The concept behind passive income is simple: as opposed to actively working to earn money, you set up systems through which you earn more money with little to no effort. These income streams might require effort upfront or regular maintenance to keep them running, but, unlike earning money at a day-to-day job, you aren't directly exchanging your time and work for money. Having one or more passive income streams in place can help you bring in extra income while also serving as a financial buffer in case you lose your job or face some other hardship.
There are many ways you can start earning passive income, but here a few of the most popular options.
Though it isn't the most effective method in terms of bringing in extra income, saving your money in a high-yield account can be one easy and familiar method to get started with passive income streams. Better yet, it's one of the methods with the least potential risk, so it's great for more conservative earners. Compare APY (Annual Percentage Yield) and other factors of various banks and account options for the best results.
2. Investing in Real Estate
Real estate is a passive income stream that can be as extensive as you'd like. On the smaller end of the spectrum, you could rent out a spare room on a platform like Airbnb. If you want to go bigger, you could devote yourself to building an enterprise and invest in multiple properties to rent or flip. Either way, you'll earn money by simply owning and maintaining the property. To get the most from this method of earning passive income, be compassionate and helpful to your tenants so they stick around (and continue to pay rent to you) for the longterm.
One possible downside of real estate as a passive income generator is that it takes a fair amount of savings to get into the business to begin with. But, if you see a "diamond in the rough" and you want to secure a loan to help you break into real estate, you might want to brush up on collateral loans. Essentially, you can approach a bank or institution to ask for funds to help you make a real estate investment, and they might offer you the funds in return for a tangible or intangible asset as collateral. So, if you have another business, if you have a savings account, or if you're purchasing real estate with the loan you're securing, the bank might require you to include that asset as assurance that you won't default on the loan. If you do end up defaulting, the bank can take control of whatever asset you put up as collateral. Ultimately, it's a risky choice, but one that might make sense if you feel confident that the real estate you want to invest in is a good long-term option, and that you'll have no problem keeping up with monthly loan payments.
Another popular way to earn passive income is through investment opportunities. While this option does require you to make an initial monetary contribution, it doesn't necessarily need to be a significant one. Even small investments, maintained over time, can bring dividends your way as a passive income stream. Consider working with experts, like those at Yieldstreet, who focus on helping you build wealth passively through investing. Investment opportunities can be confusing, so having a friendly financial advisor on hand to help navigate the world of stocks, bonds, and other opportunities can help you meet your financial goals without getting lost or bogged down in the minutia. As you generate extra cash, you can choose whether to spend it elsewhere or reinvest it to grow your passive income even more.
4. Building a Website
Creating a blog or website takes time and hard work upfront but, once you've got the ball rolling, it can be one of the best passive income ideas around. Many bloggers work with companies on sponsored content, which means they're compensated for promoting a brand or product. You can also take advantage of tools like affiliate marketing and advertising to generate passive income from a website or blog.
5. Creating Digital Products
Often utilized in conjunction with a blog or website, making and selling digital products is another potential stream of passive income that doesn't require too much effort in the longterm. Create a digital product, such as an online course, printable, or ebook, and choose a platform on which to sell it—maybe even the website or blog you created to build passive income! This method has minimal startup costs and, beyond creation itself, doesn't require much work beyond driving potential customers to your product.
No matter what method (or methods) you choose, passive income streams can help you to boost your monthly income without a lot of work. Whether you're building wealth one extra deposit at a time or are working towards the goal of financial freedom, passive income can provide the additional revenue you need to get there more quickly and efficiently.