The idea of passive income may seem outrageous to Asian Americans who are used to striving and taught that hard work is our moral duty. (Commentary withheld about the popularity of passive income among white people.) 

The good – or maybe bad – news is that passive income is never truly passive, unless you outright steal money. (Do not recommend, by the way.) You will always need to invest time, energy, and possibly money into the initial setup, audience building, or ongoing maintenance required for passive income streams. So don’t think that passive income is a way for you to earn money while lounging at the pool…you’ll need to work for it in some form. Hopefully that assuages your model minority guilt!

I’ll be defining passive income as money earned without directly providing services, such as financial planning, tax preparation, and health coaching, or creating and selling a work product, such as a website, blog article, or logo design. Passive income can be a useful way to diversify and stabilize your freelance or small business revenue. It’s also a great way to build a nest egg or take time off from client work without making your checking account incredibly sad. 

There are many ways to make money without “doing work” but the best fit will depend on what you already have in place and how much work you’re willing to put in. Here are some options in approximate order of work involved:

Advertising

Examples:

Google banner ads, YouTube video ads

Payout Mechanism:

Platforms like Google and YouTube show targeted ads to your readers or viewers and you get a payout when someone clicks through.

Pros:

Ads are very easy to set up and require little ongoing maintenance.

Cons:

You need a large audience and lots of consistent traffic to earn much. The revenue means is not really under your ownership, so if Google or YouTube change the program rules, you may be out of luck. Ads may be distracting from your original content.

Auntie’s Advice:

This is an easy on-ramp for passive income. Go for it, but don’t have super high expectations unless your traffic is already high.

Amount of Active Work Involved:

Very low.

Affiliate Programs

Examples:

Amazon Associates Program, referrals for web hosting, customer relationship manager (CRM), email service provider (ESP), and other software products

Payout Mechanism:

You send or publish content with personalized referral links or codes, and when someone else purchases or signs up, you get a payment or product credit.

Pros:

These are relatively easy to set up and maintain. You can earn quite a bit if you make lots of referrals.

Cons:

Individual payments are usually small. You may need a large audience for things like Amazon Associates to pay off.

Auntie’s Advice:

If you sell or recommend a product as part of your service offerings, affiliate programs make a lot of sense. For example, a web designer may recommend a particular web host to their clients and get affiliate commissions when clients sign up. Make sure to preserve your credibility by only recommending products that are high quality and will provide a good experience.

Amount of Active Work Involved:

Low

Reseller Programs

Examples:

Web hosting, email service provider, marketing tools, customer relationship management tools, and other SaaS products

Payout Mechanism:

You buy a bulk package of software or SaaS, then sell accounts to your own clients or other referrals for a profit.

Pros:

Being a reseller can provide recurring income from one client. Reseller programs can be relatively easy to set up and maintain.

Cons:

You may need to provide technical or customer support to your resale clients, or handle billing for multiple clients.

Auntie’s Advice:

Reselling is a bit like being a landlord. Make sure you know your responsibilities for support and billing and set up systems like recurring invoices or subclient support accounts to make that easier on you.

Amount of Active Work Involved

Low to medium.

Merchandise

Examples:

Branded t-shirts, stickers, stationery, and other swag

Payout Mechanism:

Your audience purchases products, you keep the sales minus your cost of goods and shipping.

Pros:

Like digital products, you can often set and forget your merch and keep selling for years.

Cons:

You’ll need to put in some time up front for design and sourcing. There also tends to be a cap on per capita physical product sales. Unless we’re talking Sasha Kim from Always Be My Maybe, most people only need one Hello Peril branded tennis ball.

Auntie’s Advice:

Find a way for someone else to manage merch logistics. Look for vendors with on-demand production and dropshipping to avoid managing inventory or living at the post office.

Amount of Active Work Involved:

Medium

Memberships/Subscriptions

Examples:

The Cosmos community (free), the Diamond Membership (paid), some mastermind groups

Payout Mechanism:

You curate membership perks such as education, networking, discounts, or swag. Members pay a one-time or recurring fee for access to those perks.

