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How to pick where you put your hustle

Last week I wrote a post on how abundance truly lies in simplification. This is one side of the equation when what you’re after is financial freedom.

The other side of the equation is creating streams of passive or residual income.

As a reminder, you are financially free to the extent that your passive or residual income is greater than your living expenses. 

This week I’m getting down and dirty with what passive/residual income actually is and how to make it.

(This is a bit of a departure from the usual musings on being human that I write about here. But how do you think I have the time and space in my life to ponder, philosophize, and write? You guessed it: passive and residual income.)

Let’s start with definitions: passive or residual income is money that comes in over and over again from work you did once. 

Diving a little deeper, passive income indicates money that comes in regularly without you having to do much of anything to keep it up. Great examples of this would be income from investments in paper assets (like stocks and bonds), real estate, and businesses in which you’ve invested money but don’t participate on a day to day basis.

Residual income, on the other hand, usually indicates earning money over time from work you put in once like writing a book, recording an album, or earning repeat commissions on a product you sell that people reorder every month.

And now, for some myth busting. There’s a lot of hooey here on the interwebs about passive and residual income so I’d like to set some things straight:

1. Passive or residual income can be earned without any effort.

Anyone who’s making this type of income has had to work their tush off to get it. They’ve poured their souls into intellectual property (or art), they’ve researched and executed profitable real estate deals, or they’ve been incredibly smart in terms of where they’ve chosen to invest money they already had so it could grow. The difference between people who hustle their heineys working for someone else or creating business models in which they trade hours for dollars and those who get paid multiple times for work done once is not hard work. The difference is in what activities are being pursued during the hustle.

Hustling is inevitable. But suffering is not so choose where you put your hustle wisely. (Click to Tweet)

2. You have to already have money in order to earn passive or residual income.

Not so, my friend. If you’ve got a great idea, an incredible service that you can scale, or are willing to do what most people aren’t willing to do for a few years, you can create streams of passive or residual income. Most of the people I know who are the smartest about creating income streams that come in whether they’re working or not have not gone to college. A few of them barely made it through high school. And most of them had no inheritance or access to significant money. They simply hustled in the right direction for a while so they could create freedom for themselves.

3. You have to be famous to create passive or residual income.

Most people who have financial freedom are living quiet, enjoyable lives all around the world and you’ll never hear of them. And they choose that for themselves. It’s true that getting a Platinum record or writing a NY Times Bestseller can create some great residual income through becoming well-known, but it’s certainly not a requirement. If you want to get famous, do that on your own time. But don’t confuse financial freedom with fame. They are NOT the same thing and many people who are famous aren’t financially free.

My recommendation is to choose one stream of passive or residual income to focus on first. A smart financial freedom plan will include several streams of income rolling in whether you’re working or not, but start with one.

Ways to Create Passive and Residual Income:

I’m not the word’s leading expert on all methods of creating passive and residual income. There are pros and cons to each and I would recommend reading Robert Kiyosaki’s book Rich Dad, Poor Dad  to get your research started.

Commit to taking one action step towards increasing or creating passive or residual income and share what that step is in the comments.

Are you aware of other ways to create passive/residual income that I didn’t mention?

Does this post inspire you?

Do you have any additional questions? I’d love to hear them!

P.S.  Come hang out with me in New York!  I’m going to be speaking at Nitika Chopra’s Empowering Women to Heal Themselves event TOMORROW, October 25th, and will also be speaking at Hay House Ignite – November 3 & 4th!  Join me!

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  • Barbara says:

    Thank you for writing about this topic. Unfortuneatly, finances are a part of mental health status for those who have been stessed about it. Social Security and Pension are great passive incomes, but don’t sustain enough in many cases for women mostly. I have CDs on Amazon/cdbaby and that adds some income and gives pride for helpful tools to others as does my accompanying related holestic job. I have joined USANA and that so far has been rewarding, fun and eductional (hopeful for residual income). I continue to be interested in this topic and look forward to hearing more. Wouldn’t it be nice to win powerball?

  • Johanna says:

    Kate

    I can’t imagine a life without hustle. I love love love being creative and developing programs that answer people’s needs and wants!

