Tips on How to Generate Passive Income

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As our world is changing at a whirlwind speed, the way we make an income has also become drastically different. 

It used to be that we could only earn money through a 9-to-5 job but, due to multiple recent economic downturns with unpredictable job losses, many of us have realized that multiple sources of income are necessary to become financially resilient. We have also recognized that our time is precious, and allocating more time to destressing and pursuing creative interests has made us not only more productive but also much happier. 

One very important financial health strategy is to have multiple sources of income, some of which generate passive cash flow. Out of the many creative ways out there to earn money, we highlight some of the most effective ideas for how to generate passive income.

What Are the Best Residual Income Opportunities?

1) Open a high-yield savings account

Savings accounts might seem like things of the past, but banks are finding new ways to keep their customers saving with them. One of their strategies is to offer high-yield savings accounts that have a higher annual percentage yield (APY) than traditional savings accounts. Regular savings accounts usually have an APY rate of .07%, but a high-yield savings account can boast up to .6% interest that goes straight back into your account. Most of these high APY accounts are also low-fee or fee-free.

Another kind of savings account with a higher interest rate is a certificate of deposit account (CD). The benefit of this savings account is the time constraint that each customer has to adhere to in order to avoid a financial penalty implemented by the bank. This feature of CDs can be very attractive to customers who don’t want to be tempted to withdraw their savings and therefore lose the opportunity to save as much money as possible.

2) Enroll in a retirement plan

You don’t have to plan on retiring to earn money through a retirement savings account. If you are employed by a company that offers retirement plans as one of their benefits, you can elect to participate in a retirement plan of your choice. Most employers offer plans, such as the 401(k), 403(b), or 457. These plans allow you to contribute a chosen amount of pre-tax money every month into various mutual fund portfolios differing in volatility. Your earnings will depend on how your investments perform on the stock market. Additionally, your employer may make matching dollar-for-dollar contributions of up to 3% of your annual investments into your retirement account.

You can also take advantage of retirement savings plans if you are self-employed by investing in an individual retirement account (IRA). These accounts give you more freedom to choose how you would like to invest your money. With IRA accounts, however, you may want to consult a certified financial planner you trust to help you clarify and decide on the best investment options for you.

If you would like to use your savings before you are 59 ½ years old, you can look into Roth 401(k) or Roth IRA accounts. These accounts allow you to withdraw your savings without the 10% early withdrawal penalty. However, your monthly contributions will be taxed, and there is also a limit to how much you can contribute to Roth accounts. 

3) Invest in real estate

One of the best strategies for how to make passive income is to invest in real estate. The simplest way to earn extra cash this way is to become a landlord and rent out a spare room or a whole house/apartment to other people. You can find tenants through apps such as Airbnb and Vrbo or word of mouth. If you are savvy at refurbishing homes, you can buy fixer-uppers and convert them into beautiful and well-made housing that others can rent.

Another great way to invest in real estate is to rent commercial properties to businesses. One of these kinds of investments is called single-tenant net-lease real estate (STNL) and can be very lucrative. STNL is also a low-risk investment because tenants are required to have excellent credit history and sign long-term leases.

If you prefer hands-off and relatively risk-free investments with lower start-up costs, buying and renting storage units might be just the right real estate investment for you. Since people will always need a place to store their extra belongings, and the maintenance of storage units is much less costly than for any other real estate, self-storage investing could be one of the most stable and lucrative passive income streams.

If you don’t want to deal with physical real estate, you can invest in a real estate investment trust (REIT). REITs are companies that own, manage, or finance real estate that makes a profit, and you can invest in them by buying shares in their stock. Shareholders receive dividend payments every quarter, so this kind of investment can be a valuable and steady passive income stream.

4) Self-publish your work

Are you an avid writer, musician, or artist who has created work that can be sold digitally to many people at any time? You can take advantage of self-publishing as a passive stream of income by selling your digital products through platforms such as Bandcamp, Amazon Kindle Direct Publishing, IngramSpark, iTunes, Spotify, and many others. Depending on the platform, you will receive a specific percentage of earnings with each purchase of your work. Some of these platforms help advertise your work, so there is minimal effort on your part, especially if you are already an established creative with an eager community of followers.

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5) Open a rewards-based credit card

If you are open to owning a credit card or getting a new one, it is a good idea to look for a card that will work for you every time you make a purchase. To make the best out of your credit card, look for cards that offer perks such as cashback rewards, points, airline miles, and discounts. For instance, some credit cards give you 1 to 2% cashback on each purchase you make. Other cards can help you accumulate airline miles, which you can use to buy multiple plane tickets. To find out which credit cards offer these income-boosting perks and to choose which one is right for you, you can compare different benefits on websites such as The Point Calculator and Creditcards.com.

