Are you excited by passive income? I know I am. Everyone seems to be talking about it. But there's no get rich quick scheme when it comes to earning. In this post, we're going to talk about the best types of passive income.
What Is Passive Income?
You may hear people talking about how great passive income is because they're getting paid while they sleep. Some people will try to sell you a get rich quick scheme by telling you ways to make passive income; however, the reality is, the best passive income options start off slowly and builds up over time.
Passive income, in short, is money that you earn from sources that no longer require much, if any, effort from you. An example is when you earn interest from your savings account. The money is sitting in your account and earning interest even though you aren't doing anything to it directly.
Benefits Of Passive Income
You don't need to be a personal finance guru to understand that earning extra money around the clock is a key benefit in itself. By building streams of income, you can earn $1000 per month in passive income or more.
After many years, there are people who even earn $10,000 per month in passive income! This may seem crazy, but through income-producing streams such as those discussed below, you can truly earn limitless amounts of passive income.
Once you're earning the best types of passive income, you are free to live your life the way you want. Passive income frees you from the 9 to 5 and allows you to retire early, travel, relax, and do pretty much whatever you want. Who doesn't want that? I know I do.
How To Build Passive Income
The way to build passive income is to either invest time or money (or both) into one or more things that payout down the road. An example again with a savings account is that you invest money and get paid every month in the form of interest.
You'll need multiple streams of passive income to be truly effective. That means you'll want numerous sources feeding your wallet. That way if one source is doing poorly, another source will make up for it. “Never put all your eggs in one basket,” they say.
It takes money to create money, so everything I discuss in this post will require an initial investment. If you don't have an initial investment and money's tight, consider starting a side hustle to start your passive income endeavors.
In this list below, I discuss some of the best online passive income ideas that can earn you over $1000 per month.
1. High-Yield Dividend Stocks & Funds
One thing you can do is invest in high-yield dividend stocks or index funds. Well-established companies that are quite profitable pay out dividends every quarter or month from their profits. This is free money in your pocket just for owning company stock.
Blue-chip stocks are shares of very large and well-recognized companies that have long histories of strong financial performances. These are often the best stocks to invest in because they will grow your money as the stock price goes up on top of the dividend that you're being paid periodically.
If XYZ stock is priced at $100 and pays a 4% dividend, you may receive the dividend quarterly, and therefore could get paid $1 per share every three months. The drawback of this type of passive income is that you need a lot of money to get an ample passive income stream going.
If you had $100,000 invested in a variety of high-dividend stocks, you might only receive $2,000-$4,000 per year on average from dividends, which isn't anything to scoff at, but you couldn't live off it alone.
That said, regular contributions to a high-yield dividend portfolio will snowball over time, and it's totally worth it in the end.
2. Peer-to-Peer Lending
Peer-to-Peer (P2P) lending is a relatively new way to earn passive income. It does require some money to get started with; however, you may find yourself earning 5% or more on your money each year.
If you're wondering how to start earning extra income on Lending Club, you'll need at least $1,000. This is not a small amount of money, but to make passive income, you'll generally need to invest money or time to get started. In this case, you'll need to invest money.
If you're a serious investor looking to earn passive income through Lending Club, pick up P2P Lending With Lending Club which walks you through how to use Lending Club and I share with you my exact strategy on how I earn over 8% ROI on the platform.
The best part about Lending Club is you can automatically invest money into notes based on your own criteria. As borrowers pay you back each month, you can withdraw money, or you can reinvest the payments into future notes to make even more money (preferred!).
A safe way to make money is with CDs. A certificate of deposit is a safe way to build passive income, though it's often very slow. Similar to dividend stocks, you'll need a fair share of money to get much of a return. With a CD, you won't be able to touch your money until the CD matures. You can open up CDs with banks and credit unions.
One way of getting monthly income from CDs is to use a CD-ladder technique. What you do is, at the beginning of the month, open a 12-month CD with some amount of money. Repeat this tactic for 12 months with the same amount of money each month.
When your first 12 month CD reaches its maturity date, you'll receive your money back plus interest. Reinvest the principal (and the interest if you want your money to grow further) and keep repeating this every month.
This is like getting a kickback every month for a small amount of money where you can keep the interest or grow it by reinvesting. If CDs grow too slow for you, you can do the same thing with bonds via a bond ladder, though you assume some level of risk if the bond defaults.
