We gave you a big list of legitimate passive income ideas, but what are some of the key success factors to build your passive income? The first thing you have to realize is that it is not easy, but there are key factors that will help you build successful passive income streams.
Why is it important to have passive income streams? Your job is not going to be there forever. You can’t work forever. And you can’t retire until you figure out a way to replace the income from your job.
7 Key Factors to Build Successful Passive Income Streams
1. Passion
Do what you love. If you hate writing, don’t start a blog or try to write for money! When you are passionate about something, it is much easier to stick to it and become successful, because success takes time and effort, you want to enjoy what you do while you move toward your goal.
Find income ideas that are compatible with who you are, and success will inevitably follow.
2. Proficiency
Focus on what you are good at, or take the time and effort to become proficient. You don’t want to jump into a passive income idea like investing in real estate or stock market investing unless you have the necessary knowledge to avoid basic mistakes and do relatively well.
No, you don’t have to be the leading expert, but you need to arm yourself with the necessary knowledge and be proficient.
This is especially true when you are leveraging expertise to make extra income. For example, you can’t blog or write about a subject you don’t know, you cannot be a math tutor if you aren’t good at it, and you can’t sell food or recipe for money if you cannot cook!
3. Patience
Don’t expect to see the desired results right away — e.g., this blog was losing money for three months before I earned my first dollar. Building passive income streams take time and effort. For some income, you might see results right away; for others, you might have to wait and work at it for a while. Time is your friend when it comes to building passive income streams — start as early as you can and stay in it as long as you can.
4. Effort
Some ideas take more effort than others. For example, investing my money in the stock market doesn’t take that much effort — just contribute the money, set up my asset allocation, research mutual funds, and ETFs, invest, rebalance quarterly, and watch my money grow.
On the other hand, some income ideas take a lot of effort, especially initially. For example, this blog consumes about 3 hours a day. And other ideas like writing a book could take a lot of initial effort before you end up with a marketable product.
5. Persistence
Not everything you try will be successful — e.g., my little stint with the bulk candy vending business or real estate investing using the Carlton Sheets method. You may have to try dozens of ideas before you find the one that truly works for you. The important thing is you don’t give up, and you keep trying.
6. Diversify
Don’t stop at the first thing that works. The whole idea is to have as many passive income streams as you could. You never know when one would dry up — e.g., even the Niagara Falls stopped for a day!
Diversification is a great way to reduce risk, and it’s the best insurance against losing an income stream.
7. Little by Little
The nice thing about diversifying and having a lot of income streams is that little things do add up to a lot. Just like they said, “A dollar here, a dollar there. The savings add up” — in our case, it is the income that adds up.
Bottom Line
I personally have several income streams working for me. You can find many of these in the passive income ideas list I shared. I can say with certainty that I have lived by these seven key success factors to get where I am today. Building passive income streams is not something you can do overnight. It takes a lot of time, patience, effort, and the willingness to try again and again despite failures.
The way I see it is that I am planting seeds or opening doors if you will. Not everything I try will come to fruition, and there won’t be a stampede through every door I open. But over time and across many income streams, the combined effect will snowball and become increasingly significant.
Well, there you have it — my secret recipe for building successful passive income streams.
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Pinyo Bhulipongsanon is the owner of Moolanomy Personal Finance and a Realtor® licensed in Virginia and Maryland. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, financial literacy author, and Realtor®.
I think passion and expertise are so important. Something that made a billion dollars for another entrepreneur may be a complete disaster for you simply because you don’t have the same interests and skill set. It’s ok to be yourself and have certain skills, you just have to realize that you’re not other people. 🙂
This is a great list. All of these factors are important for not only creating alternative income streams, but in creating wealth in general. Thanks for the link also!
Yes, this list is great! And keep in mind that exposing yourself to new income streams, no matter how small, will likely also expose you to new people, skills, and knowledge that can benefit you in your mainstream work as well. It never hurts to learn new things and do some networking.
Good list! I’ve gotten started on new income streams usually only I have observed someone else being successful at it. Imitation my be the sincerest form of flattery, but its also a safe way to start a new business.
@Mrs. Micah – Great point. Something that works for other people, may be proven — but it still might not work for you.
@Phil – Exactly, don’t overlook opportunities even if it seems small.
@Terry — It’s proven and safe, but it may not fit you.
I like #5 the best. Persistence. 90% of blogs, for example, die out in the first 4 months because it’s NOT a turnkey business. You need to CONSISTENTLY stick to the dream. It’ll come, but that’s why it is called ALTERNATIVE income streams. Good post!
