If you’re like most people, you probably have only one primary source of income: your job. This can be one of the safest and most reliable ways to make money, but it can also be stressful and very limiting. Many people live paycheck to paycheck, let alone fulfilling certain dreams or goals.
That’s why it’s important to have other sources of income, especially those that are passive, meaning they don’t require involvement like a full-time job on our part.
What is passive income?
If you don’t know exactly what passive income is, it’s any type of income that comes in without you having to work for it every day. Basically, this is a source of income that does not require physical presence or constant effort on your part. It can come from investments, property or other sources that generate money automatically.
For example, if you have invested in a property and rent it out, the rent will be passive income. Or if you bought shares in a company and it generates dividends, that will be passive income for you.
The Internal Revenue Service (IRS) says that passive income can come from two sources: rental property or a business in which we don’t actively participate, such as paying book royalties or stock dividends.
“Many people think passive income is about getting something for nothing,” says entrepreneur and hedge fund manager Todd Tresidder, but those who have developed sources of passive income know that’s not quite the case…
In practice, you can do some or all of the work upfront, but passive income often involves some extra work along the way. That is, even if you will not be constantly needed to generate this income, you still need to put some effort into making decisions or creating a long-term strategy.
But passive income can be a valuable source of income and can help you build long-term financial stability or even bring you financial freedom.
Passive income vs. Active income
…or what passive income is NOT, so we will take them one by one, to make a clear distinction between the two sources of income:
Your mainjob
In general, passive income is not income that comes from something you were materially involved in, such as the salary you earn from a job.
A second job.
Getting a second job won’t qualify as a passive income stream because you’ll still have to show up to that job every day and perform services to get paid. Passive income is about creating a consistent stream of income without having to put in a lot of work to get it.
Assets that do not produce income.
Investing can be a great way to generate passive income, but only if the assets you own pay dividends or interest (the discussion here is broader because an asset like a car can turn into passive income if you rent it out to make Uber, or an apartment you own can turn into a source of passive income if you rent it out).
Stocks that don’t pay dividends or assets like cryptocurrencies can be interesting, but they won’t bring you passive income.
However, both types of income can be important to establishing a healthy financial lifestyle and achieving your long-term financial goals.
Passive income – advantages and benefits for you
There are many advantages to having a passive income. First, it can relieve you of the stress of dealing with a single source of income. Even if you have a job that offers you a steady but insufficient salary, you can be sure that you will always have money to pay your bills and meet your other financial obligations.
Second, a passive income can bring long-term financial stability. If you invest in an investment that produces you constant income, you can count on it even when you are engaged in other activities, lost your job, or you need an income in retirement.
Another advantage of passive income is that it can continue to generate money even when you are not present in that activity when you want to spend more time with your family, go on vacation, or simply rest.
For example, if you invest in a mutual fund, it will continue to generate money even if I am on vacation or have other obligations.
Another advantage of passive income is that it can have a higher growth rate than an active income. For example, if you have invested in a property and the amount of rent has increased over time, this can lead to a significant increase in your passive income.
So having a passive income you can manage your free time as you wish. If you get enough passive income, you can even retire from active work and enjoy life without worrying about money.
Sources of passive income.
To give you some clear ideas about diversifying passive income sources, we will help you by providing some examples.
Thus, you will get a clear idea of how you will set your goals to create diversified sources of passive income.
Property
Surely, when you go on vacation, you look for accommodation on Booking or AirBnB, right? Why not do the same with an apartment (other than the one you live in) that you own, a method that will bring you a constant monthly income, if you opt for its long-term rental or hotel regime.
What to pay attention to in this case:
- When you set the rent price (if you opt for long-term rental), you must do a market study to establish the real value, and if you opt for short-term rental (hotel regime), you must be aware of all existing offers on the market.
- Renting the property comes with a series of risks (damage to the apartment, possible debts accumulated with suppliers, etc.), so you must constantly check the condition of the building.
