Passive Income Simplified: A Beginner's Guide to Building Wealth

Did you know there really is a secret to building wealth? And no, it doesn’t have to do with a rich uncle, or a big inheritance from a long-lost second cousin twice removed. The secret to wealth building is easily accessible to anyone willing to reach out and grab hold of it. It doesn’t involve the lottery, Pirate’s treasure or robbing a bank.

Passive Income Simplified: A Beginner's Guide to Building Wealth
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Did you know there really is a secret to building wealth? And no, it doesn’t have to do with a rich uncle, or a big inheritance from a long-lost second cousin twice removed. 

The secret to wealth building is easily accessible to anyone willing to reach out and grab hold of it. It doesn’t involve the lottery, Pirate’s treasure or robbing a bank.

So … what is this secret? It all comes down to two words: passive income

Maybe you’ve heard the term passive income, but aren’t sure exactly what it means. And honestly, it doesn’t even sound that great if you don’t know what it is. Passive income? That sounds like money that just sits there and does nothing. Boring…

We’re going to simplify passive income so you can understand how to break free from the corporate Matrix and live the life of your dreams. 

Ready? Let’s go! 

What is Passive Income

What Is Passive Income?

When it comes to money, there are really only two kinds: passive and active income

Active income is money you have to actively work for. It’s the kind you made in high school when you were flipping burgers at your local fast food restaurant (aren’t you glad those days are over?). Or cutting people’s grass for $20. You had to trade your time for an hourly wage. 

If you didn’t work, you didn’t get paid. Active income is the kind that most people earn throughout their lifetimes. There isn’t necessarily anything wrong with active income. It just limits what you can do since you’re always trading your time to keep the bills paid.

Passive income is very different. It’s the superpower income that generates while you’re sleeping. For instance, the famous investor Warren Buffet once said, “If you don’t find a way to make money while you sleep, you will work until you die.” With passive income, you create an asset like a book or real estate investment that pays you while you’re just sitting around. It automatically produces income once you’ve done the initial work.

On a scale of 1 to 10, active income would be a 5. Passive income would be 15!

The Power of Passive Income

One of the best ways to understand why passive income is so powerful is to consider apples. Think about it. What would be better—going to the store every time you wanted to eat an apple, or having an apple tree in your backyard? 

If you really loved apples—and you lived by the old saying, “An apple a day keeps the doctor away”—it would be much easier and more affordable to simply have an apple tree in your backyard. Once you planted it and watered it, the tree would produce as many apples as you could eat. You could make applesauce, apple cider, apple pie… yum! 

All you’d have to do is walk outside and pick an apple. No need to hop in the car, fight traffic, find an apple that looks good and wait in line at the grocery store.

Passive income is like having an apple tree in your backyard. But instead of producing apples, it produces dollar bills. And we’re not even joking. Once you build an asset that pays passive income, it really is like having a money tree. This is why passive income is often called the secret of the successful. Because it’s kind of like magic. At a certain point, your bank account grows without you even doing anything. 

Rich Dad, Poor Dad

Author and investor Robert Kiyosaki wrote a book titled Rich Dad, Poor Dad that showed millions of people the path to financial freedom and explained how passive income works. The book became a bestseller and has educated people from all walks of life on how to become wealthy. 

One of Kiyosaki’s main points is that you have to be careful who you listen to. If you’re taking financial advice from people who are poor, or those who are not living the life you want to live, you’re not going to get anywhere. 

On the other hand, if you’re taking notes from people who you aspire to be like, who are living the life you would want to live, you’ll get where you want to go. 

In Rich Dad, Poor Dad, Kiyosaki talks about the financial advice he learned from his friend’s Dad (the Rich Dad) as opposed to his biological father (the Poor Dad): 

“My rich dad taught me to focus on passive income and spend my time acquiring the assets that provide passive or long-term residual income…passive income from capital gains, dividends, residual income from business, rental income from real estate, and royalties.”

But Robert Kiyosaki isn’t the only one shedding light on how passive income can help you achieve your goals. Let’s take a quick look at the F.I.R.E. movement before we look at the best ways you can earn passive income. 

The F.I.R.E Movement

The F.I.R.E. Movement

One of the most popular financial trends in recent years has been the F.I.R.E. movement. F.I.R.E. stands for “Financially Independent, Retire Early.” It’s a philosophy that bucks against the old-school trend of working for a company for 40 years, retiring when you’re 65 and delaying all your dreams of hobbies, travel, etc. until later in life. 

How much better would it be if you could instead retire at 35? Travel the world now instead of waiting until your knee starts acting up? Pursue your hobbies on your own time instead of having to ask your boss for time off?

The F.I.R.E. movement is best summed up in the book “Your Money or Your Life” by Vicki Robin. But there are many other books that explain how to achieve financial freedom well before your 65th birthday. 

