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According to statistics, the average millionaire has seven different sources of income. However, most millionaires do not work seven jobs. In many cases, they’ve used the passive income to speed up their wealth accumulation.
And, while it may sound appealing to lounge back on a beach somewhere and watch the money stream in, the reality is that creating a consistent flow of passive income usually involves a significant amount of effort.
If it were simple, everyone would do it, right? If you’re up for the challenge, don’t let the promise of a little hard work put you off. There are numerous legitimate ways to produce passive income that you may begin right now. And, while earning passive income is unlikely to fix all of life’s issues, it’s not a bad place to start, especially if you aspire to be a millionaire one day.
What Is Passive Income?
Passive income, commonly referred to as residual income, is money earned while not actively working. Rather than exchanging your time for money, as most people do at their 9 to 5 employment, passive income is having money flow in even when you’re not actively working.
Investing in the stock market, real estate, and even money derived from an online business endeavor are examples of passive income.
The Two Approaches to Generating Passive Income
Passive income does not appear anywhere. It is created by repurposing existing assets. And there are only two ways to create income-generating assets, no matter what they are:
#1. Invest money
If you have a lot of spare cash, you can put it straight into an investment. These forms of passive revenue streams typically necessitate little effort. Consider them a way to “put your money to work” in the background to earn returns.
#2. Invest time & effort
You’ll have to work hard to grow your passive income asset if you don’t have a lot of spare cash. There may be some monetary fees, but most of your investment will be time and effort. Long-term gains may be greater.
Passive Income Streams That Require Cash
Here are some passive income ideas to explore if you have excess money to put to work.
#1. Open a high-yield savings account
If you have a typical savings account, chances are the interest rate on your money is almost non-existent. In fact, the national average APY for savings accounts is under 0.01 percent, which is insufficient to generate any substantial income. Fortunately, internet banks have exploded onto the scene with some pretty appealing interest rates. Higher interest rates imply that you will earn more money from your savings.
Why are interest rates for internet savings accounts so much higher than for traditional brick-and-mortar banks? Overhead is a single word. Online banks can pay their customers substantially greater interest rates since they do not have physical branches (and all the expenses that come with them, such as tellers, rent, electricity, and so on).
When it comes to giving high-interest returns — in the area of 5x – 6x the national average — CIT Bank (Savings Builder) and Discover Bank (Online Savings) are leading the charge.
Previously, if someone wanted to earn a guaranteed two-plus percent return on their money, they could frequently only do it with a certificate of deposit (CD). The disadvantage of this strategy is that the money is locked up for the duration of the CD. On the other hand, highly rated savings accounts allow you to access your cash considerably more quickly if you need it.
#2. Invest in alternative asset classes
Cryptocurrency is all the rage right now, but if your risk tolerance is below the moon, investing in fine art is a practical approach to try to outrun the profits generated by the stock market during the last thirty years.
Past performance isn’t always predictive of future results, but adding another asset class to diversify your portfolio — especially one that has done as well as fine art — might be a useful method to guard against overpriced equity markets.
Masterworks, for example, provides a platform for investing in fine art without acquiring—or securing — million-dollar paintings on your own. You can invest for the long term, much like a mutual fund, and earn proceeds (dividends) when selected works of art sell.
#3. Rent out your basement, attic, or garage
Renting out space on your house as a homeowner can be a terrific method to earn (mainly) passive money. You can rent out any space you own or have the authorization to rent through Neighbor.com, including (but not limited to) your:
- RV pad
- Office space
- Empty lot
A neighbor suggests a pricing range based on previous listings in your region, but you are free to establish your prices. Users will request to book their space using the app. Before accepting the listing, you can study each candidate’s profile and message them for further information on what they wish to store.
It is the renter’s responsibility to cancel the agreement. So, if you locate someone who needs long-term storage, you can make passive revenue each month that they store with you. A Neighbor’s $1M general liability insurance policy will protect you as a host.
Neighbor assures automatic payment on its part, so even if your renter stops paying, you will still get paid.
#4. Start earning cashback
If you currently do part of your shopping online, you could be losing out on some simple passive income by not using cashback rewards.
Cashback credit cards
Cashback credit cards give a percentage — normally 1-5 percent — on existing transactions. Some cashback deals differ based on the category. For example, a card may provide 2% cashback on gas and groceries and a 1% reward on all other purchases.
Many cashback credit cards provide sign-up bonuses as well. To qualify for these programs, you’ll normally need to spend a certain amount within the first 60 to 90 days of creating your account.
However, keep in mind that these incentives are only useful if you pay off your credit card balance every month. Interest charges can quickly build up and easily cancel out any possible benefits.
If you already have a favorite cashback card and don’t want to open a new credit account, there are other ways to earn rewards on ordinary purchases.
Cashback apps or extensions
Use deal-finding browser extensions like Capital One Shopping (in addition to your cashback credit card) to find discounts anywhere on the web – anywhere from 1 to 40% off your online purchases.
