How to Make a Residual Income: The 18 Best Ideas to Build Wealth

Everyone daydreams of making money in their sleep or creating a life where money drop into your bank account while you’re on a beach somewhere.

Maybe you stumbled onto some residual income blog in the wee hours of the night searching for a way out of your day job when you should have been sleeping.

I still remember the day I discovered the world of residual income.

My mind was blown.

I was working in my first job out of college and I was miserable. I was disillusioned with the idea of working forever in a job I hated. I somehow ended up on a website called StartupCamp back when it was run by Dale Partridge and read nearly every article on the blog.

I read story after story of different creators: bloggers, podcasters, writers, and youtubers who had created this dream life. They had put in the hard work and were now reaping the reward.

The bug was planted and I knew I had to find a way to make residual income. I started a personal blog that went absolutely nowhere and then started a new job & grad school.

Even though I found a new job that I love, the bug never went away. I was hooked on the idea of building residual income.

What is Residual income?

Let me get this out of the way… Unlike the rest of the internet, I don’t think anyone can build residual income.

Sure, anyone is technically capable of creating residual income because the opportunities out there are endless.

But let me be clear… I believe it takes a special kind of person to actually make it happen.

It takes a special person to have a vision for the future and to work towards it.

  • Not everyone is willing to sacrifice now for later.
  • Not everyone is going to put in the hours, late nights, early mornings, lunch breaks, and weekends.
  • Not everyone will push through setbacks, obstacles, and #haters that will come your way.

You don’t have to have the skills or know how up-front. But you have to have the determination to push through and endure.

But maybe you are that special person.

Who is this guide for?

My mission here at PF Geeks is to help young people, recent college grads, figure out their personal finance.

I’m passionate about helping young 20-30 somethings earn more, save more, and take control of their personal finance so that they can build wealth and give generously to causes and people they love.

If that’s not you, that’s okay. This personal finance guide will still give you the foundation and personal finance ideas you need to build residual income.

But if you’re young, hustling, and trying to get ahead in life, then this is absolutely the guide you need to start making residual income and building a life of impact.

If you’re in your 20’s then you have more time than anyone to put the places in place to create residual income. You have time and energy to build this foundation.

Residual Income Definition

Here’s the best way to define residual income…

According to the Internal Revenue Service, residual income is a consistent source of income that requires minimal to no effort by you to maintain it over the long term after a large upfront time or monetary investment.

Residual Income Definition

Basically, residual income is what happens when you continue to get paid after doing all the hard work, this could be discretionary income as well.

The goal is to pour money or time (or both) into investment decisions and build an asset that will continue to pay you after the work is done. This could be building up your investment portfolio, increasing your discretionary income, maintaining a set of rental properties, or creating an online business.

Active vs. Passive vs. Residual Income

Some quick definitions…

Active income is any money you make that comes as a direct result of your effort but also requires further time or effort to keep making it. A 9-5 day job is obviously the most common form of active income. Even if you own your own business or work as a freelancer, your income is “active” if it is dependent on you showing up and putting in the time each day.

I’ve already established that residual or it’s more popularly known alter ego, “passive income,” is a stream of extra cash flow that requires minimal ongoing effort.

Basically, if you can go on vacation for a month and still make money without doing anything, you have passive income.

The goal is to use your active income to buy or create residual income streams.

The reality though is that hardly anything is truly passive. The whole idea of “passive income” is truly a myth.

Google “passive income ideas” and 99% of the options you read about are not passive at all, even after they are built up. They may still require a minimal amount of ongoing work, but the key word is minimal. 

The only truly passive income ideas require a huge monetary initial investment and are basically just earning you a return on your residual income. 

Any kind of investing or rental property, rental income or commercial real estate business you own will require routine maintenance even after it’s at a point of maturity.

Having active income is a fantastic thing and can be used to help you invest in building residual/passive income sources. If you need some extra income to start a business, pick up a side hustle and get to work.

Dividend Money also has a ton of resources to help you boost your residual income.

The Reality of Building Residual Income

There’s no way around it. Building up a residual income stream that pays you down the road will require either:

  1. A large upfront monetary investment
  2. A huge amount of time & effort (your sweat equity)

I wish it were easier, but what do you expect?

It takes money to make money and if you don’t have money then time is your initial investment.

