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Best Methods for Making Passive Income?

Posted: Sun Feb 03, 2019 8:43 am
by Red
So several months ago, I've heard of this thing called 'Passive Income,' and have looked into several methods, but didn't really take part in it since I had no method of obtaining the money. BUT, now that the tides have changed, I think it's time to be making a small amount of money on the side.

There are several pretty good ideas, such as making a Youtube channel or publishing a book, two things I don't automatically discount, along with several other methods that sound pretty intriguing, but I want to know if any of you have done this, and if so, what methods are most effective?

Re: Best Methods for Making Passive Income?

Posted: Sun Feb 03, 2019 2:35 pm
by carnap
Making a you-tube channel or publishing a book isn't passive income. Those would both be business activities that you have to actively run, you'd also have to register them as businesses with your state and local governments.

Passive income is generated by doing nothing. For example if I buy Apple stock I will receive passive income in two ways. First I will receive dividends each quarter from the company and then I may see my shares appreciate. Once I sell them I will have capital gains which are a form of passive income as well.

Passive income requires owning capital and collecting rents on that capital.

Re: Best Methods for Making Passive Income?

Posted: Sun Feb 03, 2019 2:51 pm
by Red
carnap wrote:
Sun Feb 03, 2019 2:35 pm
Making a you-tube channel or publishing a book isn't passive income. Those would both be business activities that you have to actively run, you'd also have to register them as businesses with your state and local governments.

Passive income is generated by doing nothing. For example if I buy Apple stock I will receive passive income in two ways. First I will receive dividends each quarter from the company and then I may see my shares appreciate. Once I sell them I will have capital gains which are a form of passive income as well.

Passive income requires owning capital and collecting rents on that capital.
I'm not sure about that whole government thing. I know several people have written books (self-published) and have run Youtube channels, and they do no such thing with registering with any government.

Anyway, it depends on what you mean by 'Passive Income.'
https://en.wikipedia.org/wiki/Passive_income
Wikipedia includes business activities in the definition and examples.
Wikipedia wrote:The U.S. Internal Revenue Service categorizes income into three broad types, active income, passive income, and portfolio income.[1] It defines passive income as only coming from two sources: rental activity or "trade or business activities in which you do not materially participate."[2][3] Other financial and government institutions also recognize it as an income obtained as a result of capital growth or in relation to negative gearing. Passive income is usually taxable.
It's colloquially defined as something that takes little to no effort, which can be subjective. How much (or how little) interaction would you have to have with your income in order it to be considered passive?

For some people, it's pretty easy to make videos in a quick amount of time, and after you finish writing and publishing your book, you have to manage some things sure, but none that would take up too much time, relatively speaking.

Re: Best Methods for Making Passive Income?

Posted: Sun Feb 03, 2019 10:39 pm
by knot
Take up programming :D Find any process or service that can be monetized. Automate it and you have passive income.
The amount of upkeep you have to do can be 0, but it depends on the circumstances.

Re: Best Methods for Making Passive Income?

Posted: Tue Feb 05, 2019 7:15 pm
by Red
knot wrote:
Sun Feb 03, 2019 10:39 pm
Take up programming :D Find any process or service that can be monetized. Automate it and you have passive income.
The amount of upkeep you have to do can be 0, but it depends on the circumstances.
Yeah but I suck ass at coding. I'm sure it's one of the best methods, but I'm not too interested or skilled at coding or computer science or anything like that. Thanks for the suggestion though.

Re: Best Methods for Making Passive Income?

Posted: Wed Feb 06, 2019 12:14 am
by carnap
Red wrote:
Sun Feb 03, 2019 2:51 pm
I'm not sure about that whole government thing. I know several people have written books (self-published) and have run Youtube channels, and they do no such thing with registering with any government.
That is because they are avoiding their obligations under the law. Though I'm sure most don't understand and their income is too little for the government to waste their time.

Red wrote:
Sun Feb 03, 2019 2:51 pm
Anyway, it depends on what you mean by 'Passive Income.'
https://en.wikipedia.org/wiki/Passive_income
Wikipedia includes business activities in the definition and examples.
The term has a standard definition and what wiki gives as an example is business activity where "one does not materially participate during the year. " That usually translates into someone investing in the business but not being involved with the details of the operation.

What you describe is active income and would be classified as such by the IRS.
Red wrote:
Sun Feb 03, 2019 2:51 pm
For some people, it's pretty easy to make videos in a quick amount of time, and after you finish writing and publishing your book, you have to manage some things sure, but none that would take up too much time, relatively speaking.
The amount of time it takes you to make a video isn't relevant to the classification. What makes it active income is the fact that you are are making the video and that you are maintaining the video. Writing books often generates both active and passive income. For example a publisher may pay you an initial amount to write the book (which would be active income) and then pay you royalties once sales have reached some threshold (passive income). But if you're writing and self-publishing then its all considered active income because you're playing the role of both the author and publisher.

Generally speaking passive income is income that is generated from some investment that you don't manage.

Re: Best Methods for Making Passive Income?

Posted: Thu Feb 07, 2019 7:45 pm
by brimstoneSalad
Passive income is literally doing nothing but cashing the check. So if you wrote a book in the past or made videos in the past, and they're still monetizing, then that's passive.
But Youtube's algorithms require frequent new videos. And pushing a book usually takes work.

I guess what you're looking for is income that doesn't take a proportional amount of work to generate... and I don't think that really exists. There are people who get there by mostly luck, but you can't bank on that.
You just have to figure out what you're better than other people at and do that, since you might get lucky and spend less time doing it just as well as the next guy, thus earning more per hour of work.