I heard a great analogy yesterday. Actually, I read it in a book about stories used to illustrate financial ideas. See the picture below? What do you think it is? Don't skip ahead. Just take a guess.
What do you see? Two boxes? Okay, you are forgiven for not knowing because I am not an artist. Those boxes are two elevators and the cables supporting them. Which one would you ride in? The one with multiple cables obviously.
This is an analogy for why you should diversify. You want a second/third/fourth cable in case one snaps. The cables are representative of assets in your portfolio. It's about safety, peace of mind, and strength. You want multiple independent cables supporting your savings for retirement.
Have a nice Thanksgiving. I'll be smoking sausage and stuffing my face with turkey, pecan pie, and possibly some Glenlivet 18 yr here in Chicago's burbs.
An example of this is the sale of a mutual fund. While the majority of the income is taken by the broker up front, there are small trails of income associated with them. Another job that has components of passive income are insurance sales. Whether disability insurance, life insurance, or health insurance, there are varying levels of passive income that get paid to the agent for years into the future.
This just goes to show that not only should you strive to produce products that deliver income long after you build them, but you can also look for passive income in your career. This can result in benefits long into your future, as you may move on to another job or career, but still receive payments on work done 10 years prior.
Good night and good luck.
I've had a few people ask me how to start a business from scratch when you have no existing credibility on a subject matter. You know you've acquired significant knowledge, but no other consumers or businesses know it. How do you get those first customers?
In the past, you would have to introduce yourself to decision makers at companies, in a meeting. The same went for introducing yourself to individuals. It would be guerrilla marketing at it's finest, with a call to all your friends and family to spread the word about your new business. A more cash intensive method of reaching new people would be through traditional marketing channels of billboards, periodicals, online ads, and radio. But these methods don't typically provide high response rates.
Now there is at least one other method that people are using to launch their businesses. Fiverr is a website that matches people (or more often small businesses) with individuals willing to perform small gigs. Typically prices on these gigs, are $5, $10, or $15, although higher prices are also listed.
Many small businesses and consultants are performing these small tasks on Fiverr for minimal fees, in order to build a reputation one small gig at a time. It is much easier to get a client to pay you for one small task, where the risk is minimal, than it is to convince them to hire you on a long term basis for hundreds or thousands of dollars.
Fiverr allows you to build trust. Fiverr allows you to advertise through tiny jobs. If you are starting a business, think of it this way: Would you rather pay $1000 for a billboard, and get five new clients that month, or would you rather make $25 (five gigs at $5) and gain five new clients? The answer is obvious.
And Fiverr is a platform that reaches thousands of clients specifically looking for help in your niche. When you have performed for them, and delivered great service, you can talk to them about larger jobs. This may not work with all clients, but if you help 150 people with small tasks during the year, and over the next twelve months ten of them become clients for more lucrative services, you have a great start to your business. You can continue performing the small tasks on Fiverr to gain new clients, and/or you can ask for introductions from the more lucrative clients.
That is essentially how some people are starting businesses on Fiverr. It is a fantastic website, and any entrepreneur should consider how it can be used to reach customers at the beginning of the business's life. I even started writing articles on Fiverr for select businesses as a way to get backlinks to this blog!
Our first idea, was my first passive income idea. It is also one of the oldest passive income ideas (along with being a landlord).
Idea number one is writing a book. It can be an ebook, or a physical book, or both. But thanks to Amazon, anyone can write a book these days.
Deciding What To Write
There are essentially 3 ways to write a book. The first way, is to write about what you know. This method is contingent upon you REALLY knowing about something. Common topics are teaching the reader how to do something, or explaining the history or background of something. This falls into the non-fiction category. While this method may be faster than the next two, you still don't want to rush. Remember, for your work to be any good, you'll need to do multiple drafts and rewrites. Start by creating an outline of main topics (possible chapters) and put them in a logical order. Fill in subtopics under each main topic. This will help you write the details in the chapter. Try to make sure there aren't other viewpoints on the topic that you are leaving out.
The second method would non-fiction as well. This version would involve doing research on the topic. Whether you know about the main topic or not, this book will require you to do some more learning. In this book, you can form main topics based on what you would like to know. Then you can go out and do the research.
The third method involves fiction writing. This will take a different type of effort. It can require research, but it will also certainly involve creative thinking. Whether you have the ability to tell a story naturally, or you take the time to read up on creating suspense, conflict, dialogue, and structure, it will take quite a bit of effort.
Deciding How Much Help You'll Need
There are cheap ways to write a book and expensive ways. It will mostly involve the quality of editor and proofreader you hire, and of course the marketing budget.
It is possibly to go "middle of the road" on these services, using a website like Upstart or Fiverr. Find a proofreader or editor that charges what you can afford, but that also has high ratings. This will at least mean that your finished product is better than it otherwise might be.
Another useful expenses is hiring a designer to make sure the finished copy looks good in the book. This person will format the document. They will also be able to make a cover for the book.
Between all of these costs, you will probably be looking at a cost of between $500 and $3500. Not cheap right? But worthwhile if the book catches on and sells consistently for years.
Put Your Book To Work
Once the work is up to snuff -- you've rewritten it 5+ times, it's been proofread, and an editor has given you feedback on further changes -- you can upload the book to CreateSpace (Amazon's book publisher) and get ready to sell!
While it is hard to guarantee success, the quality of your writing and the strength of your idea, combined with (guerrilla) marketing, may yield a passive income source that can provide income for years. And even if it doesn't, you'll have created something that will live on long past your own life.
Good night and good luck.
Note: I've decided that every weekend, I'll do a passive income review for the prior week. It will detail weekly income earned from all passive income projects.
For the week ending Nov 11., income totaled $476. Of that, $228 was from 2 books I have listed on Amazon. $248 is from affiliate marketing.
Not the best week, but extra income none-the-less. Hopefully as I develop and test more ideas for passive income, those numbers will grow and I will be able to tell you which work the best.
Have a great weekend! Goodnight and good luck.
I am a Chicago-area financial adviser to young doctors & business owners.