    Sorry to miss you in NYC. I’ll be in town next week.

    xo Johanna

  • Annie says:

    great post! Love having it broken down like this especially the myth-busting.
    Question: is referral marketing, like online, residual/passive?
    Another idea, though maybe this is included in your intellectual property category:
    Residuals from acting on tv or films – though maybe good you didn’t include that since its a long shot and prob should be pursued for passion rather than as financial plan.

    My next action:
    Have our conversation about my intellectual property idea!

    • Kate says:

      Great question Annie – I realized that I forgot to include referral marketing or affiliate programs. That’s sort of like a sub-group of intellectual property because you’re marketing someone else’s intellectual property. It’s not passive because you have to do the marketing and usually it doesn’t offer referrals, but it definitely is scalable so it counts!

      And also true that residuals from acting on tv or films are a great example. Yes, they’re trickier to get but that doesn’t mean not to pursue them. Most things in life that are worth having are tricky to get but well worth it :)

      Excited to talk with you more about your idea!

  • Annie says:

    Thanks Kate! Good to know re: affiliate marketing. I have been curious. Looking forward to our talk too! Keep on shining your brilliance.

  • […] When I say financial freedom I mean the ability to wake up in the morning and do what you want to do with your time. (Click here for my recent post on what financial freedom means and how to get it.) […]

  • Danielle says:

    Great post, Kate – and I LOVE that tweetable! (Tweeted!)
    I’m a huge fan of passive income streams. I first learned about them in The One-Minute Millionaire and it was a revelation. I remember thinking; just imagine what a life you could live, if you crack the passive income thing!
    So, that’s my plan. And three books later, along with a bit of property investing, and I’m starting to see the benefits. They’re not quite raging torrents yet, but my aim is to just keep creating more – and since I love what I do, I’m not in a rush.
    Thanks again for a great post – love your money musings. (Can’t wait for your book!)

  • You have inspired me to start writing the book I’ve always dreamed of writing, even though I have no idea where to start :)

    Thank you!

    Love + light ~

  • Diane W. Teats says:

    I scored a 29 on the quiz which I felt good about being ready to know more about money. Middle of the road is where I am right now, but I’m going to fly! Just want to be more in touch with what I have going out and coming in right now, so a better system to monitor that is what I need. I’m a Licensed Massage Therapist with two sources of income. 1. Self employed with room to grow helpling others to the health & wellness benefits of massage. 2. Massage Envy Franchise employee with an excellent client base supported by a 29 to 33 service hours per week. I absolutely love what I do and have so much joy from bodywork and massage! I have diversified stock investments with Edward Jones. My wife Flossy and I have a DJ music business promoted only by word of mouth referrals. Since 2009 I’ve been a Marketing Executive partnering with a Direct Delivery Company that I feel passionate about as well. Melaleuca Co. can provide me the residue income it’s just a matter of telling others & leading them about on how to tell others as well. I have an idea of an essential oil product to make and sell as well. Please help <3, Diane

  • Kat says:

    I love this article and all the info you share! I love the idea of making residual income from music, and want to make an album!

  • Phyllis Rose says:

    HI,

    I am a hopeless rebel who hoped to get ahead somehow but I see no way. I live on my monthly income which is not very rich. I grew up in the old school days, I am nearly 84 so am foolish to think I can do something for once in my life. No one believes my age. When I answer my age people say I am lying. Do not look that way for sure. Nor act it. Tried to take care of my bod. I am widowed and lost a son and the other has lost his leg to cancer and managing OK. I wrote two books but they do not seem to be moving. Are on Amazon (hopeless) and need to get them elsewhere. I have an adopted daughter who came here from NY and s trying to help me get them moving and I can do more. I picked up computer on my own and no help to learn other stuff so depressingly go on and wish I could do something I wanted for once. I have learned if you are poor cannot do anything and may as well settle down with a good book and wish you have written it. I live and expect to die in Senior Housing. What a future, my dreams and hopes went down the drain. Fear it will not keep my going. I never had the chance to use the newer things on here, just the beginning stuff. So cannot deal with the upper stages of this program. Need $$$$$$ to make $$$$.
    Depressed totally.

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