Of late I’ve been interested in the idea of passive income. The idea and implementation of it, actually. I think I’ve blogged before about alternative sources of income, and it turns out that several of those ideas on that list are also considered passive income: any of the ones that involve writing something and selling it, for instance. Royalties on a novel would be passive, after the hard work of writing and publishing it, the sales of the book over time will generate income.
Other examples would be interest income, or investing in stocks or bonds. Or investing in someone else’s business – another way to earn interest is loaning money out to others. Of course, the hard part of all this is having enough money to loan it out to others. Takes money to make money. And unless you have a large amount of money to spend, even getting 10% return isn’t going to replace the day job.
This all ties in to my epiphany about collecting capital in a capitalist society, as well. The largest form of capital for most Americans is their house. Once the purchase is made, typically the value of the property rises over time, and hopefully rises faster than you’re paying interest on the mortgage. Once the value of the house is greater than what you owe on it, you’re making money. So home ownership in, in a very real way, a common form of passive income.
My sister’s husband once talked about a friend of his from high school. This friend was renting an apartment in a small complex, and managed to purchase the whole complex. He could then eliminate or drastically reduce his main living expense by applying the rents he collected from the other tenants towards his mortgage. Clever. I’ve thought about that, too, but I’m not sure that the building I’m living in is worth it… or even for sale. There’s also the whole maintenance and upkeep thing to consider. Ugh. Still, rental income is another form of passive income, to a certain extent.
Another idea for generating ongoing income without much actual work is my idea of starting a web hosting company. If I’m going to maintain a server for myself anyway, why not rent out disk space, bandwidth, and software services, too? In fact, on my to-do list is a note to look into what it would cost to rent a tiny office somewhere that can get DSL or bandwidth that I can re-sell. Stick a server and enough hard drives in there, configure it for serving web pages, learn a bit about using Apache and creating virtual domains, and see how many customers I could get. Again, it wouldn’t replace my current income – it would supplement it, and it would always be coming in, as long as I kept the servers running and connected to the intertubes.
Combining several of these would enable me to rely less and less on the day job. At the very least, the plan would reduce the stress I feel about my day job, and would give me vital contacts and skills in areas I very much value.
Plus most of them seem like fun. I love writing. I love tweaking computers and fixing them. I love playing with numbers and spreadsheets and calculating returns. And who doesn’t love playing with other people’s money?
Of course, it would all be so much easier if I could just win the freakin’ lottery already. Until that day, I have to make do with the foldin’ green I got, not the foldin’ green I deserve…