6) Create online courses

Do you have deep knowledge and passion about a particular subject and would like to share it with others? Another wonderful approach to how to get passive income is to create an online course on your website or one of the teaching platforms such as Teachable, Thinkific, Learnworlds, and Udemy. If you choose to go with a teaching platform, you will be able to take advantage of robust infrastructures that make creating courses relatively easy. In addition, many of your students will come to you through the search function on each platform’s website. For all these perks, you will be charged a monthly or yearly fee, although some platforms will deduct a fee only after a purchase is made so you won’t have to worry about start-up costs. These fees could be well worth it since all the perks will save you time and allow you to focus on other projects.

Another way you can earn passive income with teaching is to organize webinars through which people can familiarize themselves with your services or products. You can record your webinars and use them to draw more customers to you without doing any extra advertising and marketing. This webinar strategy could bring extra followers and therefore more earnings through less effort.
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7) Invest in the stock market

Investing in the stock market may seem daunting, but it can be a great source of passive income if you invest in index funds. An index fund, such as the S&P 500, is a bundle of well-performing stocks that are sold together. An investor can choose a particular index fund to invest in rather than look for individual stocks. Since these index funds are diversified and ranked according to their risk, even a new investor can choose one that has a specific risk level, knowing that the investment is in good hands.

Another way to earn passive income through the stock market is by investing in dividend-paying stocks. Dividend stocks come from different companies that pay quarterly dividends to their investors. No matter how a company performs on the stock market, it still gives dividend payments to its investors as long as it is in business. 

For this reason, dividend stocks are some of the lowest risk investment options on the stock market. Still, it is a good idea to invest in a mutual fund containing diversified dividend stocks so that you run a lower risk of losing money.

8) Become an affiliate marketer

Affiliate marketing has become one of the most popular and effective ways to have an extra income stream. Whether you are a business owner, a YouTuber, an influencer, or just someone who admires a particular product, you can take advantage of affiliate marketing options that different businesses offer.

Affiliate marketing can be done in many different ways. For example, if you are an avid Instagram user and have a big following, you can contact companies you would like to collaborate with and ask them if you could help market their products on your Instagram profile. Different companies may contact you if they feel you are a great match as a spokesperson for their product. Many businesses also give financial rewards if you are able to bring more customers their way. Some companies reward you for redirecting people (from your blog, social media, or website) to their business website, and others will pay you for any new customer leads.

Another creative way to earn money through affiliate marketing is to drive a car or wear t-shirts with a particular company’s logo. Some companies will pay you to show up to parties and casually talk about their products. If you love meeting new people, and going to social events that doesn’t sound like work, this kind of opportunity could be a wonderful way to earn extra income.

9) Invest in vending machines

Vending machines are such a great part of our urban landscape that you can find them in schools, offices, grocery stores, airports, and even parks. But who knew that vending machines are a very lucrative investment with relatively low start-up costs? If you are new to owning a business and are risk-averse, starting from one vending machine and growing as you see demand for your products increase could help you achieve a substantial and constant stream of passive income.

No matter which products you choose to sell (this could be food and beverage items, toiletries, toys, clothes, or even home décor), the important thing is to pick products you are passionate about that fill a niche missing in the current market. Your next step would be to find the ideal location for your vending machine. For example, if your vending machine offers healthy snacks, it would make more sense to place it near a yoga studio rather than inside a mall.

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10) Invest in precious metals

In today’s volatile financial market, the way we use and store money is quickly changing. One way to offset this instability is to invest in precious metals such as gold, silver, platinum, and copper. These elements are not only beautiful but are also important in industries such as technology, fashion, and manufacturing, so they will always hold a high value. 

Especially these days, investing in precious metals while they are still relatively low in price can help you earn a large profit in the long run with little effort on your part.

11) Become an investor lender through peer-to-peer lending

Peer-to-peer lending is an alternative way for investors to invest in consumer debt. Rather than going through a bank to get a loan, consumers can get a loan through an investor lender on platforms such as Lending Club, Prosper, and Upstart. Since these are unsecured loans, the interest rates are higher than on loans through a financial institution and aren’t backed by collateral. Consequently, this kind of investment may be riskier than some others but could also be very profitable for those investors who are more risk-tolerant.

12) Use Google Adsense

Do you have a website, are you an avid blogger, or are you on social media platforms owned by Google? Then you can greatly benefit from placing Google ads on these outlets, especially if you have a large following. 

Once you sign up for Google AdSense, depending on the content you post, the Google algorithm will figure out which ads are most appropriate to present to your visitors. Essentially, you will earn money every time someone clicks on a Google ad from your website or social media site.

