Passive income can be a great way to help you generate extra cash flow, whether you’re running a side hustle or just trying to get a little extra dough each month. Especially as the sting of high prices hits consumers hard, passive income can help you earn more during the good times and tide you over if you suddenly become unemployed. It can also help if you voluntarily take time away from work or if inflation keeps chipping away at your purchasing power.
With passive income, you can have money coming in even as you pursue your primary job. If you’re able to build up a solid stream of passive income, you might want to kick back a little. Either way, passive income gives you extra security. And if you’re worried about being able to save enough of your earnings to meet your retirement goals, building wealth through passive income is a strategy that might appeal to you, too.
What is Passive Income?
Passive income includes regular earnings from a source other than an employer or contractor. The Internal Revenue Service (IRS) says passive income can come from two sources: rental property or a business in which one does not actively participate, such as being paid book royalties or stock dividends. While legally that’s true, in practice passive income may take other forms.
“Many people think that passive income is about getting something for nothing,” says financial coach and retired hedge fund manager Todd Tresidder. “It has a ‘get-rich-quick’ appeal… but in the end, it still involves work. You just give the work upfront.”
In practice, you may do some or all of the work upfront, but passive income often involves some additional labor along the way, too. You may have to keep your product updated or your rental property well-maintained in order to keep the passive dollars flowing.
But if you’re committed to the strategy, it can be a great way to generate income and you’ll create some extra financial security for yourself along the way.
Passive Income is Not…
- Your job. Generally, passive income is not income that comes from something you’ve been materially involved in such as the wages you earn from a job.
- A second job. Getting a second job isn’t going to qualify as a passive income stream because you’ll still need to show up and do the work to get paid. Passive income is about creating a consistent stream of income without you having to do a lot of work to get it.
- Non-income-producing assets. Investing can be a great way to generate passive income, but only if the assets you own pay dividends or interest. Non-dividend-paying stocks or assets like cryptocurrencies may be exciting, but they won’t earn you passive income.
25 Passive Income Ideas for Building Wealth
If you’re thinking about creating a passive income stream, check out these strategies and learn what it takes to succeed:
1. Create A Course
Do you have expertise in a certain area? Create an online course and sell it on platforms like Udemy or Teachable. Once the course is up, it can generate income with little ongoing effort.
2. Write An E-book
Love writing? Pen down an e-book on a topic you’re passionate about and sell it on Amazon Kindle or other e-book platforms. This can be a great way to generate passive income.
3. Rental Income
If you own property, renting it out can be a steady source of passive income. This can be a house, apartment, or even a room in your home.
4. Affiliate Marketing
Promote products or services of other companies and earn a commission for every sale made through your referral link. You can use platforms like Amazon Associates to get started.
5. Flip Retail Products
Buy products at a low price and sell them at a higher price. Platforms like eBay or Amazon can help you get started with flipping retail products.
6. Sell Photography Online
If you’re good at photography, sell your photos on stock photo websites like Shutterstock or Adobe Stock. Each download will earn you a commission.
7. Buy Crowdfunded Real Estate
Invest in real estate projects through crowdfunding platforms like Fundrise. This allows you to earn rental income and property appreciation without owning a property yourself.
8. Peer-to-peer Lending
Use platforms like LendingClub to lend money to individuals or small businesses. You’ll earn interest on the amount you lend.
9. Dividend Stocks
Invest in stocks that pay dividends. This can provide a steady stream of income as long as the company continues to pay dividends.
10. Create An App
If you have programming skills, create a mobile app and monetize it through ads or in-app purchases. Once developed, it can generate income with minimal ongoing effort.
11. Rent Out A Parking Space
If you have a parking space that you’re not using, rent it out. This is especially lucrative in areas with limited parking.
12. Reits
Invest in Real Estate Investment Trusts (REITs). These are companies that own and operate income-generating real estate. You can earn dividends from your investment.
13. A Bond Ladder
Invest in a series of bonds with different maturity dates. This provides a steady stream of income as the bonds mature.
14. Sponsored Posts On Social Media
If you have a large following on social media, companies may pay you to post about their products or services. This can be a simple way to earn passive income.
15. Invest In A High-yield Cd Or Savings Account
Put your money in a high-yield Certificate of Deposit (CD) or savings account. This can generate interest income with little risk.
16. Rent Out Your Home Short-term
Use platforms like Airbnb to rent out your home or a room in your home for short-term stays. This can be a lucrative way to generate passive income.
17. Advertise On Your Car
Wrap your car in advertisements and get paid for driving around. Companies like Wrapify offer this service.
18. Create A Blog Or Youtube Channel
Share your knowledge or interests through a blog or YouTube channel. Monetize it through ads, sponsorships, or affiliate marketing.
19. Rent Out Useful Household Items
If you have tools, equipment, or other useful items, rent them out. Platforms like Fat Llama can help you get started.
20. Sell Designs Online
If you’re good at graphic design, sell your designs on platforms like Redbubble or Teespring. Each sale will earn you a commission.
21. Set Up An Annuity
Purchase an annuity from an insurance company. This will provide you with a steady stream of income for a specified period or for life.
22. Buy A Local Business
Invest in a local business and earn a share of the profits. This can be a great way to generate passive income if the business is successful.
23. Buy A Blog
Purchase an existing blog that already generates income. You can continue to earn from it while making improvements to increase its profitability.
24. Preferred Stock
Invest in preferred stock, which pays fixed dividends. This can provide a steady stream of income.
25. A Municipal Bond Closed-end Fund
Invest in a municipal bond closed-end fund. These funds invest in municipal bonds and pay interest to investors.
Frequently Asked Questions
What Is Passive Income?
Passive income is earnings from a source other than an employer or contractor. Examples include rental income and dividends.
How Can I Generate Passive Income?
You can generate passive income through rental properties, dividend stocks, creating digital products, or investing in REITs.
What Are Some Passive Income Ideas?
Some ideas include writing an e-book, affiliate marketing, selling photography online, and creating a YouTube channel.
Is Rental Income Considered Passive?
Yes, rental income is a common form of passive income.
Conclusion
Generating passive income can provide you with financial security and peace of mind. By exploring these ways to generate passive income, you can create a steady stream of income that complements your primary job or even replaces it over time. Whether you choose to create a course, invest in real estate, or rent out your home, the key is to find a strategy that works for you and stick with it.
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