One of the best things you can do to diversify your income, and to provide yourself with a reasonably steady income stream, is to engage in income investing. This provides you with the chance to build up sources of passive income, eventually getting to the point where your money is working for – rather than you working so hard for your money.

 

What is Passive Income?

 

Passive income is money that you receive without doing very much beyond the initial effort. This is money that keeps coming to you, whether you do what is considered “traditional” work or not. Some examples of passive income include:

 

• Royalties from books, music or other creative work.
• Dividends from stocks.
• Interest income from loans you provide to others. This can be from bonds, via arrangements you make with relatives and friends, or through P2P lending.
• Revenue from web sites and blogs that you operate. While you do have to take some action, this is often considered passive, since once you are established, you can keep the revenue coming with a few tweaks and occasional additions of content.
• Residual income from past work online (i.e. pageviews).
• Affiliate income.

 

The idea behind passive income is that you make your initial investment, and then sit back and watch as that money does work on your behalf. You may have to do a little research in between, and do a few things to make sure that the money continues to flow, but it doesn’t constitute “earned” income in a more traditional sense.

 

Using Supplemental Income to Build Up Passive Income

 

Whether you are earning supplemental income through a part-time job, or working to build an Internet empire, the money you make can be put to good use by building up passive streams of income. You can use your extra income to invest in an income portfolio that helps you compound your money. When you invest your supplemental income in assets that earn money in turn, you are boosting your earning power.

Dollar cost averaging and online discount brokers make this whole process even easier. Even if you are only making a couple hundred extra dollars a month, that can be parlayed into carefully chosen investments and enterprises that will eventually add up to more.

 

After you spend some time strategically using your extra income to create passive income streams, you will discover that you have reached a point where the whole thing begins to sustain itself. You can cut back on the amount work you are doing in more traditional settings, slowly relying more on your passive income to cover your regular expenses. You can even transition to the point where your more “traditional” work becomes your “extra” income. Finally, the goal is to retire from your regular job and live off your passive income.

 

As you go through this process, it is a good idea to make sure that you are setting aside money in an emergency fund, and remembering to save money in a tax advantaged retirement fund. In the end, though, building up passive income streams will help you create long-term income that can help you in an emergency or in retirement.