The good thing is if you’re young, you’ve got time on your side to save an initial outlay and create residual income.

I’m 25 as I sit here at my favorite coffee shop with a cold brew in hand and my pup next to me.

My goal is to build up a $5k/month residual incomestream by the time I’m 30. I’m trying to think big picture. It is going to take a hell of a lot of work to build up this site to be earning $5k/month, but I’ve got five years to do it.

You’ve got to think big picture.

Sure, you may not be “making money in your sleep” this time next year, but imagine what $60,000 a year would do for your lifestyle and savings goals.

If you have a residual income stream bringing $50-60k/yr then you’d be making what most households make in a year with hardly any effort once you get there. That’s what is so powerful about residual income.

6 Reasons Why You Should Build Residual Income

6 Reasons Why You Should Build Residual Income

1. Protection during economic downturns, job loss, etc.

If you have a reliable residual income stream outside of your full-time job, that is an extra layer of security you’ve built up.

Here’s one way to make a game out of building up your residual income:

List out your monthly expenses and as your passive income grows, cross off the monthly bills that you’re now able to cover. 

2. Additional income to reach your goals

No matter what your financial goals are, additional income can help you reach them. Buying a house? Saving for retirement? Paying off your student loans?

Passive income can help you accomplish each of these.

3. Can buy back freedom for you or your spouse

This one is deeply personal for me. My wife and I are 25 right now and hoping to start having kids in the next few years. I’d love for her to have the flexibility to stay home as much as she’d like in the future.

I’m trying to build this blog (my preferred residual income idea) to buy back freedom down the road.

4. Residual income = residual impact

Money can change lives.

If you can create residual income, then those are extra funds that could be used to make an impact on others. I’m passionate about giving to gospel and adoption related causes. My dream would be for this website to make enough to support church plants, missionaries, and people trying to adopt.

Maybe your own passive income can help fund the causes and world needs you’re most passionate about.

5. Pay off debt

The more money you have coming in each month, the more you have to pay off your debt. This will then free up more cash from your monthly budget.

6. You can employ people

I get that not everyone wants to have employees to manage. Personally, I would love to someday have people working for me, employing them, teaching them, and helping them support their families through meaningful investment management.

Now, what you’ve been waiting for! My list of 18 ideas to generate residual income.

18 Ideas to Build Residual Income

I’ve broken up the 18 ideas to build residual income into 4 categories:

  1. Investing: invest money in and earn a return on your initial investment. Reinvest the money and your returns will grow over time. Fully dependent on monetary investment. Nearly 100% passive.
  2. Creating: create a platform that you can monetize through ads, online course, affiliate marketing, products, etc. Low monetary upfront investment. High amount of effort up front with great potential for passive income down the road
  3. Services: Things like advisory or brokerage services, they take almost no monetary upfront investment, easy to start, and scalable. Less passive.
  4. Life / Habits: Optimizing your budget & spending to earn more money. 

Let’s get started…

Investing in something that continues to pay you

Building residual income can be as easy as finding something to invest in that will earn you a return for your money with little or no effort. You don’t have to spend hours a day blogging or creating youtube videos to earn passive income.

If your money is earning you a return for little or no effort once you’re set-up, then you are earning residual income.

The best part about this type of residual income is that it is usually the easiest way to get started. The downside is that it usually also takes the biggest upfront monetary investment.

A blog that can earn you $1,000 a month might take $50-100 to start-up + hundreds of hours of your time.

An investment portfolio that pay dividends for $1,000 would take $300,000 and less than an hour of your time to put together.

1. Index Funds

The absolute easiest way to begin building residual income is by investing in index funds. If you aren’t familiar with index funds, they are a fund that tracks the stock market indexes like the S&P based on past performance. They are passive and don’t make any attempt to beat the market. This means that however the market performs or based on past performance is how your portfolio will perform.

In the world of PF bloggers, index funds take the cake because of their simplicity and proven success rate.

If you want to start earning an average 6-8% return on your minimum investment, then invest in index funds. This won’t give you a passive income stream like a successful blog would, but it is essential to building wealth over the long-term.

As you implement the other ideas like peer to peer lending or becoming a financial advisor, you can create more and more cash flow that should be funneled back into index fund investing and building wealth.

