granted. You assume every one knows what you know. They don’t. Other people would happily pay you for your knowledge. This is what I did with my Writing a Winning Book Proposal e-books.
- Could you turn a series of blog posts or podcasts into an e-book or book? People will pay for the convenience of having your content all in one place. Plus, you can incorporate insights you get from reader feedback and take the content to the next level. This is what I did with my Platform book. My blog was my “content lab.”
- Could you turn your coaching or consulting into products? When you find yourself providing the same advice over and over again, it’s a candidate for turning it into a product or series of products. This is what I did with my Get Published Course and Platform University. I have a dozen more products like this on the drawing board.
- Could you turn a speech into a product? You can record it on video or even audio then turn that into a CD, DVD, or online file you sell. You can add additional value (both perceived and real) by including a transcript and a study guide. This is what I did with my Why Now Is the Best Time Ever to Be an Author video. I plan to also do this with my Platform speech and a few others.
- Could you turn a live event into an online training experience? Obviously, you will need to start by recording the event. Then you can turn it into modules with workbooks, transcripts, or other ancillary material and deliver it via a platform like Kajabi.com. This is what my team is doing right now with our SCORRE, Launch, and Platform conferences.
The reason passive income is better is because it scales. It works while you are doing something else—like sleeping! You are not limited by your available time.
While I still do both, I am always thinking about how I can turn my active income opportunities into passive ones, so I can get paid multiple times for the same work. How about you?