Passive Income, not so passive after all.

Congratulations! You learned the phrase Passive Income, and have probably been trying to get on board with making money without doing anything. When has that ever happened?

You may lament that large corporations pay their CEO lavish and expensive compensation packages, and they work far less hours then their lowest paid workers....well income inequality aside, something from nothing is not a thing.

Now if your ready to begin setting up systems in your life that will generate revenue, while you are able to do other things, then your on board with passive income. Think more something like setting up solar panels. There is an upfront cost of time and effort, and then they begin to save you money every month, eventually you will get your money back, and maybe see a financial benefit if absolutely nothing goes wrong for 10-15 years. I don't know about you but my experience in electronic systems is not to expect more then about 3 years out of them. Even so I am a huge fan of the idea of solar and wish I could afford some solar panels for the home, to 'do my part'.

So what do the experts recommend to do for passive income? They say start a series of youtube videos, and hope for the best. Anyone know how many views you need before youtube starts paying you? Me neither, and what do they pay? What about all the time recording and editing those videos. Don't think your cell phone camera is going to be good enough in the age of 4K. Better upgrade your camera, and sound, tripod, lighting....this is becoming an expensive proposition.

BitCoin faucets were big for a time. I kept one open at my computer at work every day for a year, and occasionally clicked it and have a little over 30 bucks. Truthfully though it was about 6 dollars but then bitcoin prices surged. So I wouldn't really recommend this way.

There is a website that will post your photos, and if one sells, you get 5 dollars. They are inedited with tons of high quality photos, uploading each one is a lengthy one photo at a time process, and it is hard to find someone that actually sold a photo from those sites. Likewise their are apps that will sell music or jingles, but they suffer from the same issues. If your not recording studio quality, your odds are nil.

Another passive income adviser recommends coupon apps, and cash back rewards cards. I would just like to point out, that is NOT income. Saving money and earning money are different. Sorry all those that quote "A Penny Saved is a Penny Earned".

True passive income requires money. And lets face it, if you are searching blogs and internet sites for passive income ideas you don't have any extra money. So what to do? Fear not, for I have a plan to help.

Step one: Know what you have.

add up your bills -look at your past two or three months for 'extras' and add those up too. Subtract how much you make from your bills. Got anything left? Yes, great! Your on your way to step 2! No? Stop. Fix this first. Start canceling something, cable, Netflix, that pizza every Friday, cancel the gym, say good bye to taco bell and fast food, say hello to cheaper snacks at the grocery store, reduce the cell phone, cut as much as you can... did that help? No? Time to look for a higher paying job, or a part time job. When you get your income above your expenses move on to part two.

Step two: Create your savings.

Savings? What about all this credit card debt, and hey what about my passive income? Patience young grass hopper. First we save. The goal? 3 months of your income. Yes, a savings account of 3 months of your income. This will take some time, so focus, stay strong, and resist the urge to spend it. This will become your emergency and stay out of debt account. When life happens, and it always does, you will not need to run to your credit cards, or to the bank for a personal loan. You will cover it yourself, and when you do have to use this account, your focus will be to stop all investing, and other savings, and re-fill it. So go to your bank and open a savings account. When its total is equal to that of 3 months of your income move on to the next step.

Step three: Credit cards

Do not empty out that new savings account to pay off your credit card, if you do, your car will break down, or the water heater will break, and you will run up credit card debt again. Also, remember while paying off your cards, do not use them! See a great deal on that dream vacation, or that new TV? No! You can't afford it! You want to get to real passive income? Well it takes work, so let someone else get the new 4K TV, they can pay that thing off over the next 10 years. You are going to live a more financially secure life, soon. Write a list of all your cards, and how much you pay to each one. The one with the lowest total balance will be target number one. Pay a minimum on all your other debt, and focus any extra dollar you can to paying off this lowest balance credit card. Once it is gone, you will now pay off the next lowest balance. This will go faster now, because your smallest balance card is gone, so you are paying more to this card. During this pay off time, if a major emergency happens and you need a lot of money, do NOT use the credit card. Use the emergency savings account. Then pay the minimums on the credit cards, until you get your savings account back up to three months of your income. Then resume paying off the lowest balance credit card until complete. This step can take years, of strict dedication. It will be hard seeing shiny new toys you want, or an expensive restaurant, a family vacation. Remind yourself of your goals. You are sacrificing now for a greater reward latter.