Step 1: Make money

Step 2: invest that money

Step 3: Make more money & repeat

That’s a winning formula.

2. Dividend stocks

High dividend stocks can be a great way to build up a residual income. There are hundreds of great stock market companies that deposit quarterly dividends (money paid to shareholders) into brokerage accountin return for being an accredited investor.

If you reinvest the dividends when you receive them then you’ll slowly be buying more and more particular stocks for free.


Texas Instruments (TXN) pays a quarterly dividend of 77 cents. If you own 100 shares of the company then each time they pay out a quarterly dividend you would receive $77/4 = $19.25 

It may not seem like much, but after a year, you would have grown from 100 shares to 103.

Each of those new shares you own will keep on paying you in dividends as well. As you keep investing, your dividends snowball will roll downhill, picking up steam! If you want to get started, check out this awesome list of dividend stocks great for reinvesting

3. REITs

Breaking into real estate investing can be nearly impossible when you’re in your early 20’s and just starting to make an income. One easy way that nearly anyone can start in real estate investing with little or no effort is by investing in Real Estate Investment Trusts or REITS. These are publicly traded companies that deal in real estate in which you don’t actively participate.

I personally own a couple of different REITS and they pay great dividends (6% and 4%) in addition to great appreciation potential.

REIT dividends

You can see that I had an initial purchase of 75 shares at the beginning of 2017. Every quarter, those have paid a solid 5-6% dividend! Over time, I’ve accumulated about 10 more shares and those are all helping me buy more and more shares each quarter. 

On the far right column you can even see the estimated annual dividend income I should receive! $113 in annual income may not be much, but that number is up 20% from when I initially purchased the stock. One REIT that a friend of mine loves is the VNQ (Vanguard Real Estate ETF).

4. Rental Property

Investing in rental property can be an incredible way to build wealth. You buy a rental property, get it into good condition, and then your renters will pay down your mortgage over the years. You build real estate equity, and rental income to cover all of your costs using other people’s own money.

It takes a sizable upfront investment, but once the work is done, you’ve got a real estate asset that can create cash flow for you.

Becoming a property manager is not a totally passive venture, but managing properties can be a great way to build wealth and create additional income streams, you can even start by renting a spare room.

Check out the Bigger Pockets podcast to hear hundreds of stories on how everyday people like you are growing their net income through real estate or even renting a spare bedroom.

Another rental property strategy is House Hacking, it’s where you buy and live in a multiple unit rental property as the primary residence, and then rent the other real estate units to tenants that cover the mortgage and expenses.

5. Invest in other businesses

Not everyone can invest in businesses or real estate early in their career. Someday though you might have the investment funds and connections to be an angel investor in startups and local businesses!

This can be a way to invest and get returns way higher than the stock market average.

The Basics of Angel Investing

Be a Creator

The most popular way to build residual income is by creating something that can earn you income after you’ve done the hard work of building it up.  The key to making the income that you earn residual is to focus your efforts and financial decisions online. Whatever you create can live there forever, is accessible 24/7, and you can constantly find new ways to promote it

My goal is to create something that requires little to no additional effort once it’s built OR to be earning money with the same amount of effort.

The first podcast episode, blog post, online course or youtube video you create will probably take your 10x more effort with almost

Once you’ve got 100 or 1000 reps under your belt, the creation process gets way easier! And by that point, you may even be earning an income from your platform so your ROI is infinitely higher. No matter what your background or skills are, you can find way to create something online. My buddy Derek recently wrote an awesome guide on how artists can make money online

Most of the ideas to make money and creating residual income center around two purposes:

  • Educate people
  • Entertain people

Most blogs, podcasts, youtube channels, courses, investment advice or books fall into one of these two categories.

6. Start a blog

If you’ve read any guide to generate passive income, then you’ve definitely heard the battle cry of “Start a blog!” It is unquestionably one of THE most suggested ways to earn extra money across the internet!

In fact, according to google, there are almost 6 billion results for “how to start a blog.” I don’t even know how that’s possible, but clearly blogging has made it mainstream.

start a blog

For good reason too!

There’s no question that blogging can be an awesome source of income.

Blogging is one of my favorite ideas to generate residual income. This blog you’re reading is part of my plan to generate income and for building a stream of $5k/month residual income by the time I’m 30.

