Passive income can be a great way to help you generate extra cash flow, whether you’re running a side hustle or just trying to get a little extra dough each month, especially as the sting of high prices hits consumers hard. Passive income can help you earn more during the good times and tide you over if you suddenly become unemployed, if you voluntarily take time away from work or if inflation keeps chipping away at your purchasing power.
With passive income, you can have money coming in even as you pursue your primary job, or if you’re able to build up a solid stream of passive income, you might want to kick back a little. Either way, a passive income gives you extra security.
And if you’re worried about being able to save enough of your earnings to meet your retirement goals, building wealth through passive income is a strategy that might appeal to you, too.
Passive income ideas:
- Create a course
- Write an e-book
- Rental income
- Affiliate marketing
- Flip retail products
- Sell photography online
- Buy crowdfunded real estate
- Peer-to-peer lending
- Dividend stocks
- Create an app
- Rent out a parking space
- REITs
- A bond ladder
- Sponsored posts on social media
- Invest in a high-yield CD or savings account
- Rent out your home short-term
- Advertise on your car
- Create a blog or YouTube channel
- Rent out useful household items
- Sell designs online
- Set up an annuity
- Buy a local business
- Buy a blog
- Preferred stock
- A municipal bond closed-end fund
What is passive income?
Passive income includes regular earnings from a source other than an employer or contractor. The Internal Revenue Service (IRS) says passive income can come from two sources: rental property or a business in which one does not actively participate, such as being paid book royalties or stock dividends. While legally that’s true, in practice passive income may take other forms.
“Many people think that passive income is about getting something for nothing,” says financial coach and retired hedge fund manager Todd Tresidder. “It has a ‘get-rich-quick’ appeal… but in the end, it still involves work. You just give the work upfront.”
In practice, you may do some or all of the work upfront, but passive income often involves some additional labor along the way, too. You may have to keep your product updated or your rental property well-maintained to keep the passive dollars flowing.
But if you’re committed to the strategy, it can be a great way to generate income and you’ll create some extra financial security for yourself along the way.
Passive income is not…
- Your job. Generally, passive income is not income that comes from something you’ve been materially involved in such as the wages you earn from a job.
- A second job. Getting a second job isn’t going to qualify as a passive income stream because you’ll still need to show up and do the work to get paid. Passive income is about creating a consistent stream of income without you having to do a lot of work to get it.
- Non-income-producing assets. Investing can be a great way to generate passive income, but only if the assets you own pay dividends or interest. Non-dividend-paying stocks or assets like cryptocurrencies may be exciting, but they won’t earn you passive income.
25 passive income ideas for building wealth
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