by Dolens

Created on: April 15, 2008

Passive income is the holy grail of personal finance. Whether while fighting through rush hour traffic on Monday morning or fighting through the last hour of work on Friday afternoon, we all like to think about what it would be like if we could make money for nothing. Unfortunately for most, they never get beyond this dreaming stage, and never reach the end of a journey to financial independence. Not to worry though, I'm not there yet, either, but I'm more than happy to help give some suggestions and guidance to setting up a stream of passive income. Here are the 3 most common sources. I'll provide some links below each section. All of them are free, and some of them are blogs, but they've all helped me generate more passive income along the way!

1. Investing

There's a reason the adage "It takes money to make money" still rings true, and you'll find the heart of it in investing. If you save money and invest into income-producing investment vehicles, you have single handedly created a money machine! Whether this is a high-yield savings account at ING direct or a brokerage account through sharebuilder, anyone and everyone has the opportunity to create passive income through investing. Your first step will be to save a portion of your paycheck each month. The more you have invested, the more income you'll be able to generate.

If you're looking for help in this area, some sites below can help you get started investing:

The Motley Fool: Http://www.fool.com
Living Off Dividends: Http://www.livingoffdividends.com
Get Rich Slowly: Http://www.getrichslowly.org/blog

2. Residual

Residual income is something that takes a significant amount of work to create at first, but then continues to generate income long after your work is complete. Examples of residual income include writing a book, creating a widget, writing a computer program, or even shared-revenue sites like Helium! If you're willing to do the work up front, residual income can be built into a substantial stream.

Looking to generate residual income? My favorite blog on the matter is http://www.geniustypes.org

3. Real Estate

Real Estate is far and away one of the most expensive sources of passive income, but also one of the most consistent and proven. In the simplest terms, it goes like this: You buy a property, rent it out to reliable tenants, and take your profits after the mortgage, maintenance, etc. are taken out. This is terribly oversimplifying the process, as there are a wide variety of considerations to take into account before getting into Real Estate. Location is important, as well as the monthly cost of maintaining the property and seeking out reliable tenants. Be sure to do your research!

A good summary of how to make money off this source of passive income can be found here:

http://geniustypes.com/real_estate_strategies_c ashflow_vs_appreciation_/

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