Affiliate marketing
Exploring this source of passive income, we thought within our company to create such a structure, allowing our learners to recommend the educational products of the Profit Point brand, and we reward them based on the number of new learners brought within our company. You can read more about this system implemented by us, right here.
To have a clear definition of what Affiliate Marketing entails, it is a program through which you promote a product or service provided by a third party. You earn a commission if someone buys the product as a result of your promotion.
Car rentals
Like real estate, the automotive industry allows us to explore it as a source of passive income. How? We’ll explain right away.
If you’re willing to use public transportation to get to work and don’t want your car sitting in the parking lot, you can opt for it to generate money for you all the while. Companies like Uber, Bolt or BlaBlaCar can use your car, paying you a monthly fee.
What to watch out for:
- As with renting property, you need to take into account wear and tear on the car and accidents, so it would be best to take out an insurance policy to cover any inconvenience.
Investment funds
By investing in investment funds, you can benefit from a passive income through the interest obtained from the investments made by the fund managers.
The main riskof this option is the fluctuation of the financial market, but if you carefully choose the funds to invest in and monitor them closely, you can get a good long-term profit.
Equity investments
Another idea would be to invest in stocks, which can bring income through dividends or by increasing the value of stocks. However, there are risks, such as market fluctuations and the risk of losing your investment.
Loans
Many crypto projects pay interest, and interest rates are often much higher than traditional savings accounts. Unfortunately, these higher rates come with high risk.
Usually, in a cryptocurrency loan agreement, the lender and borrower are individuals, not organizations such as banks. Many platforms that offer interest-bearing crypto accounts do so by lending you your assets and giving you a portion of the interest on the loan. The level of risk depends on who is lending you the money and what collateral they need.
Mutual funds
Investing in mutual funds can be a beneficial option for you if you are looking for a way to diversify your investment portfolio and earn passive income.
One of the advantages of investing in mutual funds is that they are managed by professionals in the field, who have the experience and knowledge to make correct and profitable financial choices for you. Thus, you can benefit from professional management of your investment without having to have very deep knowledge of financial markets.
In addition, investing in mutual funds helps you diversify your risks, because the funds contain several types of financial activities, so if one of them does not perform well, the impact on your portfolio is minimized.
The biggest advantage of this investment is that it can be financially accessible, as the minimum investment amount can be relatively small. Thus, you can start investing in mutual funds even if you do not have a large amount of money.
Cashback
Cashback is a system by which you get money back when you shop, regardless of whether you make purchases online or in stores.
This type of passive income can be an advantage for you because you don’t have to do anything special to earn money. You just have to sign up for a cash-back program and buy the products you need.
Another advantage of cashback is that you can earn extra money even when you make purchases that you already need. For example, if you need detergent and make the purchase through a cash-back program, you will receive money back for your purchase.
Although cashback may seem like an easy way to earn extra money, you must also be aware of the risks of this system. First, you need to check if the cash-back program you are signing up for is safe and reliable. You should also pay attention to the cash-back rates offered by different stores and shop at places that offer safety and a convenient percentage.
MLM business
One of the main advantages of an MLM business is that you can earn passive income without having to work very hard. For example, if you manage to build a strong team under your position, you will be able to earn a commission from their sales, even if you are not necessarily involved in every transaction.
Also, many MLM businesses offer quality products, so you don’t have to worry about promoting substandard products.
However, you must also be aware of the risks of an MLM business such as your team not working as well as you which may mean you will not get the passive income you expect.
Sources of passive income on the Internet (or online)
You don’t necessarily have to own property or assets that you can turn into passive income, if you’re a creative person, find out that there’s good money to be made in the creative industry. How can you do this? Of course, we will tell you in detail in what follows.
Creation of online courses
A popular passive income strategy is to create an audio or video course, then these materials can be distributed and sold through sites like Udemy, SkillShare, and Coursera.
Alternatively, you could consider a “freemium model” – building a following with free content and then charging for more detailed information or those who want to learn more. Free content acts as a demonstration of your experience and can attract those who want to take it to the next level.
Opportunity: A course can provide an excellent income stream as you make easy money after the initial “spend” of time.
