Passive income is a great steady cashflow to have, but not easy to obtain. Getting there requires people who are willing to pay. When you read headlines that Amazon founder Jeff Bezos currently earns over $230,000 per second, it’s only natural to start wondering how you too can earn money when you’re not working.
Even if you don’t generate as much passive income as Bezos, an additional source of revenue could allow you to leave the daily grind of the 7-to-5 pm workday so you could pursue entrepreneurial dreams or travel the world.
But, generating passive income isn’t as simple or straightforward as some of the world’s richest people can make it seem to be. Figuring out how to generate a steady flow of cash requires a fair amount of work. Even more importantly, it requires that you dedicate your own time and investments in the right areas.
What Is Passive Income?
Passive income is considered a “set it and forget it” revenue stream in which you sell products or services and earn money without being actively involved. This type of income is ideal for small business owners with limited staff and time who need to boost online sales.
For example, you can set up a blog and consistently start creating amazing content that people would be interested in reading or sharing. You earn passive income through affiliate marketing (promoting other vendors’ products, then earn commissions).
Types of Passive Income
1. Residual Passive Income
Residual income is derived from assets you create or purchase that continue to profit with minimal upkeep after the initial work or investment. Residual income can be passive, but passive income isn’t always residual. Passive income is money earned from business enterprises with little or no ongoing effort to maintain them.
Sources of residual income include commissions, renewals, return customers, rental properties, pre-recorded online course signups, e-book sales, and stock photography royalties.
Residual income, however, is a measure of how much discretionary (nonmandatory) money is available from your income sources (earned or passive) after bills and taxes are paid.
2. Leveraged Passive Income
Leveraged income is when you do work once and get paid many times afterwards by leveraging other people’s work to create continual income for you. Here are some examples:
- A photographer takes photos and adds them to a stock photography website that markets their images while they sit back and collect royalties.
- An artist can sell in an online marketplace or ask a third party to fulfil their orders.
- A writer can sign with a publisher and let them handle sales and shipping of their books.
- A food blogger makes one recipe post, and through affiliate marketing and Pinterest traffic, earns profits that continue indefinitely.
Why Do You Need Passive Income?
Passive income is a great way to earn money without having to actively work for it. Collect passive income while you enjoy your life Instead of spending your day working for someone else. Here are some ways you can put your passive income to use:
- Fund your children’s college funds
- Set up and build your retirement fund
- Pay off your debts
- Achieve financial freedom
- Build your savings
5 Ideas for Passive Income in 2021
Does it sound too good to be true? Don’t forget we still live in the age of the internet, it’s not that difficult to earn extra money on the side. With that in mind, here are 5 ways that you can earn money while you sleep.
1. Start a blog
Perhaps the most popular way to earn a passive income is by launching your blog. It only takes a couple of minutes to set up and is cheap to start — just purchase your domain name and pay for hosting.
After that, start creating amazing content that people would be interested in reading or sharing. For example, if you’re an accountant that has helped small business owners with their taxes, then that could be your blog. I have my invoicing blog to help customers know everything there is to know about invoicing. This draws thousands of sign-ups a month.
Make sure the topics you write about are popular. Once you’ve gained a following, you can start making money from your blog by:
Earning commissions as an affiliate. This is where you push other people’s products or services on your site. Make sure these products or services are relevant to your blog. For example, that accounting blog could become an affiliate for accounting or invoicing software. Once you find an affiliate partner you’ll be given a unique code so that whenever a visitor clicks that link on your site you’ll earn your commission.
Sell advertising. If your site has the traffic to become an affiliate, then it may also be good enough for advertisers to purchase ads on your site. You may start small, like making under $20 per ad. But, you may eventually be able to charge triple digits. Again, your site must be quality.
Find sponsors. This is slightly different from just selling ads on your site. Sponsorships may be a one-off piece of sponsored content or a permanent logo embedded in your footer.
2. Become A YouTuber.
Yes, you can make passive income as a YouTuber. Instead of being paid to create videos for an hourly rate, you can create videos on a monetized channel you own and get paid allowing ads to be shown on your videos based on variables including several monetized views, viewer location, seasons, target market, and industry.
3. Develop an e-book based on your expertise
Another way of earning money while sleeping is by selling e-books or video or podcast based on your expertise. If you’re knowledgeable in a certain area, then you can start creating products, such as e-books or videos, and sell them on your blog. It may take a lot of work to create and market your products, but once all the leg work is over, you can just set back and collect the proceeds.
4. Invest in stocks
When you invest in stocks, you become a stakeholder. That entitles you to a share of their profits. Investing in stocks has been a popular way to earn a passive income for years, and thanks to the internet, it’s easier than ever to research and invest in stocks on your own.
Keep in mind that the stocks you invest in can change throughout the various stages of life. Imagine having 5-10% shares in Tesla company or Amazon or Facebook, that’s a lot of money.
5. Invest in Real Estate
One of the most popular ways to generate real estate passive income is through rental properties. You can rent out your home while on vacation or your vacation home when not in use. You can also rent out your garage, parking space, or unused office space.
If you are searching for a stable method of building financial freedom over time, then perhaps passive income real estate is just the right investment strategy for you.