What makes blogging so incredible for this kind of income is that once you’ve done the hard work in writing and establishing your site, your content will live on forever and continue to earn you money through ads, partners compensate you with affiliate marketing, or maybe even a product.

Before you rush off to start your own blog, you need to know the truth…

Blogging is one of the slowest ways to make money.

Anyone who has been blogging for more than a month can tell you that it is NOT a quick route to building up another income source. For most people it takes a couple of years for blogging to pay off at all and even then the large majorities of blogs never earn income.

I’ve been writing for a little over a year and I’m just now starting to see an income from blogging–and trust me, it’s nothing to write home about! At this point I’ve barely covered my expenses and my hourly rate would average out to less than pennies.

I recognize that I’m still in the building phase for this site and so my entire mindset for 2019 is “laying the foundation.” That’s the phrase I keep repeating to myself when I get impatient, frustrated, or even when I’m hyper-motivated.

I’m laying the foundation for a bank of content that will change lives. I’m laying the foundation for cultivating and building relationships with an audience. Bit by bit, I’m tweaking the design elements to be attractive and effective.

One of my friends Pete has a podcast that is all about helping people like you and I figure out how to build sustainable and impactful blogs. If you’re at all interested in starting a blog, you must read his guide: How to Start a Blog: The Complete DYEB Blueprint.

In similar fashion, Brooks Conkle, who has a personal brand at has also launched a niche website called

A niche website is a form of blog where you target a specific topic so that the search engines see you as an expert in them and begin to rank your website on these topics.

If you end up going the blogging route and starting a site, make sure to read this awesome resource on how to launch your new site!

7. Write a book

If you have some writing chops then another way to build residual income is to self-publish ebooks on amazon.

Personally, I think this is an incredibly ineffective way to start building passive income. If you already have a platform and audience created, then an ebook could be a fantastic way to build your income.

But writing a book/e-book without any established audience will be incredibly difficult. The initial investment with little guaranteed success is a big put-off for me.

8. Create an app

If you have some great development skills, another way to earn residual income would be to create an app! Once you’ve done the hard work in building the app, it can continue to sell or earn advertising income.

9. Make a video course

Are you an expert in any one subject? Decent at teaching people?

Starting a course could be a great way to bring in residual income.

For most bloggers and podcasters, courses are where the serious money is at. If you don’t have an existing audience then your best option is to create a course of a site like Udemy. You can create a course on a subject, get it listed, and earn a % of each sale on their site.

10. Youtube channel

Just like a blog creating a youtube channel can be a great way to build a stream of residual income! It takes a while to build up the followers and audience, but once you have it, you can bring in some serious cash.

Quick story time.

Youtube videos were actually my very first exposure to passive income.

I had a college friend who has filmed a 12 second video of him screaming like a scared baby. It went viral and to this day has received almost 25 million views. He still receives about a $300 check every month for this single video.

What makes it even better is that 95% of the views are negative.

11. License something: Stock photography, Music

If you don’t want to create your own platform, you can still create residual income using your skills. Got skills with music or photography? You could license your stuff and earn a royalty every time someone chooses to use your it.

12. Digital product on Etsy

Etsy is a popular online marketplace where anyone can open an online store, list products, and run their own business through. It started off mostly as a place to buy and sell crafts or homemade goods, but these days you can also list digital products!

Once you’ve put in the effort to create the product you could sell it 1000x without any additional work. Planners, digital artwork, and cards of all types tend to do well on the platform!

Service Based Business

The problem with most service type business is that they are incredibly difficult to make residual income from. The typical service business requires some kind of exchange of your time for money–whether that’s real estate, graphic design, freelance writing, or offering digital marketing services.

Even though service based companies will never start off as passive (neither does any other business!), that doesn’t mean it’s impossible to turn it into a stream of residual income!

It just takes a bit of creative thinking.

There are essentially two ways to make residual income from this inherently non-passive kind of business.

1. Introduce truly residual income streams within your already established service business

If your service business is your primary source of income, then there may be opportunities to introduce some ideas to build residual income into what you’re already doing.

If you have a successful graphic design business, you could create a blog, course, or youtube channel to teach people how to do what you do for a minimum investment. Not only could you make money from those, they could become great ways to bring in more potential clients who see you as an expert.

