It’s common to hear about “making money while you sleep.” Passive income opportunities is just that. The idea of your money — or some other asset you own — making money while you do very little is an attractive prospect. Before you decide to jump into passive income, it’s important to understand what it is and realize that, most of the time, it’s not completely passive.
Understand exactly what is passive income
Realise the work involved
Passive income opportunities under your nose!
When we think of passive income, we often think of ways to receive revenue without doing active work. However, there are some things to realize before you move forward:
If you’re hoping for some passive revenue — whether it’s truly passive or through residual income — here are some ideas.
Dividend-paying assets like ETFs that offer exposure to an index (like the FTSE 100 or the S&P 500) can be a good way to start building passive income opportunities.
Dividend stocks, real estate investment trusts (REITs), and certain business partnerships also pay dividends. As you create a dividend stock portfolio, you can grow your passive income from investments.
Buy a property and rent it out. Each month you receive payments from tenants. This can cover the costs of the property, plus provide additional cash flow. This can be more active if you are acting as the landlord, or more passive if you have a management company handle the landlord duties.
Create and sell digital products, including courses, worksheets, templates, stock photos, and ebooks. This requires upfront work, so is more likely to be considered residual income. However, once you have the product ready to go, you can set up marketing automations and then wait for the money to roll in.
Again, this is more like residual income, but once you set up a website, you can potentially earn money through ads and affiliate marketing. When others buy products through your website, you earn a commission. However, setting up the website and keeping it going can require effort at first.
Running a business — being involved in the day-to-day — is not passive. However, as your business grows, you can hire others to do the heavy lifting. With the right planning and approach, the income becomes passive over time.
With the right credit card program, you could receive cash from everyday transactions. You’re going about your regular activities, but receiving cash or other rewards you can use to pay for travel or merchandise. Don’t carry a balance, though, or you destroy the value of the rewards.
If you think crypto is here to stay, you could earn money by staking. When you stake, you lock up some of your cryptocurrency coins to be used for others in transactions. In return for letting others use your crypto to promote liquidity on an exchange, you receive a portion of fees and interest. You receive this in the form of crypto, so you need to be able to sell your coins for fiat currency.
Most passive or residual revenue sources require some degree of effort to start. You might have to research investments or set up a website and market it. Here are some things you can do as you begin your journey.
Look for small ways to get started with passive revenue. Some strategies include:
Understand your risk tolerance before you begin. Determine where the passive income opportunities belongs in your portfolio. Take steps to diversify your portfolio so you are not relying on a single revenue stream. For example, if you stake cryptocurrency, make sure you limit how much of your portfolio is tied up in this volatile asset. Add dividend stocks or REITs to limit your portfolio’s exposure to risk.
Do not forget to look into what you already know. Look for opportunities to develop a business idea based on something you’re already good at. If you write a book, focus it on an area of knowledge. Review your hobbies and interests to find something you can turn into passive income.
Over time, building up wealth can lead to receiving ongoing revenue from various established income streams. This is sometimes referred to as passive income, but the reality is that almost nothing is completely passive. You might still need to do work to establish and maintain an income stream.
However, if you want to build wealth, developing different revenue streams can make sense. While it might be slow going at first, over time, you are likely to build up a portfolio of income streams that can sustain you even after you quit earning an active income.