Passive Income for a Noobie

Sam beat me to the punch by asking “How Hard Is Your Money Working For You” and describing (and grading) several sources of passive income. Still, I want to write about it from the perspective of a noob who hasn’t had a lot of success earning monthly passive income.

I’ve read Steve Pavlina’s passive income series. It’s great for helping understand the psychology or reasons behind money and passive income. However, for the practical application part, it is a bit shallow in content. Still, it was the first multiple-article series I read on passive income and I am continuing to educate myself more so that I might be able to increase my passive income earnings. I’m an amateur when it comes to passive income, but I know of some ways to get started. My definition of passive income is money I make that has to work for me even while I sleep. That’s my definition.

Savings Account (Very low interest rate)

Most of my money is in my savings account right now. About 90% of it. The interest I earn is 0.1%. Right away I know this is not going to take me where I want to go, so steps are going to be taken to rectify this. I plan to have in savings 6 months of living expenses and that is it. Many of the areas below will pull from this savings account money and be allocated differently.

COD (Certificate of Deposit)

Certificates of Deposit are simply a way to give your money to a bank and they pay you interest over a period of time. You don’t take the money back until a time period is up (usually between 6 months to 5 years). The interest rate on a 5 year Certificate of Deposit is about 1.3%. This doesn’t seem very exciting to me either, so I don’t intend to put any money here right now.

Prosper Lending (Peer lending of loans that gain interest)

Sam (from Financial Samurai) introduced me to this concept. Sites like and allow for an individual to loan out their money to others and receive an interest rate gain on the money. The website makes money by taking a small cut of this percentage. Because rates range from 6% to about 15%, this seems like a great candidate to put my money right now. The is always the risk that someone won’t pay me back, so I’m not going to put all my money here. But to start, 15% of it is very reasonable of my money to invest.

Website (Adsense, affiliate, etc…)

I have a few websites that make me some extra lunch money each month in the form of about $50. They cost hardly anything to maintain (one is a Blogger URL). It’s worth continuing to try and increase this amount. With the low cost of a website, increasing monthly revenue from this area can only be a good thing. Another 10% of my income is going to go here.

Mobile Apps (Sales)

I have one free mobile application for Android at the moment, the Real Time Calculator. It’s free. I don’t make any money from this space yet. The costs are even more minimal here – just the time used to develop an application. If I can make this part work, it’ll be a great asset to the passive income I earn. I plan on investing 10% of my income into building mobile apps.

Real Estate (Rental income)

I’ve been researching properties for the last few months now, but none have resulted in a sale yet. Because the Real Estate market is near its low here in Utah, I’m going to continue to keep my eyes open and contact sellers to see if I can find a great property to rent out. 50% of my income will stay in savings in case I find a great property to rent (for a down payment). In the event I can’t find property, I will likely allocate the 50% across the categories here with peer to peer lending getting the most.

Book (Sales/Royalties)

I wrote a book called Eglathia. It sold about 30 copies and that was about it. Were I to write more books here and do more promotion, I imagine I could do better and start to generate passive income here. The real challenge is time. To write another book will take a year and there are other areas I can get my time and money working for me more effectively… I’m not going to allocate any money here at this time.

Stocks (Dividends)

I got the stock investing bug a few years ago and think I am ready to dive back into the mix. Before I was a little emotionally unstable for trading, but now I feel I have the knowledge to invest without freaking out over every penny the stock goes up or down. I plan on putting another 15% of my savings money here.

I’ve learned most of these areas from Sam at Financial Samurai. I think the key is to just do it by researching and then making a firm decision. Money can’t work for you if it’s all in your savings account :)

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4 thoughts on “Passive Income for a Noobie

  1. I agree with you, especially in real estate investment, you can reinvest your cash flow or profits from your rental income in order to grow bigger and bigger. At the time that your rental properties are giving you passive income more than what you earned from your job, you can leave your job anytime.

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