2. Scale your service business to bring others on board

The second option is to scale your service business by bringing others on board to do the work. Your role will have to shift from being the doer to being a manager, but this is necessary to scaling a service based business.

Lastly, it may not be passive income, but if you are running a service-based business or being a service provider, then the low-hanging fruit for jacking up your income is to raise your interest rates and charge more. Making more money for the same amount of effort is always a huge win.

Creating Residual Income through your Life / Habits

Remember, the definition of residual income boils down to doing the work upfront and earning the benefits with minimal ongoing work. All of the residual income tips I’ve looked at so far revolve around building a business or an asset that pays you.

This isn’t the only form to generate residual income. A place to lock in some easy to generate residual income is by looking at how you’re already managing your money. These are 5 ways to put in some effort up front that will help you build wealth over the long-run.

13. Ask for a raise

The most effective way to build wealth early on in life is by maximizing your full-time income. The more you can make in your 9-5 job, the more cash you’ll have to invest in some of these ideas for passive income.

Negotiating a raise can be awkward but once you lock in a higher salary you’ll be reaping the rewards for as long as you’re employed.

Landing a $5,000 raise and investing that difference will help you save an extra $600,000 over a 30 year career if you invested it at an 8% return.

14. Get out of debt

If you’re trying to build wealth, the most important metric to keep track of is your savings rate. This is simply the gap between your net income and your expenses. The more cash you have available each month to invest, the faster you can grow your net income

Once you generate residual income, this will help you massively widen the gap between your net income and your expenses. But it takes time to really get the ball rolling on this.

Paying off your debt is one of the fastest ways to increase your savings rate and put more cash in your pocket every month.

Imagine life without that student loan payment, car loan, or credit card bill.

Imagine how much easier it would be to save money if you didn’t have those monthly payments hanging over your head. The quicker you can become debt free, the more money you’ll have to invest.

My wife and I are about to pay off the car loan! This will free up $328/month from the monthly budget, which would be going to be invested into building up those residual income assets (index funds & this blog).

Using money to save money, that will then compound and make more money. That’s the goal.

15. Switch to a high yield online bank account (CIT BANK)

Do you have any idea how much interest income you’re earning with your bank or any financial institution?

If you’re with a major bank like Wells Fargo or Bank of America then you’re getting hosed on interest rates. Most of these nationwide banks pay .01%-.1% interest income.

That means if you have $10,000 in your checking and savings, then you’re making at most $10 a year in interest income.

That. Is. Awful.

If you have a decent amount of cash sitting in your bank then you HAVE to switch to a higher yield online bank or a high yield savings account. This is by far one of the easiest ways to create residual income.

Don’t get me wrong… This alone won’t make you rich.

But if you could be earning 200x more interest, wouldn’t that be a major win?

I just set up an account with CIT bank’s “Savings Builder Account” that is earning me a whopping 2.45% in interest! It was super easy to set up and I HIGHLY recommend them. That is 245x what I was making at Wells Fargo. 

impact of interest rate

If you had $10,000 in savings, over ten years you could either have earned $100 in interest OR $2773.

Make the switch today and earn residual income by signing up with CIT Bank’s Savings Builder Account!

16. Negotiate your bills

One of the easiest ways to save money is by negotiating all of your monthly bills! You know how it works. You get offered a great deal to sign-up with someone for internet, cable, or electric and then once the initial offer runs out, you’re stuck paying a higher rate.

It can also be a real pain to keep track of all this, make phone calls, negotiate, etc.

If you don’t want to do the work of monitoring your monthly bills and then negotiate them down, you could always sign up with a company like BillSmart or Trim.

They’ll negotiate your bills for you, saving you money, and in return they’ll take a small cut of the savings they earn you.

17. Cash back apps

Honestly, I’m a bit mad at myself as I type this right now.

I almost didn’t include this one because I think too many people use cashback apps as a way to save money without addressing real underlying spending issues.

Saving money with cash back apps when your spending is out of control is like getting a diet coke to go with your Big Mac.

The harsh truth is that if you want to build wealth and become a money-saving machine you need to jack up your income and cut your savings. That will get you 80% of the way towards growing your net income

That being said… I’m also a bit obsessive about finding 1% gain opportunities.

I know that if I can improve my personal finance by just 1% here and there that those tiny micro-gains will begin to compound and add up to massive savings.