The key is to cut down on your expenses, pay off debt, and build up passive income streams that can replace your expenses. For example, if your monthly overhead is $4,000, and you’re consistently making $5,000 in passive income investments, congratulations! You’re now officially financially free. 

This quote by author T. Harv Eker sums it up nicely:

“You can only be financially free when your passive income exceeds your expenses.”

But we’ll admit it. This isn’t easy to do. But nothing in life that’s worth doing is necessarily easy. It’s not easy to lose weight, build muscle or build a house. But those things are still worth doing. 

Even with all the resources that are so easily available about passive income, many people simply don’t know how to get started. Let’s change that for you.

Here are some of the top ways to earn passive income. 

5 Best Ways to Make Passive Income

Here are a few of the best ways entrepreneurs and everyday people are building wealth through passive income in 2023. Some of these methods are old—tried and true. Some of them are new with the advent of the Internet.

  1. Dividend-Paying Stocks
    Certain types of stocks will pay you interest, dividends, or capital gains from investing in them. Some companies pay out regular dividends (up to 11%) that can give you a great stream of passive income. You can also invest in Index Funds and Exchange-traded Funds (ETFs), which pool money from multiple investors into diversified portfolios of assets.
  2. High-Yield Savings Accounts
    A high-yield savings account is like a standard bank savings account, but one that offers higher interest rates. This gives you a place to park your money and generates some passive income on the side. Even if it’s just a little bit each month, every little bit helps!
  3. Real Estate
    A lot of Americans are using real estate to create passive income streams. This is probably one of the most popular methods. You can buy or invest in residential or commercial properties, rent them out and create an excellent source of passive income. You can also rent out an AirBnb or Vrbo for some extra monthly cash.

    You should also look into real estate investment trusts (REITs). REITs earn you passive income through dividends from the rental income generated by these properties.
  4. Peer-to-Peer Lending
    Peer-to-peer lending platforms are a new way to make passive income in the Internet age. Peer-to-peer lending is when you lend money to borrowers using the platform and you earn interest on their investments. These platforms connect borrowers with lenders and give you a great opportunity for passive income.
  5. Online Business
    Maybe you aren’t interested in going into real estate or investing. We get it. You still have plenty of good options for passive income.

    You could start an online business dropshipping physical products like hats or T-shirts on online marketplaces. Or you could create an online course as a digital product offering. You can also make money by selling ads on a blog, your social media accounts or a YouTube channel. The creator economy has created an endless amount of ways to make money to generate passive income.

    With an online business, you’ll also have the opportunity to automate it. Set it and forget it! You can automate the logistics, ordering, inventory and email campaigns to operate without you while you’re sipping Margaritas at the beach!

One of the Best Ways to Earn Passive Income in 2023

We saved the best for last. Self-publishing eBooks on Amazon’s Kindle Direct Publishing platform is one of the easiest and best ways to make passive income in 2023. It’s totally free, you can publish as many as you want and make as many changes to them as you want, and you have access to millions of potential readers. Amazon also pays publishers up to 70% in royalties—an amazing way to earn passive income.

Self-publishing on Amazon is also much easier than you might think. Everyday people are finding that, with a little education, they can create multiple streams of passive income through eBook sales. 

You don’t need to hire anyone and you don’t even need to consider yourself an author because you can just be a publisher. We’ve already helped thousands of people tap into the power of self-publishing to generate up to $10,000 a month in passive income. 

Here are just some of the ways you can earn passive income on KDP:

  1. eBook sales
    All you have to do is publish one short eBook and you can immediately start generating income from online sales. Passive income will start hitting your bank account every time one of your eBook sells.
  2. Kindle Select (also called Unlimited Page Reads)
    Enrolling in Amazon’s Kindle Select program allows you to make revenue streams based on page reads. (It’s kind of like Spotify but for book publishing.) It also gives you access to special promotions like Kindle Countdown Days that can help more readers find your work.
  3. Kindle Vella
    Kindle Vella allows you to publish your book one short episode at a time. Readers buy tokens to unlock chapters and publishers get 50% of the money that comes in from the tokens.

These are just some of the ways you can create passive income streams through Amazon’s KDP. There are more.

Just keep in mind that you don’t have to read a million books on how to earn passive income to start earning. And you don’t need a Master’s Degree in Business to build wealth and live out your dream life. All you need is a little education, some motivation to get started and the willingness to put in the time and effort. 

To learn more, check out our free webinar that walks students through exactly what to do to use Amazon’s KDP to generate multiple income streams.

And be sure to check out our book The Freedom Shortcut: How Anyone Can Generate True Passive Income Online, Escape the 9-5, and Live Anywhere by the Mikkelsen twins—the founders of The Freedom Shortcut breaks down the step-by-step process they used to publish books and audiobooks on Amazon and Audible and actually make money at it. It also includes examples of people they have coached and helped achieve success using this unique business model.

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