Compare Passive Income Streams (5 tips)

If you don’t want to work for the rest of your life you need to find a way to earn money while you sleep. Saving up money from your 9-5 simply isn’t enough. Especially not if you’re receiving a low paycheck every month. That’s where passive income can help set you free.

What is passive income

Passive income is income that keeps coming into your bank account without any or close to zero effort. However passive income is not completely passive, since it requires a lot of work in the startup phase. Read more about what passive income is here.

5 things to look out for when comparing passive income streams

Although it sounds like you should just pick a passive income idea and then you are set, that’s not the truth. It’s important to compare the different alternatives, and find the one that fits your situation the best. Thus, here is 5 things to take into consideration before choosing a passive income idea.

1) Time

The time aspect is essential. If you don’t know how long it will take before seeing any results you’ll quit before you are even started. Let us emphasize this with an example:

Let’s say you want to generate passive income through writing, and you are considering one of the 2 following options: Write on Medium vs. Start a Blog.

When writing on Medium all you need is 100 followers before you can start earning money. And if you post every day consistently you’ll soon be able to lean back a bit and see a decent amount of passive income. In fact, you don’t need more than 1 to 3 month before seeing results. Thus Medium gives a kind of instant gratification.

On the other hand, starting a blog can take 6 to 12 months before any results are coming your way. Sometimes even longer. But a blog might create more income when it finally up and running.

Therefore, a cost/benefit analysis where time and income are variables in the equation is fundamental.

2) Skill requirements

Looking into the skills needed for a specific passive income is important as well. Starting a blog is not just writing blog posts. You need at least the 3 following skills if you want to do anything on your own:

• Great writing skills
• SEO knowledge
• Website design skills

Of course you can learn as you go, that’s what I always do. I simply cannot wait to get my fingers dirty and start a project. However, it’s still essential that you from the start know what you need to learn in order to succeed.

And learning new skills is also time consuming, so keep that in mind as well, when picking your next passive income idea.

3) Consistency

Depending on what passive income idea you choose to pursue, the degree of consistency can vary.

For instance investing in bonds, stocks, index funds, etc. might not demand the same degree of consistency as a blog or YouTube channel.

When blogging or YouTubing your job is partly to satisfy the underlying algorithm to get your content in front of the world, thus you must post consistently.

But when you invest, it doesn’t matter if you invest three times a week or or one time a month. Of course the results will differ a bit depending on the prices, but you’ll not be punished by an algorithm for not investing consistently.

That’s why you need to discuss with yourself how consistent you want to be/can be, and put that into the equation as well, when picking the passive income you want to pursue.

4) Location Flexibility

Some enjoy the ability to work from anywhere in the world, and many passive income streams are well suited for this, however some are not.

For instance if you choose a non-online passive income idea it might not be suitable for you to travel for three months since you are not in control of you passive income anymore. In other words, if you passive income needs you to be in radius of x kilometers, then traveling wouldn’t be an option.

Therefore you should also include the location flexibility in your thoughts when choosing what idea you would go for.

5) Costs & Income Potential

It’s no surprise that this should be included when comparing different passive income alternatives. While some passive income ideas can be started with zero upfront costs other ideas need money before it can be started.

For example, I needed to pay for a domain and WordPress before I could start this blog. But when starting on Medium I didn’t need to pay a dime to earn money.

On the other hand I know the income potential from this blog can and will exceed my income from Medium, which is why I see those costs a great investment.

But again, it comes down to who you are, and what your situation is. Maybe you don’t have a lot of money, thus starting a passive income that requires no money would be ideal to you.

Final Thoughts

Passive income is nice to have, and also a necessity if you don’t want to work for the rest of your life. But before you get started you must weight the importance of the 5 factors; time, skill requirements, consistency, location flexibility, and costs & income potential.