Brian Page is an entrepreneur, online educator, and passive income pioneer who is best known as the creator of the BNB Formula, the world’s #1 bestselling Airbnb™ coaching program with over 25,000 students in 47 countries.
Are you looking to create a passive income stream? If so, you’re not alone! A passive income stream is a great way to make money while you sleep, or travel the world. However, there are a few things you need to know before you get started. In this article, we will discuss 10 common mistakes people make when building a passive income stream. By avoiding these mistakes, you’ll be on your way to financial freedom!
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Passive Income Stream Mistake #1 – Creating Another Job
One of the most common mistakes people make when building a passive income stream is creating another job for themselves. For example, let’s say you start a blog about your favorite hobby. You might be passionate about the subject, but if you’re writing all the articles on the blog, it’s not a passive income stream. It’s simply another job.
To make your passive income stream truly passive, you need to outsource the work. This could look like hiring an SEO expert to find and create a structure for your blog that will attract organic traffic, or it could look like paying a manager to handle the day-to-day tasks of running your blog. Hiring writers to create content for your blog is also a great way to make it passive.
The key is to not do everything yourself – otherwise, it’s just another job.
You may not have the funds to delegate the work to someone else right away, but that’s okay. You can start small by creating one or two pieces of content each week, and then gradually increase the amount of content as you’re able to delegate more work.
Eventually, you should be able to work less and less until you’re only occasionally checking to see if the business is running smoothly – and the rest of the time, you can enjoy your freedom!
Mistake #2 – Not Diversifying
Another common mistake people make when building a passive income stream is not diversifying their income sources.
Building a passive income stream is all about creating multiple sources of income that can eventually replace your day job. But if all of your eggs are in one basket, so to speak, then you’re not really diversifying.
For example, let’s say you start a blog and begin generating income from advertisements. That’s great! But what happens if the algorithm changes and your blog traffic starts to decline? You could be in trouble.
That’s why it’s important to have multiple income sources from different platforms. For example, you could also generate income from hiring podcast hosts to talk about the related topic. You can then hire negotiators to close deals with brands that pay you directly for sponsorships. And so on.
The more income sources you have, the less risky it is to rely on any one source. Income streams can also be directed towards building up other assets, such as rental properties or a portfolio of dividend stocks. Diversifying your income sources is one of the smartest things you can do to build a passive income stream.
Mistake #3 – Diversifying Too Much
On the contrary, another mistake people make is diversifying their income sources too much. With so many options for building passive income, it can be tempting to try to do everything at once. But that’s usually not the best idea. Make sure that one income stream has solid foundations before you start to build another one.
For example, if you’re trying to build a blog and generate income from advertisements, but you’re also trying to launch a podcast and build a YouTube channel at the same time, you’re spreading yourself too thin. It’s important to focus on one thing at a time and build a strong foundation before moving on to the next thing.
You can always add additional income streams later, but it’s important to make sure that each one is strong before moving on. Otherwise, you’ll just end up with a bunch of half-finished projects that aren’t really generating much income. It’s better to have four income streams that each produce a consistent income than eight streams of income and have six of them become liabilities due to a lack of focus.
Find the balance between diversifying your income sources and not spreading yourself too thin. It’s important to have multiple streams of income, but make sure you can focus on each one and build it up before moving on to the next. By having strong foundations, you can leverage one asset to ensure the success of the others.
Mistake #4 – Neglecting Taxes
If you’re not careful, taxes can eat up a large chunk of your passive income. This is especially true if you live in a high-tax state or country.
There are a few things you can do to minimize the amount of taxes you owe on your passive income. Make sure to take advantage of any tax breaks that are available to you. For example, in the United States, there is the earned income tax credit, which can reduce the amount of taxes you owe if you have a low or moderate income.
It’s also important to consider setting up a corporation for your passive income business. This can help you save on taxes by taking advantage of corporate tax rates. Speak with an accountant to see if this is right for you.
Paying attention to your taxes is crucial when building a passive income stream. Otherwise, you could end up giving the government a large chunk of what you’ve worked so hard to earn. It’s not always a fun part of passive income, but it’s important to do it right.
Mistake #5 – Not Automating or Systematizing The Business
One of the best things you can do to make your passive income stream more efficient is to automate or systematize it as much as possible.
For example, if you’re running a blog, you can use a plugin like WordPress to automatically post your articles to social media platforms. You can also use an email marketing service like MailChimp to send out automated emails to your subscribers.
The more you can automate or systematize your business, the less time you’ll have to spend on it. This will give you more time to focus on other things, or even just enjoy a little bit of leisure time.
Not everything can be automated, but try to do as much as you can. The rest can be delegated but systems can still be put into place. For example, communications can be streamlined by having a schedule of work to be done. If an SEO team can produce the framework to be complete by Monday night and your writer begins working on Tuesday, there is no need to have him or her email you every day asking what to do next. The work would already be assigned.
Creating systems can take some planning and organizational skills but It’ll make your life a lot easier in the long run. It’s a return on the time that will make each aspect of your passive income stream run more smoothly.
Mistake #6 – Taking On Too Much Risk
You might be tempted by a 20% dividend yield or a rental property that is so cheap that you could buy it entirely in cash. You might think that the dividend yield is lucrative and that it’s an easy passive income due to not having to pay a mortgage. However, there are a few things you need to consider before jumping in head first.
The first thing is that high dividend yields often come with higher risks. The company might be in financial trouble and the dividend might not be sustainable. The second thing to consider is that if you’re buying property entirely in cash, you’re missing out on the potential returns that come with leverage.
There might also be a legitimate reason why the property is so cheap. What if there was mold in the basement that you didn’t know about? Or what if you can’t rent it out due to the high crime rate in the area?
It’s important to consider the risks before investing in any asset. Just because something has a high yield doesn’t mean it’s a good investment. And just because you’ve acquired an asset without a loan, doesn’t mean it will produce positive cash flows. Be sure to do your research and only invest in assets that you’re comfortable with.
When you’re building a passive income stream, you should focus on stability and consistency rather than going for the home run. A small, consistent income is better than a large, unpredictable one. Achieving financial freedom as fast as possible, but don’t sabotage your progress due to emotional investing and only risk setbacks that you can handle.
The Bottom Line
These are just a few of the most common mistakes people make when building a passive income stream. If you can avoid these mistakes, you’ll be well on your way to financial freedom. If you make any mistakes on your journey to financial freedom, don’t give up. Mistakes happen but if you can learn from them, you’ll be one step closer to your goal.
What other mistakes do people make when building a passive income stream? Share your experiences in the comments below.
Brian Page is an entrepreneur, online educator, and passive income pioneer who is best known as the creator of the BNB Formula, the world’s #1 bestselling Airbnb™ coaching program with over 25,000 students in 47 countries.