Step four: Retirement Account.

Congratulations on being debt free and having an emergency savings account of three months of income. Now time to set up a retirement account. Employer doesn't offer a free Retirement account? No worries, there is a great app called acorns, where it rounds up your purchases to the nearest dollar. Or another app called Robin hood where you can buy stocks with no trade fees. Or you can find a financial planner that can perhaps set up an IRA for you. IRAs are the way to go for retirement. Traditional IRA puts the money away before tax comes out, and you pay taxes when you take the money out at retirement. Roth IRA you pay the taxes now and get the money tax free after retirement. I like the Roth, because when I retire I will have passive income, and be in a higher tax bracket then I am now. All financial advisers tend to agree that you should put away a minimum of 10% and do it as soon as possible. If your going the Robinhood way, and buying individual stocks, here are a few suggestions. Diversify. Don't buy all tech stocks, don't buy all real-estate investment trusts. Mix and match, that way if one sector falls, you will hopefully have better luck in your other stocks. Also, with individual stocks I recommend starting small. Now that your debt free and already have your emergency savings account, consider opening another savings account. Then you could put half of your savings in there, and half into stocks. Just some thoughts.

Step five: Stability.

Where are the weak links in your life? The shaky foundation that can crash all of this downwards? Is that old clunker of a car, one cold morning away from not starting and making you late again? Is the neighborhood you live in crime riddled, and unsafe? Is there family, personal, spousal, drama or issue that's been boiling and waiting to erupt. Now is the time to fix it. Start looking for a new-er car that is affordable, maybe start a savings account that will become the down payment. Start looking for a new place, is now the time to consider if buying a house is right? Start saving up for the down payment on a home in a safer neighborhood, keep it within your means though, and don't touch the emergency fund. Hate your job? Now is the time to get away from that crazy ex- or friend or boss or person that has been a toxic influence on your life. You are not trapped with debt anymore, and now have the freedom to make a large life change. Or maybe life is great, and now is the time to plan the wedding, baby, classes in something your passionate about? In any case, take steps here to ensure you are on a path to succeed in the future.

Step six: Real Estate

Not a home owner yet? Better think about getting on board. Even if your home doesn't increase in value, your still paying towards your house. Don't go above your means. Consider if homeownership is the right move for you.

Step seven: Passive Income:

Passive income 1. Real Estate. Hey...deja vu! Become a land lord. Buy a home, and you can rent it out. Charge at least 25% more then what your mortgage is. This is not of course passive. At the very least you have to find a house, and then find a renter. However, realistically you will need to get a fixer upper and slap some paint, and possibly re-do some things. Honestly it sounds challenging. But guess what, that's work. Work requires, well...work! But the pay off could be great. Someone will be paying the mortgage every month, and you take that 25% additional put it in a savings account, that way when something goes wrong at the house that you can not fix, you will have some money to help pay for it.

Passive income 2. More stocks

Mutual Funds are a nice way to invest some money and let it diversify. Usually there is a fund manager, and they take a fee, but their job is to 'read the market place' and make educated investments. Personally, I would rather invest it directly and diversify myself, but if you don't geek out reading financial statements like I do then a mutual fund is a great idea. Investing rule number 1. Buy low sell high. Remember, when the market crashes, and it always does. Do not panic, and pull out all your money. Ride it out, it always comes back. In fact, not to be insensitive, but crisis is really a great time to invest more.

Passive income 3. You become the bank!

Lendingclub.com and sites like it offer you the ability to lend money to borrows and get interest on that investment. They allow a host of borrowers in different risk categories, and do crowd source funding.

I personally just offer 25 dollars to each one, and I stick with the higher credit scores, and lower debt to income ratios. This is risky. I split mine up to 25 dollar increments amongst different borrowers to diversify. It really just takes 1 or 2 borrowers to default to throw away any earnings from the others though.

Passive income 4. You tell me?

What other ideas are out there?