How to Build RELIABLE Passive Income for 2022

So back when I was at uni, four or five years ago, I remember having this moment where one day I searched for physiotherapy jobs in my city. It was at that exact moment of my life I realized I was never really going to make all that much money as a physio. There seemed to be this ceiling on how much I could make working for someone else and I didn't like that.

But at the same time, it made sense. I have limited hours in the day, which means I can see a limited number of people, which means my boss can only pay me a certain amount to ensure the economics of their business work. I realized that, in fact, the only way I would ever make a large sum of money as a physio is if I was the person that owned the clinic. Now, I didn't realize it at the time, but what I just worked out is one of the most important financial lessons you can learn.

And that is to achieve real financial freedom, you need passive income to remove the ceiling on your income. To truly achieve the big bucks and achieve real financial flexibility, you have to focus on passive income. And no, passive income is not making money for doing nothing, as much as the YouTube ads want you to think that it is. Passive income is, quite simply, it's a model of income.

There's active income, which is trading your time for money, and then there's passive income, which is putting in a lot of effort up front and sometimes effort into maintenance to then be able to potentially generate income around the clock, regardless of whether you're actively working or not. If you came here looking for some sort of get-rich-quick scheme, then sorry, this video is not for you.

However, if you came here because you know you realize that the way you're going to achieve financial freedom and retire on your own terms is through building passive income streams, then this video is definitely for you. So let's talk about the genuine ways that you can start earning passive income that are scalable and quite seriously can get you to CEO level paydays.

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Okay, so when we talk about passive income sources that will genuinely shift the needle and propel you towards financial freedom, we have two umbrella categories: there's investments and there's business activities. So stocks and real estate would obviously fall under investments, whereas things like selling products online, affiliate marketing, or YouTube, etc., they would fall under business activities.

So let's start with investments. Now, as we know, there are two ways to generate money from investments. There's capital appreciation and there's income. For building passive income, obviously, we're going to be looking at the income side of that equation, not so much the capital appreciation.

So let's start with property. To start from scratch and try and build passive income in real estate, honestly, it's very much an uphill battle because with traditional property investing, the costs of entry are quite high. But say you've already got some property investment, you know if you are able to do that, you can definitely generate passive income from renting it out, collecting rental payments, and simply paying a property manager to manage it for you.

Now, yes, you can also make money on paper through capital appreciation; however, us seeking passive income, that's not really helpful for this scenario. So overall, that's property—tough to get into, but certainly a popular method of investment for passive income.

But a far more accessible way to get on the passive income bandwagon is through shares. When you hold shares in a company, you can either make money by potentially selling the shares down the road for more than what you bought them for, or you can make money through receiving dividend income. And if you're trying to build passive income in particular, then obviously dividend income is what you're looking to focus on.

Or is it? We'll hold that thought for a second. But yes, to produce passive income, you need regular reliable dividend payments. You can do this by, you know, buying shares of a single company that pays a juicy dividend. But a much better approach, at least in my opinion, not financial advice, is to find a diversified investment structure that pays regular dividends.

For example, you can buy market-tracking ETFs that, instead of reinvesting dividends into the fund, they just pay the earnings out to you. For example, SPY, it's an S&P 500 index fund; it simply pays out any dividends it receives to the fund's investors. But you could also make more. You can also find more exotic ETFs like HDV, which tracks an index composed of high-paying dividend companies, and then it'll pay you a rough three to three and a half percent annual dividend spread across quarterly payments.

Or you could look at, say, a listed investment company, which, particularly in Australia, aims to pay healthy regular fully frank dividends, quite tax-effective. Now, these are all very simple ways to get started with reliable passive income. All you need to do is fund a brokerage account and just get started.

It also takes very little maintenance. You just need to keep up-to-date with what investments you've made and check in to every now and again to see that your investments are healthy and that the dividend payment isn't slowly sucking the life out of the investment. But that's about it.

And if I'm honest, for most people, this is going to be the most realistic way to start building passive income. You know, over time, convert your hard-earned cash into more shares that will keep paying you regular dividends.

The only consideration I would make, however, is this, and this is that hold that thought moment that I was talking about earlier. You know, if you're investing in shares, do you right now actually need passive income? Because consider this: you have two ETFs that track the S&P 500. One pays a three percent dividend, and one doesn't. The S&P 500 gets, on average, about eight percent per year total. If you're sucking out three percent each year as income, then that eight percent compounding machine is now a five percent compounding machine.

And this is the difference between ten thousand dollars left compounding for forty years at eight percent versus five percent—there's a big difference. So I would ask yourself, do I need that passive income, or is it better to leave the whole investment compounding over time and then switch my investments to create a passive income-focused portfolio, you know, when the time is right?