They are frequently free to join and use, ensuring that you never miss out on a good deal. When you visit one of Capital One’s 30,000 partner sites, such as Amazon, Best Buy, or Target, the extension will notify you of any discounts or coupons it discovers.
#5. Invest in crowdfunded real estate
Many believe that real estate investing is the ultimate passive income type. In an ideal scenario, you would own a property that provides revenue through rents and increases in value over time, resulting in exceptional returns. The issue is that, in the past, it was often necessary to invest a large sum of money to get started.
There is now a way to invest in real estate without spending hundreds of thousands of dollars on a single property. For example, a real estate investment trust (REIT) is a pool of funds managed by experienced real estate investors.
The money in the pool is used to invest in real estate. Investors pay money into the REIT, which then buys buildings and distributes the profits to the investors.
The best aspect is that you don’t have to bother managing the landlord chores – it’s a genuinely passive income source. Most REITs still need a significant initial commitment, but with Fundrise, you can access hundreds of quality, value-producing assets for as little as $500. Overall, it’s a simple method to diversify your investments and gain access to a previously inaccessible market.
#6. Start investing with a Robo-advisor
Investing is frequently seen as a critical component of any wealth-building plan. Previously, only the wealthy could have their money managed by a financial specialist. It was simply too costly for the average person to get started.
In today’s world, technology has made investment more accessible to everyone. Rather than depending on a single person to handle your assets, Robo-advisors (a.k.a. clever computer programs) do all of the work for you – even if you are new to investing and only have a little amount of money, to begin with.
Betterment is a Robo-advisor that provides you with a customized, professionally constructed portfolio. All you need to do is tell it a little bit about yourself and your long-term investment goals, fund your account, and it will handle the rest.
#7. Buy your first investment property
Investing in rental homes is one of those risky passive income ideas, especially when locating renters. Roofstock allows you to acquire buildings with as little as 20% down currently occupied by tenants.
That is, you begin receiving payments on the first day of your investment. You don’t even have to go to the properties in person!
Roofstock, unlike Fundraise, is not a real estate investment trust, so you will be purchasing individual properties.
This is an excellent option if you reside in a region where real estate prices are too expensive to invest in or don’t want the trouble and expense of flying all over the country to look at potential homes. Furthermore, if you are new to single-family real estate investing, allowing a company like Roofstock to walk you through the process is a terrific way to get your feet wet.
#8. Invest in dividend-paying stocks
Investing in equities that pay quarterly dividends is one of the oldest and least glamorous passive income techniques, but there is much to be said about it. This is one of the finest strategies to produce passive cash flow quickly and easily.
When you buy stocks, you’re hoping to “buy low and sell high,” as the old adage goes. Dividend stocks operate similarly but with one additional benefit: you are paid a small share of the company’s earnings in the form of a dividend simply for having the stock.
You are compensated when the stock’s value rises, and dividends are paid out with these types of stocks.
Assume you purchase shares of Colgate-Palmolive. Not only will the stock price rise over time, but you will also be paid for each share of stock you possess. Colgate-Palmolive has paid between $0.34 and $0.68 per quarter for every share owned by owners over the last seven years.
#9. Peer-to-peer lending
Peer-to-peer lending, commonly known as “P2P lending,” is a relatively new method of lending and borrowing money. The concept operates by establishing a marketplace that connects people with money and others in need of money. It connects them and allows borrowers to lend money to their peers (thus the name) and get a return on their investment, exactly like a typical bank or lending organization.
Consider lending a friend $10 and having them promise to repay you $11. Your friend receives the funds he requires, and you earn a 10% return if they repay you.
Consider how this might work on a much larger scale, with thousands of people lending and borrowing money from one another. That is how peer-to-peer lending functions.
P2P lending supporters highlight its benefits and emphasize how it is democratizing the loan business. It enables individuals to obtain credit that they would not have been able to obtain otherwise while also allowing people with disposable means to earn a return on their money.
Passive Income Ideas That Require Time & Effort Investment
If you are willing to roll up your sleeves and get to work, the concepts in this part can eventually lead to a constant flow of passive income – and may even surpass your day job income. There may be some monetary fees, but most of your investment will be time and effort.
#1. Affiliate marketing with a blog
Affiliate marketing is a method of earning money by promoting other people’s (or companies) products and services and receiving a commission on each sale you make.
Assume you want to earn a commission when someone purchases a mattress online. Given that most mattress firms pay a 5% fee and that the average price of a decent quality bed sold on the Internet is around $1,000, you would make $50 for every bed sold based on your recommendation.
In theory, it appears to be an excellent idea, doesn’t it? But how do you even get started?
One of the finest places to start is with your blog. A blog is your website where you can write about anything. The most successful bloggers and affiliate marketers specialize in a single niche or theme.
Returning to the mattress example, someone who blogs about sleep (sleep habits, sleep hygiene, tips, tricks, and so on) would be an excellent affiliate for mattress firms. Asleep blogger, on the other hand, is unlikely to be successful if they were to sell basketballs on their site.
#2. Start a YouTube channel
So, while the rules for making money with a YouTube channel changed in January 2018, this remains an option. You’ll only need to make a minor adjustment to your strategy.