Things like cashback apps are 1% gain opportunities.

The best part though is that they take less than 5 minutes to sign-up for and require no almost no additional effort.

That means you can put in a tiny bit of effort now and you’ll keep saving money.

Sounds like a form of residual income to me.

My favorite cashback app and the one I recommend to people all the time in real life is Ebates.

Today isn’t the day for me to talk about how awesome and easy Ebates is. But I will say that I get about $25-50 in cashback every single month from them.

They also payout fantastic referrals fees. If you sign-up using my ebates referral code, then you’ll get $10 for free after you hit a minimum amount spent and I’ll also paid for referring you. Win-Win.

18. Cashback CC

Just like cashback apps, getting a solid cashback credit card is a great 1% opportunity.

Even better though, with the right card, it could be a 1.5-2% gain for your personal finance.

I’m not an expert on credit cards and I won’t pretend to be.

Fidelity Rewards Visa Signature: 2% cash back + $100 bonus

Chase Freedom Unlimited: 1.5% cashback + $200 bonus

I have no relationships with either of these cards, but I really do think they are some of the best options out there if you’re trying to get cashback without any kind of annual fee.

How to Make Residual Income Using My 4-Step Residual Income Formula

Passive income comes down to a few key ingredients. My residual income formula is:

The right idea x knowledge or skills x effort x time.

Step OneComing up With the Right Idea
Step TwoUsing your Knowledge & Skills
Step ThreePutting in the Effort
Step FourGiving Yourself Time

Step One: Coming up With the Right Idea

The first step of my residual income formula and the key to building passive income is starting with the right idea (list of 18+ passive income ideas above)!

Books have literally been written about coming up with the right business to start, so I’ll be quick with my two cents. You’ve got to find something that you’re passionate about, that you have time for, that you’re willing to commit to, and that you hopefully already have some specific skills or a base of knowledge you can pull from.

You don’t need all the stars to line up to be successful in creating a stream of residual income. But the more they do, the more likely you’ll be successful. You also have to start with the end goal in mind. You are trying to create passive income.

So whatever your idea is, at some point, it needs to be able to make money for you without much additional work. This doesn’t mean you’ll be able to sit back forever and watch the checks come in, but you should be able to cut back your work without the income disappearing.

You have to be selling or providing something that involves no follow-up, or the follow-up can be automated through email or other tech options.

Remember, the rule with passive income is that you are not trying to trade time for money. Because of the nature of this, most forms of residual income are online businesses. Makes sense, right?

You can create a website or online platform, post, publish, record, and people from all over the world can show up at any time of day (#makemoneyinyoursleepright?).

My last quick thought on finding the right idea is creating something that you can continue to grow, build up, and invest time or money into to keep growing your passive income.

CASE STUDY: Blogging 

Let’s say you run a personal finance and wealth management blog like mine with 100 articles making you $1,000 a month primarily with traffic coming in from google. That’s great residual income and as long as you keep the website updated, content refreshed every so often, that income is reliable.

If you wanted to grow that you’d have 3 options:

  1. Write more content
  2. Optimize current content
  3. Create a product and weave it into all your posts

Each of these direct inputs, could easily grow the residual income that comes from your blog.

It’s great to have the option to grow your residual income stream.

I love passive income ideas that can grow with more direct input from you. $1,000 a month is awesome and may be enough for you, but as time goes on, you want to able to earn more without too much additional work.

The best passive income idea is one you can continue to level-up over time.

Step Two: Knowledge & skills

The second step of my residual income formula is learning what you need to build passive income. Hopefully this residual income formula has given you a few ideas and frameworks to think through.

When you’re starting there are two issues you might run into with this step of the residual income formula:

  1. You try to learn everything and waste time chasing things you don’t need to know yet. It’s also easy to get overwhelmed.
  2. You don’t know what you don’t know / need to know.

The anchor of any success I’ve had with my residual income formula is finding trusted sources of education.

You probably don’t know the name Samuel Brannan. He struck it rich during the Gold Rush of the 1800’s in California. You know how? He owned the stores in town that sold shovels, pans, and food.

While the miners who discovered the gold were trying to keep it hush, he was shouting to all who could hear that gold had been found.