Risk: “It takes a massive effort to create the product,” says the same Tresidder. “And to make good money from it, it has to be great. There is no place for trash in this world.”
Write an e-book
Writing an eBook can be a good opportunity to take advantage of the low cost of publishing and even take advantage of Amazon’s worldwide distribution to get your book seen and known by millions of potential buyers.
eBooks can be relatively short (30-50 pages) and relatively inexpensive to create because they are based on your own experience.
You will need to be an expert on a particular topic, but the topic could be niche and use some special skills or abilities that very few offer, but many readers would need. You can quickly design the book on an online platform and then even market test different titles and price ranges.
Opportunity: An e-book can work not only to provide good and valuable information for readers, but also as a way to drive traffic to your other offerings, including audio or video courses, other e-books, and a website.
Risk: your e-book must be very strong to build a trigger in the user’s mind so that later they follow you and consume your existing or future products. Otherwise, you’ll be putting in a lot of work upfront and getting very little return for your efforts (especially in the beginning).
Sell photos online
If you are passionate about photography, we urge you to consider this source of passive income. By partnering with platforms like Getty Images, Shutterstock or Alamy you can expose your creative portfolio there.
To get started, you’ll need to be approved by the platform and then authorize your photos to be used by anyone who downloads them. Then the platform pays you every time someone uses your photo.
Passive income from crypto
We don’t leave out the fans of the crypto universe either, and in the following, we want to give them some options by which they can generate sources of passive income from crypto.
Mine clouding
Cloud mining was developed as a way to mine cryptocurrencies by using leased cloud computing power without having to directly install or run any associated software or hardware.
People can remotely participate in cryptocurrency mining by opening an account and paying a minimal cost. Thus, cloud mining firms have made mining more accessible and profitable for a larger group of people.
Minedollars is a mobile cloud mining software that allows anyone to mine Bitcoin from the comfort of their own home. Minedollars uses advanced mining technology to allow users to mine various tokens at competitive costs. Thus, they get the highest possible return on investment from mining.
Drop shipping
Dropshipping is an easy business to start and can be extremely profitable.
One of the advantages of dropshipping is that it does not require large investments. You don’t have to buy the products in advance and store them in a commercial space, you will order them directly from the supplier only when you have an order from a customer. Thus, you will have better control over costs and profit.
You will also have greater flexibility in choosing products and suppliers. You can change products or suppliers if they do not bring you enough profit or if certain problems arise.
However, you should be aware that there are risks in dropshipping. One of them is that there is strong competition. Due to the low costs and convenience offered, dropshipping is popular among online businesses, which means you will need to stand out from the crowd in order to attract customers.
Don’t forget to choose your suppliers carefully. If you choose one that doesn’t deliver quality products or doesn’t deliver on time, it will reflect negatively on your business. So make sure you do all the necessary checks before working with a supplier.
Photo and video editing
If you love photo and video editing, then you could do it in a way that will bring you a passive income. There are several advantages and risks to consider when choosing this path.
First of all, one of the main advantages of making a passive income from photo and video editing is that you can do it from home or wherever you are, as long as you have access to the Internet and the necessary equipment.
Thus, you can organize your time as you wish and you do not have to conform to a fixed work schedule.
If you are good at what you do and provide quality services, then you can attract many clients and earn a steady and predictable income. Plus, you can do this on top of your current job or in your free time, so you can maximize your income.
However, you should also be aware of certain risks involved in making a passive income from photo and video editing. First, you need to be sure that you offer quality services and have a portfolio of work to prove it. You must also ensure that you comply with all copyright rules and laws and do not infringe any rights of others. In addition, you should also consider that the market can be very competitive and that there may be many other photo and video editors that offer similar services.
Thus, you must be prepared to promote your services and make yourself known in the market, but also to adapt to the demands and needs of your customers.
The world of passive income gives you a new perspective on how the phrase “make money work for you” applies. We just gave you a few options, but in conclusion, we want to leave you with a list of new sources of passive income that you can exploit.
Set big goals for each step you take toward financial independence.