CDs are FDIC-insured and earn money at higher interest rates than other bank accounts.
4. YouTube How-To
It seems like everyone has a YouTube channel these days. If you go to YouTube and search for “passive income 2020”, you will undoubtedly meet dozens of YouTubers who tell you to make YouTube channels.
It takes a lot of work to get a YouTube channel going. You need good video and sound, and you'll need to produce consistent, regular, and high-quality content in a targeted niche.
That said, if you have something great to talk about and you do it regularly, you can make thousands of dollars a month (and honestly, a ton more) off your YouTube channel given time to build up an audience. That's more that just a little extra cash!
Find a niche topic that you really enjoy, such as craft or hobby, and you could make money creating how-to videos on your topic of choice.
Advertise your channel to all of your friends and followers to grow an audience. It could take months to get off the ground, but once you start getting traffic, your older videos will begin paying you passively via ads and any other sales you drive via affiliate links (see below).
5. Make A Course On Udemy
Perhaps you have a skill that you'd like to share with the world. Online course sites such as Udemy allow you to create online courses to sell to others.
Courses don't have to be technical in nature. Courses can range from programming to crocheting to soft skills. The best bet is to go there and search for other offerings for hobbies you have or things you're good at.
If you see offerings for those categories then people are interested in those topics and you could capitalize on it. The best part about selling courses is that once they're created, you'll earn passively for as long as you keep the course active.
6. Write An eBook
Writing an eBook is a great way to start earning passive income because once you've published an eBook, sales will come in with little-to-no effort from your end. There are endless topics you can write about, including fiction and non-fiction. The best place to get started selling eBooks is Amazon's Kindle store, where you can self-publish for free.
Do you have an idea for a t-shirt or mug design? Even simple sayings can make for great t-shirts. There are tons of YouTubers out there who talk about you can make money with Print-on-Demand items such as t-shirts and mugs. You can sign up for a site such as Canva and instantly begin designing some ideas.
Slogans targeting niche markets are great. Whether it be pets or vegans, or anything in between, find a market you like and start designing. You can then sign up for a t-shirt store such as Printify and the store will handle all of the work for you.
The way it works is, you direct traffic to your store, and when a person buys a t-shirt, you are charged the price it costs to make it (let's say $8) and the person pays what you're selling the t-shirt for (let's say $15).
The POD store then prints the t-shirt and ships it to your customer and you keep the difference ($15 – $8 = $7 profit). Once you've streamlined the process and have gotten steady traffic, you can literally wake up in the morning with a whole lot of money waiting for you.
Looking to start an online business? Print-on-Demand is one way to do it and you'll earn passive income doing so.
Related Post: How To Make Money With Print-on-Demand
8. Affiliate Marketing
If you've been reading this blog for some time, you'll notice many pages have links that go to external sites that ask you to sign up or buy something. If you click through to those links and sign up or buy what's being offered, I would get a commission.
This is known as affiliate marketing. Affiliate marketing pays out when a user does something (submits an email address, for example) or when a user buys into an offer. There are hundreds of affiliate networks out there where you can find offers.
Then, what you can do, is create a website, a YouTube channel, a mailing list, a social media page, blogging, or another avenue where you can promote the product.
What To Do With The Passive Income
After you begin earning passive income, you'll have a regular cash flow coming in. You can use this cash flow to pay down credit card debt, or use it for things such as fattening up your emergency fund in an online bank.
Related Post: 9 Ways How To Get Out And Stay Out Of Debt
Online banks are best for emergency funds because they provide a much higher interest rate than brick-and-mortar banks. I highly recommend CIT Bank, who I've been using for a few years for my online banking needs.
Remember, passive income doesn't have to be huge. It can take a long time to even earn $5 a day from passive income, but once the money comes in, you can use it to further grow your income streams.
Related Post: How Saving $5 A Day Can Make All The Difference
In fact, if you don't need the passive income, then reinvest it into your current streams or use it to create a new passive income stream. The more you have, the better.
Wrapping It Up
This post was a summary of different ways you can earn passive income. Coming soon, we'll drill down into each method. Passive income can be the best type of income because you earn it whether you're working or not.
If you build up enough passive income, you can retire and live your life whatever way you want. Sign up for our free newsletter to stay up-to-date with The Dollar Blogger and learn more about passive income.