Passive Income And How To Earn It
Many people imagine life after passive income as laying on a beach all day without a care in the world. It’s not. Earning passive income means creating more time to pursue fulfilling ventures. This post details 35 passive income ideas to bring you closer to financial independence. Simply put, if you want to generate multiple income streams and escape the 9-5, this post is for you.
What Is Passive Income?
Passive income is earnings derived from a rental property, limited partnership, or other enterprise in which a person is not actively involved. As with active income, passive income is usually taxable. However, it is often treated differently by the Internal Revenue Service (IRS). Portfolio income is considered passive income by some analysts, so dividends and interest would therefore be considered passive. However, the IRS does not always agree that portfolio income is passive, so it’s wise to check with a tax professional on that subject.
Passive income is when you continue to get paid after the work is done. It includes royalties from books, movies, or songs. It’s also revenue that comes from real estate investments or business investments where you don’t have to be present to earn it. Some passive income ideas take a degree of upfront work to earn, like writing an e-book, and some don’t take any effort at all, such as investing with a robo advisor. Pursuing some of your passive income ideas can also speed your path to financial freedom.
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. But as mentioned bellow there are more than two ways of passive income.
Many people think that passive income is about getting something for nothing. It has a deceiving ‘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.
The point of Passive Income is to liberate your time for more fruitful endeavors – whatever those may be.
There are many ideas for Passive income, some with the potential of earning 1000$ on a monthly basis:
- Selling information products
-One popular strategy for passive income is establishing an information product, such as an e-book, or an audio or video course, then kicking back while cash rolls in from the sale of your product. Courses can be distributed and sold through sites such as Udemy, SkillShare and Coursera.
- Rental income
Investing in rental properties is an effective way to earn passive income. But it often requires more work than people expect.
If you don’t take the time to learn how to make it a profitable venture, you could lose your investment and then some, says John H. Graves, an Accredited Investment Fiduciary (AIF) in the Los Angeles area and author of “The 7% Solution: You Can Afford a Comfortable Retirement.”
For example, if your goal is to earn $10,000 a year in rental income and the property has a monthly mortgage of $2,000 and costs another $300 a month for taxes and other expenses, you’d have to charge $3,133 in monthly rent to reach your goal.
- Affiliate marketing
With affiliate marketing, website owners, social media “influencers” or bloggers promote a third party’s product by including a link to the product on their site or social media account. Amazon might be the most well-known affiliate partner, but eBay, Awin and ShareASale are among the larger names, too.
Affiliate marketing is considered passive because, in theory, you can earn money just by adding a link to your site or social media account. In reality, you won’t earn anything if you can’t attract readers to your site to click on the link and buy something.
- Dividend stocks
Shareholders in companies with dividend-yielding stocks receive a payment at regular intervals from the company. Companies pay cash dividends on a quarterly basis out of their profits, and all you need to do is own the stock. Dividends are paid per share of stock, so the more shares you own, the higher your payout.
That said, there are ways to invest in dividend-yielding stocks without spending a huge amount of time evaluating companies. Graves advises going with exchange-traded funds, or ETFs. ETFs are investment funds that hold assets such as stocks, commodities and bonds, but they trade like stocks.
ETFs are an ideal choice for novices because they are easy to understand, highly liquid, inexpensive and have far better potential returns because of far lower costs than mutual funds.
Another key risk is that stocks or ETFs can move down significantly in short periods of time, especially during times of uncertainty, as in early 2020 when the coronavirus crisis shocked financial markets. Economic stress can also cause some companies to cut their dividends entirely, while diversified funds may feel less of a pinch.
- Rent out a room in your house
This straightforward strategy takes advantage of space that you’re probably not using anyway and turns it into a money-making opportunity. Best example: AirBnB.
- Advertise on your car
You may be able to earn some extra money by simply driving your car around town. Contact a specialized advertising agency, which will evaluate your driving habits, including where you drive and how many miles. If you’re a match with one of their advertisers, the agency will “wrap” your car with the ads at no cost to you. Agencies are looking for newer cars, and drivers should have a clean driving record.
How many streams of income should you have?
There is no “one size fits all” advice when it comes to generating income streams. How many sources of income you have should depend upon where you are financially, and what your financial goals for the future are. But having at least a few streams of passive income is a good start.