Great list. It is true that a lot of people who are looking for alternative income get discouraged, because it’s hard… I get discouraged sometimes, too. But just like with anything – weight loss, personal improvement, etc. – you have to believe that the efforts you are putting in today will pay off tomorrow. Getting reminders of that – like your article here – are ALWAYS useful!
Multiple income streams are a great way to build wealth, but they can be extremely difficult to build up when you have children at home (even for a parent @ home).
However, a second income stream is a great way to enjoy retirement sooner and more safely. No one really knows how expensive life will be in 30-40 years. Taxes will likely be higher and medical treatment will be significantly more expensive if we continue to push medical boundries, so part-time work might be the key to a retirement.
@Hank – That’s true for most businesses also. @Steve – Thank you. We are in a society of instant gratification. To gain an appreciation for this, I always think about rice farmers. Rice farmers have to work from dawn till dusk for weeks to plant rice, and then they have to watch over it for months before they see any result. @Aaron – I can relate because my wife just gave birth to a baby boy not long ago. “However, a second income stream is a great way to enjoy retirement sooner and more safely.” And that’s exactly why it’s… Read more »
Great list of tips, Pinyo. I really need to work on more income streams. My problem is that my job takes up 10 to 12 hours per day and more if I’m on a business trip out of town. Right now, I’m traveling 3 weeks per month!
THAT is motivation though!
I’m with you 100% on starting multiple income streams. Thus far I’ve got a couple but I know I watch enough TV that there is certainly room to squeeze in one or two more ventures. The real challenge for me is not motivation but start up capital. I love blogging largely because it had virtually zero start up costs. The other businesses I regularly consider (like real estate or franchise ownership) have large start costs and fixed expenses that continue even if cash flow dries up. Do you have any suggestions for how to get started in these capital intensive… Read more »
@Ron — Thank you. A job that you like and willing to invest a lot of time in is both a blessing and a curse. The important thing is to think about when that job is no longer there. I am sure there are plenty of Bear Stearns with six figures income that now wish they had thought about other income streams. @Adfecto — I am reading a book by Terry Sprouse and he has some good ideas on how to get started in residential real estate investing. I am in the same boat as you — not really ready… Read more »
Pinyo – excellent point on the Bear Stearns employees! That’s EXACTLY the reason why I self-downsized from my massive-time-corporate job with constant travel to a local consulting job – it freed up my time for alternative income and frankly a life. If you make 100,000 per year working 100 hour weeks you are making less than someone who makes 50,000 per year working 40 hour weeks. Seriously. I don’t mean to say I’ve got it all figured out – I’m making $.02 per hour blogging right now, but I am confident it will grow. Adfecto, don’t get started in capital… Read more »
Nice post. There’s no question that passion and commitment are key factors to successful income streams. The key is finding “work” that doesn’t feel like “work” to you. Those things that are aligned with your interests so well that you would do it for free are the things that would make a great place to start looking for income.
Commitment and persistence are definitely things to keep in mind.
It took me 3 years to become an “overnight success” 🙂
At first it may seem like you’re not getting anywhere, but you never know when one of your ventures will start to prosper.
appreciate small sucessess
WOW. That’s a great article. I will have to go back to this one from time to time just to re-read.
Having the passion to find your passion is a mission all on its own. Getting crystal clear on what your passion is really does help you become an expert which can be turned into a profitable venture.
I am currently going through the learning curve in terms of balancing multiple future streams of income. I am happy to have made my first real estate investment this year, and am continuously improving in the internet marketing/internet affiliate arena. One of the great things of multiple streams is that it satisfies my desire for varied learning. But I do have to be disciplined to spend time on the most profitable things, not wasting my time on low priority items.
This is more of a question than a comment…Do you ever worry if diversification is dangerous? Do you feel it is better to be great at one thing than good at many things?
I absolutely LOVE this post, because it represents so much how I think. I think it was an earlier post of yours which stated that in the 21st century, our new job is to work on multiple streams of income. Also, I like what you said about patience and persistence. Everyone needs to look up Zig Ziglar’s “Prime the Pump” video on You Tube!
Excellent post with very good points to running a home business. You must do something that you love to do and be persistent If you do something every day, whether big or little to build your business, it will eventually grow.
This is so True. Many Streams of income Remove the Risks and Worry of being defeated in the job market. The Less stress factor creates a better Life. Thank You for the Tips.
Patience really helps as you’re trying to build quality first and hopefully money with it. I think if focus on your reader you’re going to have a solid foundation. Great article!