Making money while you sleep, sit on a beach, ski down the slopes. That’s the promise of passive income.
It’s easy to think of passive income as money earned while sitting on a beach sipping mojitos, but there is lots of work involved. If saving enough to meet your retirement and enjoy all life has to offer, building wealth through passive income is a something you need to incorporate with all your other income producing activities.
Brianna Wiest, a Forbes magazine contributor, calls passive income an “infinite potential income stream” and makes a point of saying we NEED to have passive income streams in our lives.
“When you’re employed full-time, you’re contracted with a company to give you a certain amount of money for eight hours of labor each day at best, and an unlimited amount of time at worst.”
The problem with that, is the money is limited but so is the amount of time we have in a day. No matter what we will not be able to earn more money than the hours we have in a day to contribute to that money generating activity.
In contrast, passive income requires an upfront investment and a lot of nurturing in the beginning. But after a little time and dedication, this income builds to a point that it maintains itself. It reaches a level that brings consistent revenue with little to no effort on your part.
Some people argue that true passive income is not achievable. You have to be born lucky to acquire the dream life promised by passive income hawkers. The truth is, if you expect to invest €1.000 into a business and start making €10.000 a month without working, that will NEVER happen.
On the other hand, if you involve yourself with activities and projects that generate returns, even as low as 14%, you can leverage the powers of compounding and scaling to grow your investments over time. Eventually your investment would produce enough income to live off of, and when that happens, your time is now free to pursue much more fulfilling activities. Whether that’s activities that generate greater income or activities that enrich your experience of life, you have achieved the illusive dream so many seek.
Passive income is freedom. True financial independence. An escape from the daily grind. There are numerous ways to generate passive income. Here are 5 tried and true paths to passive income starting from smallest financial commitment to largest.
1. Providing a service
In today’s digital world, almost anyone with a connection to the Internet can provide some sort of service for pay to others. Whether you provide a service delivered digitally (SEO, web design, graphic design, etc.) or one that’s delivered physically (computer repair, plumbing, handyman, etc.). There’s a platform to put yourself out there and get side gigs coming in on a regular basis.
At first, this doesn’t sound like a passive income solution, but with just a little commitment and time. You gain reputation and reviews bringing in steady income from the services you provide. With that reputation and steady work, you now have the opportunity to outsource the extra work that comes in to other providers.
Over time you’ll build a team of experts to fulfill all the jobs coming to you. Reaching this point, your profits come in the difference between what you charge your clients and what you pay to your team to perform the jobs. Freeing your time while taking income that you don’t have to “work” for.
Here’s a short list of platforms to get started with:
- Upwork | most widely trusted platform for all digital services
- Freelancer | world’s largest marketplace of 32m. receive quotes in seconds.
- Kolabtree | a freelance platform for scientists and researchers
- takl | easiest way to find same-day help with home services.
- TaskRabbit | taskrabbit connects you to safe and reliable help in your neighborhood
2. Affiliate Marketing
Affiliate marketing is a business model with passive income written all over it. The only model of business where you can truly be your own boss.
Other businesses involve taking on clients, providing customer support or working to strict project deadlines.
But with affiliate marketing, you get paid for recommending products and services you believe in through affiliate programs. When someone buys something through your recommendation, you receive a commission from the sale of the product at no extra cost to the buyer.
If anything, affiliates can save consumers money by offering special discounts that aren’t available directly through merchants.
These are a few of the largest networks of affiliate offers you can start promoting today.
- Amazon Associates Program
- Commission Junction
A finance bot can be your personal financial guide giving you advice on anything from investing your money in properties to buying a new car. Letting an algorithm manage your investments is about as passive as you can get. And the fees are much lower than what you’d pay a human account manager. Places like Bettermint, M1 Finance, Vitae Aurum and Bloom provide interested parties with very creative low cost solutions that perform well over time.
Dividend stocks have long been a passive income asset. Shareholders in companies with dividend-yielding stocks receive a payment at regular intervals from the company. Since the income from the stocks isn’t related to any activity other than the initial financial investment, owning dividend-yielding stocks can be one of the most passive forms of making money.
If you don’t know which stocks to begin with, buying “ETFs” are great places to get started. They don’t require a large amount of capital and allow you to participate in broader financial movements in the stock market.
4. Real Estate
You can’t go too far wrong with real estate investing. It’s one of the safest places to put your money and is a “go to” investment strategy for generational wealth. Real estate has a significant place in the world of passive income but most people think of it as just renting out houses, or that it takes a lot of capital to get started.
REITS (Real Estate Investment Trusts), like Fundrise, gives individuals the opportunity to invest in commercial real estate online through an eREIT. Their crowdsourcing model allows the average investor to participate in deals for as little as $500 with lower fees than typical open market REITs.
Almost everyone looking at passive income is aware of the power of rental properties. The challenge is usually the upfront cash outlay to get involved with a property. But the Digital Age has made rental properties accessible even for the small investor. Depending on what your goals and interests are, you have options. You can be a limited partner in large residential or commercial properties, or you can buy homes and be a landlord, all you need is access to the Internet.
5. Alternative Investments
Historically alternative investments were only open to institutional investors and individuals with high net-worth. Today with peer-to-peer lending, crowdfunding, crowdsourcing and various automations, the field is open wide.
Peer-to-peer lending allows individuals to lend directly to other individuals without going through a financial institution. The rigid and time-consuming procedures of traditional banks have unknowingly paved the way for an industry that has grown tremendously in less than a decade. It’s popularly referred to as P2P lending.
The P2P lending system has made the practice of borrowing and loaning money easy. With just a click of the mouse, you can easily find loans online without going to banks in person or waiting for approvals. Low interest rates, simplified applications, and accelerated decisions have made this peer-to-peer model a huge success in the modern world. Having offered borrowers an improved financial landscape, these institutions are gaining a foothold and gathering momentum. According to a
PriceWaterhouseCoopers report, “although still in its infancy as a market, US P2P platforms issued approximately $5.5 billion in loans in 2014.”
PwC estimates that the market could reach $150 billion or higher by 2025.
Property sharing marketplaces have popped up for just about everything you can own. From renting out your extra room on Airbnb to renting your car out on Turo, property renting is fast becoming an industry in its own right. The number of people who have built a wealth of passive income from renting out they personal property is growing each year. Entire financing programs have sprung up around these systems to help budding rental entrepreneurs take flight.