Pros:

You can earn recurring income while building a community that likes you and may be eager to buy any future products you launch.

Cons:

Creating quality perks can be difficult and time-consuming. You will need to provide ongoing customer support and possibly community management. 

Auntie’s Advice:

I am personally a very hard sell when it comes to paying for “access” and of all the passive income options in this post, I’ve seen this one abused and done poorly most often. so Your value proposition should be clear and significant. Make your perks truly valuable, not just fluff. Memberships also make a good add-on to high-ticket services or products. (These should probably be free or discounted for clients who have already purchased the big ticket item.) For example, if someone books a coaching package with you, they can automatically get access to your accountability group, but others can join by purchasing a membership.

Amount of Active Work Involved:

Medium to high, depending on how often you update or add new content and the level of interaction and availability you have for members.

Crowdfunding

Examples:

Patreon, Ko-Fi, Kickstarter

Payout Mechanism:

Your fans contribute money to support your work, often in exchange for exclusive content, swag, shoutouts, or other perks depending on level of support.

Pros:

You can potentially earn large contributions and/or recurring income. Crowdfunding campaigns can also bring you a lot of publicity and build your audience quickly.

Cons:

You are dependent on the generosity of others, which isn’t necessarily a bad thing, but it’s not as straightforward as you make something, people give you money. You may have to invest a lot initially to create your perks or prototype, and the marketing collateral needed for big crowdfunding campaigns.

Auntie’s Advice:

You can do small-scale crowdfunding by adding a Ko-Fi or Patreon link to your website, but don’t count on that income to pay your rent yet.

Amount of Active Work Involved:

Medium to high.

Sponsorship/Product Placement

Examples:

Sponsored posts on blogs or social media, sponsorship shoutouts on podcasts or videos

Payout Mechanism:

Brands and businesses pay you to create content about or with their product or service in exchange for free product or cash. (Preferably both!)

Pros:

These partnerships can help you create better quality content by providing nice products to use or review. You may also start showing up in searches for a particular product which can increase your traffic-based revenue like advertising. Working with well-known brands can make you famous by association and lend your work legitimacy.

Cons:

You will probably need to build up a fairly large following (or at least good search engine cred) before brand start approaching you. Sponsored content may make you seem less authentic. Creating quality content for brands will take a lot of time and may prevent you from making your own content.

Auntie’s Advice:

Be very selective about the brands you work with. Choose brands that align with your own work and respect the audience you’ve built. When you first start blogging or social media-ing, it’s fine to accept payment in product, but you should start asking for cash as your influence grows.

Amount of Active Work Involved:

High

Information Products

Examples:

Printed books, e-books, printable worksheets/workbooks, live or recorded webinars, online courses

Payout Mechanism:

Customers buy your product, you get money.

Pros:

You can often set your product and forget it.* The product(s) are usually evergreen, meaning it can keep earning money for years after your launch it. Information products can be a good stepping stone to your signature services. For example, you may sell a workbook for household budgeting and follow up with an offer for personalized financial planning.

Cons:

You will probably have to invest a lot of time, energy, or money into creating a product without a real guarantee of profit. Generally, you need a large volume of traffic for information products to really be profitable.

Auntie’s Advice:

*This is often touted as the “easiest” way to make income passively, but that is super misleading. Make sure you have a really good supporting infrastructure in place to attract leads (engaging content), guide them to buy (an email list opt-in and nurture sequence), sell the product (e-commerce) and follow up with the opportunity to buy other products or book your services (email marketing and/or CRM).

Amount of Active Work Involved:

High initially, can drop off quickly after launch

Final Thoughts

Any of these revenue streams could very well comprise your entire business. In my own experience, it makes more sense to start by providing active service or tangible product, then branching into other ways of earning money once you’ve gotten off the ground. On the other hand, maybe you start with an organic blog or social media feed. Then you monetize that through ads and sponsorship, and use that income to launch your consulting or service-based business. There’s no wrong way to start as long as you’re prepared to work hard and work smart.