300,000 people rushed out to California in droves in hopes of striking it rich. Few made off as well as Brannan did.

In the world of online business, there are lots of Sam Brannans. Many are honest, transparent, and truly want to help. Unfortunately, many do not.

If you want to get ahead in building an online business, you have to have resources to learn from that you can trust.

Here are my personal trusted resources:

These are people who have blogs I read, podcasts I listen to, or financial products I’ve used.

Step Three: Put in the Effort

Once you’ve got the right idea and the skills to make it happen, the last two steps in my residual income formula are just a matter of consistent effort over the long-term.

My biggest complaint about the movement and rush to make passive income is the amount of people trying to sell their own get rich quick scheme. Most of the people trying to sell the dream are the ones selling you the shovel. Can I be real? Creating passive income won’t happen overnight.

It *might* happen in a year but it will really depend on how much effort you put in.

The other reality is that even if you’re able to build up a business, turning it into an income stream that is passive might be the tricky part.

I truly believe that if you go into this pursuit with your eyes wide open, knowing that it could take a few years, then your odds of success are 100x better because you are that much more likely to stick it out.

Step Four: Give Yourself Time

The fourth step in the residual income formula is giving yourself enough time to develop this extra stream of more income.

I can’t tell you how many times I nearly quit blogging during my first year. Heck, I’m starting to earn money and I still question what I’m doing from time to time. I’ve read countless stories of people who nearly quit right before their break came. Some may call that luck.

But if you have the right idea, the skills you need, and you’re putting in the effort, then you don’t need luck. You’re creating your own luck.

However, if you’ve been chasing an idea for several years with nothing to show for it, then maybe it’s time to reevaluate the other pieces of the puzzle.

The Four Phases of Building Residual Income by Starting an Online Business

Phase One: Building

The first phase of building residual income is the building phase. This is the long slog of trying to create something.

If you’re anything like me, you’ll start off motivated and ready to conquer the world. The reality though is that building passive income is a marathon, not a sprint.

Rome wasn’t built in a day, but every day they were laying bricks to build it.

Wake up everyday and try to lay a couple of bricks: write, take pictures, shoot a video, record a podcast, and try to network with others.

The key in the building stage is to put in the hours working to develop skills, keep learning, figure out what’s working, and refine your business plan.

Things you can expect during this phase:

  • You’ll question everything about what you’re doing: your idea, your skills, your motives, the potential return.
  • Overwhelm. In the beginning there is so much to learn and try to master. Respond to the feeling of being overwhelmed by trying to improve just a little bit each day.
  • No income: You probably won’t make a dime your first year and you’ll be tempted to quit.
  • Shiny object syndrome: you’ll be tempted to try every new trick, hack, and tactic out there. Stay focused on creating.  

I’m 95% still in building stage, but in some aspects I’ve progressed to phase two.

Phase Two: Growing

Once you know what’s working, it’s time to grow. At this point you should know what your business is about and have a plan in place for making an income.

You’ll be in a constant state of refining, learning higher level concepts, digging deeper into certain strategies.

The key here is to double down on what is working.

During this phase you should start investing (using active income) or re-investing (from the passive income you’re generating) into your business. You’ll probably pick up a course, join a mastermind, and experiment with different growth strategies.

Phase Three: Scaling

By phase three, you have a clear passive income strategy for growth and you have the pieces in place. You’re earning a decent income but not as much as you’d like. When you are still doing the bulk of the work yourself.

This is when you really need to be investing money into the business. The goal here is to start freeing yourself up from certain tasks that don’t drive the income engine.

The easiest place to start is to identify the aspects that drive you absolutely crazy to do.

For me, I hate image creation, formatting in wordpress, and pinterest.

As soon as this blog is making $500/month, I’ll be outsourcing some of those so that I can focus on the parts I love: writing, big picture strategy, and connecting with people.

Phase Four: Systems

Remember, the whole idea behind creating residual income is putting in the work up front so that you can earn income passively.

By the time you’ve hit phase four, you’ve put in the hours, the late nights, early mornings. You’ve sacrificed social outings, family time, and maybe your health to build up this income stream.

At this point, you’re likely either at your income target or getting close to it.

Phase four is all about putting systems in place to make this income as passive as possible.

The key is to figure out what your role is going to be long-term.

