The thought of earning money while we sleep is attractive for everyone. Passive income is money you don’t have to work for.
Let’s get to the following commonly asked questions
Don’t worry; you don’t necessarily need a massive sum of money up front to build your wealth further. We’ll take you through all the different passive income streams, whatever your financial starting position.
It’s easier to start by explaining what passive income is not. The money you get from your job is active income. You work each day to earn a salary.
On the other hand, passive income is money that doesn’t come from your job. Or, indeed, from any particular work. However, that isn’t to say there is no commitment at all. It would be nice if you could make money from nothing.
However, passive income usually requires two upfront investments: time or money. Yet, the goal is that your time or money commitment will diminish after a period, and you’ll reap the rewards.
Property investing, for example, is considered passive. You invest money and receive long term gains with minimal effort. It is an excellent way to supplement your earnings.
Whether creating a retirement plan or just wanting added cash, follow our passive income ideas to build your wealth.
There is no one size fits all solution to building a passive income. The direction you take largely depends on your starting position. How much time do you have? What are your skills? Can you afford to invest any money?
An example of passive income might include setting up an affiliate program. Through your blog, YouTube channel, or social media, you could create earned income passively by promoting third party products.
All you need is a connection to the internet and the drive to reach an audience. Yet, if that doesn’t sound of interest, we have plenty more passive business ideas to help you reach financial independence.
Important: If you’re planning for retirement, use a retirement calculator to determine how much you need to save.
Investing in real estate is perhaps the most obvious answer when thinking of passive income. It’s a long term investment and requires upfront personal finance. However, it is also the most rewarding financial investment.
Firstly, decide whether you want to invest in a commercial or residential rental property. Secondly, think about what you can afford. You don’t need to buy a four-bedroom house to earn rental income. Anything as small as a one-bedroom unit will earn you an income.
Thirdly, save up for your deposit. To get a home loan, you’ll need a deposit of 20% of the property value. Use online loan calculators to work out what you can afford.
Check out different mortgage rates and mortgage lenders to find the best deal. If you have bad credit and cannot secure a loan, consider peer to peer lending.
Your investment property earns passive income in two ways. Firstly, you’ll receive rental income that should cover your expenses (loan repayments, home insurance, etc.). However, you will also build home equity over the years. When you sell your property, you should make a profit.
Note: Either get a home equity loan by refinancing and reducing your debts or use the money to buy another property.
Buying an investment property isn’t for everyone. After all, property prices are reaching all-time highs. Securing the 20% deposit for an investment property is only possible for those with money to spare.
But, don’t worry; you can still build a passive income without any starting funds. If you’re set on creating a side hustle that might require an upfront equipment purchase, you could always take out a personal loan.
However, it is possible to generate passive income without any money. Start thinking about how you spend your money. Are there any shops you frequent? Do they offer rewards cards? It is essential to point out that this isn’t an income source, but they might offer discounts or credit.
Many ways to earn money are online. But, there are still plenty of strategies for building wealth in your local community.
As everyone becomes more concerned about the impact of vehicles on the planet, car sharing is more popular by the day. For instance, you could rent out your car. Advertise online and via local posters that your car is up for rental.
Let’s say you have a car you use five days a week. You rent your car out for $100 a day the other two days. You will have started earning $10,400 a year with this passive investment. It’s an excellent way to create income streams on an asset that would otherwise be sitting on your driveway uselessly.
Cryptocurrency is one of the most popular ways to generate an income. There are several ways to use bitcoins and altcoins to create cash flows. These include:
If you're not ready to start investing in cryptocurrency, we've many more ideas. It's easy to get started, whether you want to invest in traditional shares or create a side hustle.
One of the best ways to start building passive income is to reduce the money you owe elsewhere. You’ll free up cash that is better spent elsewhere by paying off your credit card or student loans.
To reduce your debt, consider refinancing your loans. You likely have a better credit score now than when you first applied for your home or car loan. Therefore, you might be able to receive better refinancing rates. Use a refinance calculator to reduce your monthly expenses.
Another way to reduce debt is debt consolidation. Debt consolidation means you take out a loan that will pay off all your other debts and streamline payments into one place.
Or you can make a balance transfer to reduce your debt on a high-interest credit card. For example, if you have a card at 10%, by paying it off, you’ll have an immediate 10% return on your money.
Side hustles tend to involve less of an upfront monetary commitment. However, they require an upfront time investment and effort to get started.
The internet is an excellent place to set up your side hustle. Have you considered becoming a freelancer? If you’re handy with a camera, you could try selling stock photos. There are plenty of online markets that sell stock images and stock photography for you. Or set up your online store.
There are many ways to use your online presence, from working with affiliate marketers to creating a dropshipping store. Or, you can use your online business to sell designs online. Whether this is a print on demand service or you sell digital products, use your creative skills.
Moreover, have you considered creating videos for entertainment? Or an online course? Or write an ebook? The possibilities are infinite. All you need is to purchase your domain names.
Nevertheless, have you thought outside the box if these passive online activities aren’t up your street? For example, a basic car wash requires minimum startup funds and little maintenance. How might you use your skills to create new sources of income?
Putting your money into a high yield savings account is truly a way of generating passive income sources. Look at your online bank for a savings account with high-interest rates.
Investing in a high yield savings account or money market fund is more lucrative than a regular bank or checking account. However, check for contribution limits. There is typically only a certain amount you can save.
Investing is the easiest way of creating passive income. With relatively little minimal start-up funds, you can immediately start investing in dividend stocks or on the stock market. Although there might be a learning curve and risk factor to account for, here are some investment ideas to get you thinking.
Important: Find either an online broker or sign up for investing apps. Our We Talk Cents podcast covers five finance apps you can't live without here — this is a must-listen-to, and you can check it out here.
Whether you try real estate investing, selling a stock photo, or putting your designs online, these passive income ideas will get the cash flowing. Passive income is an excellent way to start retirement planning. You can use your extra income for anything.
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Disclaimer: The author is not a financial advisor and the information provided is general in nature and was prepared for information purposes only. This article should not be considered to constitute financial advice. Accordingly, reliance should not be placed on this article as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs, or financial situation.