Since becoming a consultant about 10 years ago, I've been pretty happy with my decision. Consulting has brought me many rewards. Over the past few years, I've sought to diversify my income streams, so that I'm able to weather industry downturns, clients closing shop and the like. I've been careful to add complementary income streams. So far, these include:

marketing consulting
project management
freelance writing
teaching at the university level
information products
advertising & affiliate revenue

This fall, I'm going to go on my second maternity leave. In Canada, women usually take a year for maternity leave and this is paid by the government. However, I'm self-employed and people who are self-employed receive no maternity leave benefits. Since this is my second time taking leave with no pay, I'm going to see my consulting earnings decline.

My goal for 2007-2008 is to earn enough from passive income streams (information products, advertising, etc) to cover half of my current monthly earnings. This is a fairly ambitious goal, since I've been consulting for 10 years and I only added advertising a year ago and information products about five months ago.

I should note that, by passive income, I mean that I want recurring revenue from work I've already done. I recognize that creating content takes a great deal of time -- it's just that it's something I can do before I have two children under my full-time care.

I'm not going to be posting numbers, since I don't want to disclose that much info to the world at large. But I will keep you posted on the percentages. And if you have any ideas for ways to keep money rolling in, please let me know. I'm sure some of you will suggest hiring subcontractors, but I really don't want to have to worry about any sort of work once this baby is born. (I will be returning to consulting at some point; I just don't want the pressure to do it immediately.)[/list]

Wow, this is a popular one.

I'm waiting for updates! Passive income is a keen goal, and I'm anxious to hear your progress!

Well, I had a bit of a panic earlier this month, when my ad earnings dropped. They've come up and now the first 15 days of this month are about the same as for last month, perhaps a little higher.

My information products are selling steadily and I've made a few minor changes to my website to make them a little more noticeable. I went with a really soft launch and even the way I have my site set up now is pretty low key. I'm keeping the emphasis on the free articles, because that's what most people want.

My biggest challenge is that I'm 80% through a new information product, but I just can't seem to move ahead with it. Not sure what is holding me up...perhaps all the non-passive work I'm doing!

Andrea, can you explain what you mean by "information product"? I'm wondering if this is similar to some of the things I'd like to do. (You can e-mail me if you prefer.)

Information products include fact sheets, reports and ebooks. I've got some lengthy reports.

June Update:
My advertising revenues dipped slightly this month, possibly because I was featured in Lifehacker and the resulting advertising-blind traffic reduced the rate that advertisers would pay on my site. Still, it was only down about 10% from last month.

Information product revenue spiked by 36%! This was a great month and I hope it keeps up. I'm still pushing myself to finish my upcoming product, but I have been very busy with other projects.

The biggest threat in the months ahead is the rising Canadian dollar. I do a significant amount of US-based business (also via consulting) and my earnings are being hurt by the jump in the Canuck buck.

I don't know the size of your business, but you might benefit from hedging your position with currency options or forex futures. If you consider that you effectively have a short position on the loonie, there are strategies that can protect against a rise.

I don't have any knowledge of how to do that. Where could I learn?

I had 2 semesters in grad school that covered options, futures, swaps & hybrid derivatives, but I'd have to review my notes before giving you more specific suggestions. As I recall, hedging strategies involving foreign currency transactions are either futures or options on futures (which either expire or become futures contracts at expiration). In general, most hedging strategies require you to exchange upside potential for less downside risk.

I think http://www.888options.com is a good place to start. Despite the (in my opinion) shady-sounding name, it's run by a non-profit consortium that includes the options exchanges themselves. They have a vested interest in making sure people don't completely lose their shirt trading options. As I recall, everything there is free of charge.

A quick browse elsewhere lead me to http://www.futures.org (run by the National Futures Association) which has an "Investor Learning Center" which might give you some information about that particular derivative investment as well.

Can someone explain the benefit of currency arbitate in this case to protect against a further devaluing of the USD? To me, it's like betting $50 on black at the roulette table and then also betting $49 on red so you don't risk losing as much. You'll still lose if red hits, just as you'll really lose on -00- or in this case if the North American economy as a whole plummets.

Sorry if this is OT and undesired commentary.

I suppose that's not a terrible example of a hedging strategy. In your scenario, you're better off not playing. In the real world, in some cases, you already have your $50 bet on the table as a matter of simply doing business. In that case, you may stand to risk substantial loss and you can't NOT play.

Suppose you're a car manufacturer in the US and the Chinese are buying up all the scrap steel on the market. Assuming you don't have unlimited warehouse facilities to buy all the steel you need right now and store it, you're SHORT steel, because you have to buy it at some point in the future. If you believed the price were going down, you'd be better off waiting to buy it until you needed it, but that's not likely to be the case here. A futures contract allows you to set the price of steel closer to today's price, but with delivery at a later date. You pay for the right (but not the obligation) to buy steel next month. If the price holds steady, you don't exercise the contract and you buy your steel on the spot market. Adding the price of the futures contract to the overall price, yes, you pay a little bit more than the spot market price. But that's your insurance against a rise in the price of steel.

So the difference between markets and your roulette example is that there may be a wide variety of winning and losing prices, not just win or lose. If there is very little market volatility, you probably don't need to hedge. Hedging with derivatives protects you from big losses in a volatile market.

Good example. Also, I like the 'can't NOT play' which illustrates the need to mediate risk.

Well, it's the end of June. Things didn't go so well, but they went a heck of a lot better than I thought a couple of weeks ago. My Adsense earnings nosedived for the first half of June, but came up considerably. Looks like I'll make about 90% of what I did last month. My information product sales tanked, though. I made about 18% of May's take and less 25% of April's earnings. I have to go back to January to find sales that low. Given that information products make up the mainstay of my earnings, this is a big drop.

I'm hoping this is a summer trend. I imagine fewer people think about starting businesses when it's sunny and warm outside. And there may be more distance from winter holiday and heating bills now -- I think debt makes a lot of people think about business.

The good news is that my incoming leads for my marketing business have perked up. And a major client has offered to let me do 3 months of retainer work in advance of October -- so that I can keep the contract and not have to do any work from October to December. That's a real gift. It's not the same as passive income, but it will allow me to keep my consulting business going. I still make much more money from consulting than from the "passive" part of my business. I'm still hoping that the passive income earnings will keep going. Perhaps there's an opportunity for me to look at how I can keep consulting going, even with two little ones around.

That being said, this is just one month at the start of the summer. Things may improve. I suppose that, even if they stay static, I'll be making enough to pay several big bills. When I consider how much I earn per hour from the "passive income" side of things, it's still pretty close to what I make from consulting. Most of the other bloggers I meet seem to make closer to minimum wage. So, for input vs output, I guess I'm getting a good deal.

Once I make some headway on the retainer work I need to do in advance, I'll see about finishing up my newest information product. There are only so many hours in a day, though!

I'm guessing that people are less interested in going out on their own while they're making plans for what to do with their paid two-week vacations.

Ha ha! There's probably something to that. Of course, when they charge up the credit cards and find themselves bored at work in the fall, perhaps they'll find their ways back to me.