What is passive income and why is it so important? Before we even get into this article, let me start off by quickly explaining passive income. Passive income is money that you make without really having work at it anymore. If anything, passive income streams just need to be maintained so that you can continue to reap the financial benefits as time goes on. Sounds great, right? So why doesn’t everyone do it?
Well the problem with setting up a passive income stream is that it usually isn’t easy or cheap to get started. It takes hard work, large investments, or a combination of both that a lot of people don’t have the time or money for. This is why the wage gap between the wealthy and the poor continues to grow. The wealthy have the time and money to spend creating passive income streams while the poor work at an hourly rate that takes up all their time and leaves them with little extra money to work with. So how do you get started building a passive income that will allow you to make more money and have more free time later on in life?
There are a couple ways to do it that we will cover, but the first thing you need to do is decide how much money you are willing to spend and how much time you are willing to put in upfront. By realistically assessing the upfront costs as well as the time you are willing to donate towards achieving your financial goals, you will be able to quickly find which passive income stream ideas are the best fit for your specific lifestyle.
Option 1: Dividends And Capital Gains
Low Upfront Cost – Low Involvement
The reason I am listing this first is because this is probably the easiest and least time-consuming way to start earning passive income immediately. Anybody can participate in it, and it basically takes the same amount of effort as it would for you to go online and transfer your money into a savings account. If your looking to earn passive income the easy way, start putting some money aside every month and investing it into an ETF that pays out dividends. You can easily do this for free by using a brokerage like Robinhood, and you will get a quarterly payment per share for the number of shares of the ETF you hold. Your investment will also grow in value which means down the road you can sell off shares as an additional form of passive income. If you are new to investing, check out our article that explains how simple it can be to benefit from investing.
The benefit to this passive income idea is that it takes very little time to set it up and you don’t need a ton of money upfront to get it started. You can start investing with $25 if you want and keep adding to it as time goes on. If you feel like you won’t have enough free time or motivation to build a passive income stream from scratch, use this method and let the stock market do the work for you. As long as you are dedicated to saving some extra money each month, after a long enough time, you will start to see a good amount of extra income coming your way while doing absolutely nothing for it.
Option 2: Affiliate Marketing
Low Upfront Cost – High Involvement
The second option you have if you are looking to build a passive income stream is to start your own online business. This can be one of the most financially rewarding passive income options down the road seeing as there is no limit for what you can earn online as well as very few overhead costs to keep your business running. Without getting into too much detail, affiliate marketing is simply a way to monetize your website. The more people who use your website, the more money you can pull in through advertisements and links. Starting your own website is extremely easy to do nowadays and can be done by anybody regardless of how good you are with technology.
This is a fantastic option for people who don’t have money to invest upfront but are motivated and willing to put in the time and effort to be successful. The issue with affiliate marketing is that it can take a long time to build a website that gets traffic to it. A lot of people will lose motivation or patience when attempting to start a website business and will end up quitting before they are able to establish a passive income stream from it. If you think you have the work ethic to start your own website business, check out our article on how to become an online entrepreneur and learn how to get your own website up and running for free. If you are looking for a passive income stream that is less time-consuming to achieve, you are most likely going to need some money upfront to invest with. That being said, there are some good options available for those with the money to spare.
Option 3: Rental Properties
High Upfront Cost – Low Involvement
If you have some money upfront that you can invest, rental properties are a great way to build a passive income stream. It requires less work than building your own website business, and can be more lucrative than dividend payments. If you are able to buy real estate in a location where people are looking to rent, you can earn a substantial income every single month from rent payments. Similar to the dividend and capital gains option, aside from the regular payments you are receiving your property historically increases in value. This means that down the road you will most likely be able to sell your property for more than your initial investment.
Rental properties are a great idea if you have the capital to buy a property and will generally not require too much free time to manage. In fact, if you really want your rental property to be a hands-off investment you can hire a property management company to handle your property for you. They will usually take a small fee off the top of the rent payments, but you won’t have to worry about the day-to-day responsibilities of managing the property. However you choose to manage them, rental properties are a great way to earn passive income without spending a lot of time and energy to get started.
Time To Decide!
Now that you know some of your options, it is time to decide which option is best for you. What level of involvement works best for you and how much money are you willing to fork out upfront? Your own website business has the potential to payout substantially more than the other options, but are you willing to put in the hard work upfront without seeing the rewards right away? Everyone is different, and finding the right fit for your specific situation is a very important piece in becoming financially successful.
Obviously this is not a complete list of ways to earn a passive income, but these are some of the most reasonable options for everyday people to benefit from. You don’t have to be a millionaire or a genius for any of these options, but each option will certainly put you in a better financial position in your future. If you want to retire early without having to stress about money, passive income is a necessity, and we encourage everyone who shares our vision of financial freedom to start building their future income today.