Woman with laptop

13) Learn how to code

In our increasingly digital world, being tech-savvy is one of the biggest money-making assets you can have. With many online coding academies such as General Assembly and Fullstack Academy popping up, learning to code is very accessible and even affordable. 

Coding can help you with building a website, creating animations, or becoming a developer of apps that can be subsequently purchased by anyone online. Once you develop a code, it can be used by another person or company many times, and you may be able to receive royalties for your work for years to come.

14) Invest through investing in mobile apps

Investing is no longer as mysterious and difficult as it once was, especially due to the rise of investing mobile apps such as Robinhood, Stash, and Acorns. These platforms make it very easy and affordable to start investing, as they are famous for having low or no commission fees. 

Robinhood, a beautifully designed investing platform geared toward younger users, doesn’t require a minimum deposit, has no commission fees, and lets you trade cryptocurrencies. It also gives you plenty of freedom to invest in the stocks you want since it doesn’t require you to choose from automated portfolio options.

Be sure to check out different investing apps on the market because they may differ substantially in the features and benefits they offer. Acorns, for example, boasts a unique passive investment setup: It has an opt-in feature that invests your spare change from every purchase you make. This change is then invested in a diversified portfolio, which is automatically updated for best performance. 

Although it is advisable to consult a financial advisor for any investment decisions, the good news is that you can invest very little money in these platforms, and some of them even offer financial advising at no extra cost.

15) Create a YouTube channel

With its millions of subscribers, YouTube has become the TV of our time and also one of the primary ways we receive information and educate ourselves about any possible subjects we can think of. If you have anything you would like to share with others in a video format, YouTube can be a great way for you to get your work out there and gain a following. 

Once you have more than 1,000 followers, you can apply for monetization of your channel, which is possible because of ads that are inserted throughout your videos.

If you would feel uncomfortable allowing YouTube to place random ads in your videos, you can still earn money from your channel through sponsorship. Companies wanting to find ways to reach their audience are always looking to advertise their products and services on YouTube channels that match their esthetics and demographics. Usually, these companies will contact you directly if they feel that you have a substantial enough audience and could be the right person to represent their business. 

You could also reach out to companies that you like and see if they would like to sponsor you. In return for their sponsorship, these companies will ask you to somehow incorporate their offerings in your videos in a way that is effective yet unobtrusive to your audience.  

16) Take advantage of crowdfunding

If you are working on a project and would like to get support from your community or the public at large, crowdfunding could be just the right passive income strategy for you. Crowdfunding involves telling your story and describing why you are asking for financial assistance so that the audience who is excited about what you do can support you. 

A great way to be found online is to post your project on platforms such as Indiegogo, GoFundMe, and Kickstarter. Although there is no guarantee that your project or cause will be a great source of passive income, this support can go a long way when combined with your other resources.

For creatives who have developed a following, some of the best platforms to receive financial support from your community are Patreon, Bandcamp, and Seed&Spark. These platforms allow you to post your creative work and receive funding through donations, purchases, or monthly subscriptions to your content. Usually, there is not much work for you to do to receive support because your audience is supporting you to continue doing your work.

17) Sell print-on-demand products

Are you an artist who wants to sell affordable prints of your art without having to print and send out your work to your customers yourself? Then print-on-demand companies may be just what you need to gain an additional stream of passive income as a creative using your existing work. 

Redbubble, Printful, and TeeSpring allow you to add your art or photography on cups, backpacks, t-shirts, postcards, bedding, accessories, and many other objects. For a fair fee, these companies print your artwork on products of your choice, package them, and send them to people who purchase them. Essentially, all you need to do is create these products, promote them the best you can, and receive any earnings right into your bank account.

18) Invest in other businesses

Do you know a small business you love that would like to support financially? Consider making an equity investment in that business and becoming a partial owner. When you make an equity investment, you are entitled to receive a percentage of the business’ profits. Although this kind of investment can be very profitable, it is also risky because there is no guarantee that the business will always do well. However, if you are reasonably risk-averse, equity investing can be a wonderful way to earn passive income and help your community grow.

Takeaway

There has never been a better time than now to find out how to generate passive income streams. As the way we interact with the world becomes increasingly digital and new programs make it possible to do difficult jobs much more easily, earning passive income will become more of a norm than a fringe strategy to make a living. Perhaps we are entering a time where our precious energy can be used for focusing on jobs we absolutely love, leaving us time to live more aligned and joyful lives.

With so many ways to generate passive income, it could be difficult to choose which investment strategy is right for you. One of the strategies we specialize in is storage-unit investment, a low-risk and start-up cost investment that can be very profitable and steady. If you’d like to learn more about storage-unit investing as a source of passive income, check out this guide on how to get started and take control over your financial health!

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August 5th to 7th 2021