Previously, almost anyone could monetize a YouTube channel. This implies you’re allowing advertisers to post videos (i.e. adverts) at the beginning of your content. You receive money when you reach a particular amount of views.
Popular topics include cosmetic tips, vacation advice, unboxing videos, and anything else you can think of. Because YouTube is such a big site, there are more than enough eyes on even the most esoteric niche.
#3. Start an online advertising agency
Consider how many small enterprises exist in your city. Most of them, most of the time, are not properly using social media to attract new clients or generate more sales to their company. Most will have a regular Facebook profile, but it won’t be enough to spread the word in today’s cluttered newsfeed.
That’s where you as a Facebook Ad agency owner, can help. One of the most appealing aspects of this business model is that once a client’s advertising campaigns are up and running, there is relatively little ongoing effort required on your part.
Aside from a few minutes of checking in daily, it’s a reasonably hands-off business approach.
Learning the art and skill of Facebook advertisements is feasible even with little experience. Almost anyone can learn it in a month and land their first client.
Most Facebook ad firms, even one-man operations, would typically charge a fixed monthly retainer of $1,000 – $2,000 per customer. This is in addition to the money spent on the ads, which is paid directly to Facebook.
Your revenue can quickly rise as you bring on additional clients and establish a name in your area. At that time, you can hire an assistant to help you operate your firm as efficiently as possible.
#4. Create and sell an online course
Perhaps you have specific expertise in a subject. You can build an online course teaching everything from algebra to guitar and sell it on sites like Udemy or Teachable.
The beauty of this technique is that once you’ve completed the initial work of designing the course, you’ll continue to be compensated for each new student who enrolls. So, what platform should you go with?
Teachable and Udemy are two of many, but they’re the most popular, and they’re both simple to use. You have more flexibility over your price and the design and feel of your course with Teachable, but you don’t receive a built-in audience.
Instead, you must handle all of your own marketing. Udemy offers a built-in student base, but you don’t have as much control and it takes a larger portion of your money.
#5. Sell your photos online
Shutterstock is a great place to generate money with your photos. Shutterstock has paid out approximately $500 million to its donors since its founding in 2003. Because of its popularity and minimal entrance barriers, this site can serve as a passive income source regardless of your degree of experience.
Create an account, submit your photos, and earn money every time a consumer downloads them. The amount you receive per download is determined by the buyer who bought the photograph. If a consumer with a monthly membership downloads your picture, you’ll earn less than a customer who purchases your photo separately.
#6. Become a Graphic Designer
Graphic design is another high-paying vocation worth pursuing, with an average base salary of $51,603/year. It’s a great method for creative people to make money online.
A graphic designer’s professional path is similar to that of a web developer. After deciding on specialization, the next step is to learn the necessary skills and software. Numerous design courses are available on various eLearning sites to assist you in getting started.
A web designer, for example, will need to learn about user experience, user interface, and the fundamentals of HTML and CSS.
How to Pick the Best Passive Income Stream for You
Finally, you can choose a combination of these passive income possibilities or try them all.
The best path for you will depend on your short- and long-term goals, how much time you have, how much money you want to make, and how many hours of effort you’re prepared to put in.
Many experts recommend pursuing a career in real estate. According to investor Louis Glickman, “the best investment on earth is earth.” And, of course, there are statistics claiming that real estate is responsible for 90 percent of all millionaires.
And, while real estate is a fantastic choice, it does necessitate a hefty initial commitment. Whether or not this passive income stream suits you is determined by your present financial circumstances. You could be better off starting with an investment strategy that allows you to save money until you have enough to invest in real estate.
Some people will be more drawn to passive income ideas that they can control. Many entrepreneurs enjoy the concept of producing something, whether it’s a blog, a YouTube channel, a course, or a store. And, while it is technically not passive at first, it may be a life-changing event that offers immense wealth and joy.
Starting an internet business does not have to be difficult. Take things slowly at first. First, identify an online niche and popular products. Determine your business concept and fulfillment approach next.
After that, you can begin establishing your web business. Select an e-commerce platform, customize its look, and begin adding products to your catalog. Concentrate on increasing traffic to your online store.
Once your company is up and going, collect as much data as possible. The data should then be analyzed to better understand what works and what doesn’t. Make necessary changes to your business approach.
And don’t be concerned if you don’t know everything there is to know about e-commerce. Nobody does. We’re all learning on the job!
FAQs on What are the Best Passive Income Practices in 2023?
The truth is there are real ways to make money online – millions of people are doing it each day. From freelance digital nomads to savvy marketers to rising entrepreneurs, you can try plenty of business ideas at home using your laptop, a solid internet connection, and hard work.
There are numerous ways to generate money online, but a handful is the most rewarding. Dropshipping and print-on-demand businesses can be started with little capital. Starting a blog or becoming a writer can be longer-term investments to gain money online.
There is a way to earn money by sharing good stuff with your WhatsApp connections. When it comes to this strategy, it all boils down to employing paid URL-shortening services like Shorte. st, etc.