My dream for this blog is to be making $5,000/month by the time I turn 30. I know that if I want this to be passive, then I’ll need to hire & outsource some some of the work, which means I’ll need to be making more than $5k/month.

My 3 Prong Strategy to Making Passive Income

1. Use Active income to invest in passive income streams

Right now my wife and I are both working full-time and making decent incomes! My wife and I pull in just over six figures and are saving right around 30% of my income

I am using my monthly surplus to pay into 3 primary buckets: retirement account, debt payoff, and my home.

The majority of my surplus funds have gone straight into front-loading my retirement account. The faster I can grow this to hit $100-200k, the more time it has to compound and grow on its own.

I’ve also deployed a small amount of my active income into this blog, but the initial investment into PF Geeks has been time & effort. You can also start a side hustle to make money on the side to create some more active income to put into your long-term projects! Another way to get some startup capital is to flip stuff on ebay!

2. Use Active income to pay down debt

My first financial goal for 2019 is finally getting rid of my wife’s car loan! I have around $4,000 left to pay off and once it’s gone, I’ll have another $330 each month to funnel into my goals. The plan is to use this residual income I’ve created to invest in this site, save for retirement, or go towards my mortgage.

The principle here is using your money to earn and save more money.

3. Use my time & effort (and a little bit of money) to create this platform

Lastly, I’m putting in a huge time and effort investment to create this platform here at PF Geeks. It’s currently only making around $50 a month but I do a see huge potential to grow this over time.

The little bit of income I’m generating is all being reinvested back into the site so that I can keep growing it. Up until now, the initial investment has been my “sweat equity.”

The goal is to be earning $5k/month by the time I’m 30. At that point, the residual income I’m earning could be dumped into other residual income tips like index fund investing and rental property.

Still need more wealth management and personal finance ideas? This how to make an extra 1000 a month article will give you plenty more to choose from.

Take Action Today 

Building up multiple income streams is all the rage these days and for good reason. You can create job and life flexibility, save more, and not be dependent on your day-job to get by. You can use the extra money to pay down debt or build it into a full-fledged business!

If you’re the type of person who is willing to invest time and energy today to create the life you want in the future, residual income is right up your alley. Take action today on my residual income formula and one of the 18 residual income ideas above and #DoTheWork

Jared Bauman is the owner and editor of He has started and sold several companies, along with owning several investment properties. His interest in personal finance started as a young kid, developed through his entrepreneurial ventures and real estate investments, and continue through his conversations with friends and colleagues.

6 thoughts on “How to Make a Residual Income: The 18 Best Ideas to Build Wealth”

    • Yep! I can’t believe you didn’t know that! Turning 26 here in a couple of months. Definitely fortunate to have parents who got us on track early on in life. Trying to take advantage of the head start we have and help others who don’t have that.

  1. 1. Is it really passive income if you’re working a couple of hours every day researching, writing, publishing these blog posts?
    2. What if you ever stop writing these blog posts – the search engines will slowly push you off their search index because you’re no longer offering fresh, useful content.

    My basic point is that you’re working a couple of hours every day for the *hope* to be paid $60,000 a year, when you could actually just work full time like a normal person and get paid your full value.

    • Great questions man. First off, I don’t consider it passive which is why I use the phrase “residual.” I still expect to be doing some work on the blog but it can certainly be minimal or outsourced. A few posts a month isn’t much work for me.

      I’m currently working full-time like a normal person, as is my wife, but the goal is to develop a passive stream that can add to our existing income sources. We’re busting our tails to maximize our day job income. Either way, I’ll be working full-time 5, 10, 15 years from now. But I’d love to have an extra $60k coming in. Wouldn’t you?

      • Perhaps I can add this into the post. Residual to me, means the work I’m doing today will continue yield results down the line. 10 hours a week blogging now makes me around $250/month. Hardly anything on a per hour basis. But 5 years from now, that same 10 hours a week (and likely less) will earn me $5k.

  2. Thank you for this info. It is incredible how many opportunities are out there to make a residual income. I believe that mindset also determines what you can achieve. I saw some comments about people complaining that for blogging, for instance, you would still need to put a couple of hours a day., The truth is that everything will require an inicial investment of time. As long as you are willing to commit to your endeavors and stay focused you can add an extra income and even more. Anyway, great reading!!


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