Passive income is one of those phrases you’ve probably heard around the internet. What does it mean, exactly? Technically it is known as “unearned” income by the IRS. “Earned” income refers to money that you’re paid by an employer or person who hires you. “Unearned” (passive) income means that you didn’t actively do anything, meaning perform a job or task, to acquire the money.
What are some examples of passive income?
Commissions on affiliate sales.
When you sign up to be an Amazon associate, for example, you’ll receive a user name and associated tag or string of characters. To promote a product using your Amazon affiliate link, you would log in, find the product you’d like to promote, and then copy your affiliate link, which contains your tag. If someone orders through the link, you’ll receive a commission. All of your commissions add up over the course of a month. Once you reach a certain monetary threshold (say, $100), Amazon will issue you a payout.
Royalties from the sale of a book.
A book that you author is the perfect example of passive income. You write the book first, then get it copyrighted and printed. Each time you sell a printed copy, you earn passive income. Even decades after you publish your book, long after you’ve stopped actively promoting it, any sale of your book that comes in counts as passive income.
Income earned as a silent business partner.
A silent partner fronts the money for a business that other people build and manage. At the end of the fiscal year, you’re given a cut of the profits which you would then report as unearned income, to the IRS.
Income that you receive as the owner of a rental property also count as unearned or passive income.
Income from interest, dividends and annuities.
Income that comes to you simply by placing your money in a certain type of bank account or financial investment also must be reported to the IRS as unearned income which is another way of saying passive income.
Income from the sale of digital goods, such as ebooks and emailed courses.
In the same way that you’d receive royalties from the sale of a book that you authored, an ebook or course that you sell via a website can accumulate passive income for you. The idea is that you’d create the material up front, set it up for automated sales on your site, and then continue to accumulate sales over time without actually having to do anything.
What Makes Passive Income Something to Strive For?
Passive income helps you earn a living while giving you more freedom over how and when you choose to work or focus your time. People who want to compound their income without having to physically show up, or give up their time to serve in a professional role, really like the idea of passive income.
Do you want to create passive income from a niche website?
As mentioned, affiliate marketing and digital product sales are two great ways to keep income flowing in without having to actually do anything beyond the initial setup.
Your first step, if you’re interested in turning your niche site into a passive income generating machine, is to set up an opt-in gift and start growing your list.
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