But with that said, generating passive income via investments is extremely common, and honestly, for most people, it is the most realistic way to really shift the needle towards financial freedom. If you don't have much money to start with, then the stock market is probably the easiest way to go.

But, you know, if you do have a sizeable chunk, then that does open you up to the world of traditional property investing. However, to invest in property without a whole lot of money, you can also invest in something called a real estate investment trust. This is basically just buying shares of an income-generating property portfolio, but that's a topic for another video.

So passive income from investing is that first umbrella, and then the second umbrella after that is passive income from business activities. This is the YouTube channels, the online courses, the affiliate programs, etc. And I'm very lucky to be in a position where I've reasonably successfully implemented quite a few of these passive income methods, both in investing and in business.

So in this, I just, I wanted to give you guys the honest truth. I mean, generating passive income from our business activities umbrella, it's very hard. It takes a lot of effort to start, you know, it's a slow grind; it can feel impossible at times. But if you succeed, you can unlock insane financial potential, and I do mean that.

But from my experience, you really do have to put the work in. It's not easy, because at the end of the day, whatever passive income stream you're trying to build, you know, you will inevitably encounter lots of competition. So to succeed, you need to offer more value than your competitors.

For example, if you're trying to build a finance-related YouTube channel, if you make crappy videos that take you five minutes to put together, they aren't entertaining and aren't well-researched, it's obvious you're not going to gain traction. You know, if you add Amazon affiliate links to your blog post, but you chuck the post together in five minutes and really just tell people to click the link every second sentence without really providing a whole lot of value, it's not going to take off. You need to provide value—that's really the number one thing.

It's the number one thing in anything, really. But secondly, the hard thing about this business-style passive income, these passive income ventures, is that to gain traction, in most instances, you really do need to build an audience. You know, if you made a carpentry video course that's absolutely epic, who are you going to sell it to?

If you created some sort of digital product that's just an awesome product, how are you going to generate sales? You know, if you want to be an affiliate, where are the clicks going to come from? Here on YouTube, we get paid per monetized playback. You know, I really do think that if you want to generate meaningful passive income, you do need to build some sort of audience.

Yes, you can make a course on Skillshare. Yes, you can make a once-off YouTube video. Yes, you can put your t-shirt designs on Redbubble. But if that's all you do, you're essentially waiting for their business to provide you with traffic. And as time goes on, those avenues get more and more saturated, making it less and less likely that you actually create significant revenue for yourself.

So I know this video isn't, you know, like the traditional, "Oh, start a YouTube channel and become an Amazon affiliate, make an online course." But in all honesty, I think these ideas that I'm talking about here are way, way, way more important when it actually comes to growing your passive income.

So probably my number one tip to work towards building reliable passive income from business activities would be to build a network of people. The passive income structure itself—that's the easy bit. It's finding sales that is difficult.

And if you look online at all the people who preach how important passive income is and they make videos about how successful they are in generating passive income, I'll pretty much guarantee you that they all have sizeable audiences. This is the exact reason why Gary Vee tells businesses to be a media company first. You know, you're a media company and then you're a lawyer. You're a content creator and then you own a lawn-mowing business.

Because when it comes to passive income streams from business activities, the success is in your ability to passively generate sales. If you have a passively structured income stream but you have to actively work to generate meaningful sales, then it's not really passive income, right? Something to think about.

So anyway, guys, I hope you enjoyed this video. As I said, it's definitely not the usual passive income video. "Oh, start a YouTube channel, sign up for Amazon affiliates, and you can do this and that." But hopefully, I really, with this sort of video, just hope that it provides a lot of value from, you know, me trying this for many, many years.

So I really do think that for most people, investments, if you want to try your hand at passive income through business activities, then you have to realize that the hard bit is the passive sales generation. The actual business part is the easy step, and it's really not passive if you have a passive income-structured business but you have to actively work every single day to try and generate sales on that passively structured venture.

So anyway, guys, I hope this video was helpful. I don't know, it kind of felt like a bit of a ramble, but hopefully, it helps you guys. Leave a like on it if you found it useful or if you enjoyed it. Subscribe to the channel if you're interested in seeing more videos from me. If you're interested in how I go about my investing strategies, then you can check out Prof, which links are in the description below. If you're interested in short form new money content, then head over and check out New Money Clips.

But that will just about do me for today, guys. Thank you very much for watching. I'll see you guys in the next video. Thanks again to Sharesight for sponsoring this video.

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But that's it for today, guys. Thanks very much to Sharesight for sponsoring this content, and I'll see you guys next time.

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