Passive income can be a great way to increase your cash flow without losing a huge chunk of time. You may currently have a 9 to 5 job but find yourself daydreaming about earning enough money to pay the bills and enjoy life. Or maybe you’ve recently been laid off and are looking to find a more reliable source of income. You might be looking for some passive income ideas to help you start your journey towards financial freedom. In this article, we’ll share what is passive income, why it’s important, and our top ten passive income ideas.
What is Passive Income?
Passive income is money you earn without trading your time. In most cases, the ‘active’ work is either automated with technology or outsourced to an employee or freelancer who puts in the effort.
Passive income allows you to make money while you sleep. This statement essentially means that the money is generated at any hour of the day– even if you aren’t currently working.
What is Non Passive Income?
Non-passive or earned income is money you actively earn through employment or freelancing. For example, those working a 9 to 5 job earn non passive income. That means employees trade their time for money.
The regular paychecks are a nice perk of non passive income, but the responsibilities often leave individuals feeling burned out and hit an earnings plateau. In contrast, passive income requires less overall effort and the work you put in initially could help sustain your lifestyle for many years.
What Is Portfolio Income?
Portfolio income is money you earn through “paper investments” like stocks and bonds. It’s different from passive income in that it requires excess cash to create a recurring income stream. It’s also riskier and requires much-needed protection in case the stock market goes in reverse.
The best time to invest in the stock market is when prices are low. The lower the stock price when you buy, the more you could potentially make. You’ll want to spend a lot of time reading a company’s annual reports to know whether they’re a buy or a sell.
If you’ve never invested in stocks before, you should consider experimenting and learning with a smaller budget. Avoid taking big risks or investing your entire life savings– especially if you’ve never invested in something before. While stock market investing can lead to earned passive income, this is considered portfolio income.
Why Is Passive Income Important
1. Higher Potential for Making More Income
Executing a few passive income ideas allows you to make more income. Since you aren’t trading your time for money, you can scale your money-making efforts. For example, if you make money through dropshipping, you can always create more dropshipping websites to scale your efforts. As long as you’ve outsourced the responsibilities of managing the websites to a freelancer or employee, the possibilities for scaling are endless. You can continue pursuing other entrepreneurial opportunities to earn higher amounts of profit.
2. Additional Stream of Income
Some people choose to make passive income as they work a 9 to 5 job. You might have a side hustle to help you earn more money. Amazing! The truth is you never know when a potential layoff may happen. Thus, having a passive income stream can help protect you financially if the worst-case scenario were to happen. And with more uncertainty in the world than ever before– many are now realizing that there’s no such thing as job security in the corporate world. Those who execute on their passive income ideas experience less risk overall as they build their income streams.
3. Better Work-Life Balance
Instead of trading your time for money, 40 hours per week for 30 to 40 years, earning passive income gives you more time so you can live your life. Life’s short, and do you really want to spend it working for someone else? Probably not. By creating streams of passive income, you’ll get more time to pursue your passions, engage with friends and family, or invest in yourself.
How Much Passive Income Can You Earn?
You can earn as little or as much passive income as you want. But, let’s be clear: it isn’t easy. Earning passive income isn’t a get rich quick scheme. It takes time, effort, and some investment to generate passive cash flow. The good news is that if you nail these things early, you can sit back and reap the rewards for a long period.
How much capital do you need to get started? Most people start by making a small investment. It may start with as little as $100. To scale it, they continue to reinvest their profits until the amount of passive income grows to a substantial amount. With reinvested profits and a little bit of patience and luck, you can earn enough passive income to live off of.
13 Best Passive Income Ideas to Boost Your Income In 2021
1. Website Flipping
Website flipping is one of the most popular passive income ideas. Whether you own a blog, a dropshipping store, or an affiliate marketing website, you can then sell it to another company or person for a profit. There are many reasons someone may decide to sell their website. For example, a person may build many successful websites and choose to sell a few so that they can focus on their best-performing website instead. Others may be earning a profit and choose to sell their website to help achieve financial wellness. You can find websites to buy and sell here on Exchange. You might choose to buy a website to generate passive income or to flip for a profit later on. Or you can choose to sell a website to help you earn passive income in the short-term.
2. Real Estate Investing
If you have enough money to afford a down payment and the market is filled with active renters, you may decide to invest in real estate to earn passive income. You’ll want to partner with a real estate agent who understands the market well to help you find a good investment property in a popular area that has active renters. The renter will then pay down the mortgage. There may be an extra $100 you can pocket each month from every renter. And you can also use this as a long-term way to earn passive income. For example, when you sell the property you might use the funds to invest in a bigger real estate portfolio with more rental units, or you might consider the profit you earn from the sale as earned passive income. Don’t have enough capital to invest in a standalone property? You can look into real estate crowdfunding where several individuals pool their money together to acquire and manage real estate through a third-party platform.
Dropshipping is a great way to earn passive income. In the early stages, you might be handling some of the responsibilities yourself. However, as you automate and outsource more elements of the responsibilities of your online store, you’ll be able to turn your dropshipping business into a passive income stream. Many successful dropshippers eventually create a network of online stores that allows them to earn more money overall. To succeed at scaling a dropshipping business and network, you’ll need to hire freelancers who can manage the day-to-day operations for you. Find people who are skilled and ready to take ownership of your marketing, administrative, or customer service tasks. By hiring the best remote assistance, you ensure that your business performs at a high standard without your help or supervision.
4. Stock Images
Do you love taking candid pictures and have a vast collection of images on your hard disk? Why not turn them into a passive income stream by selling them on stock photo websites? Tons of people require high-quality photographers to use in social media, blogs, and other places – and they are ready to pay a fee for the right to use them. You can license a collection of images and sell them on stock image platforms that take care of the marketing, logistics, and payments for you. This way, you can start generating passive income with minimal effort on your part.
5. Print on Demand
Similar to dropshipping, print on demand allows you to dropship items as well. There’s only one key difference between the two: print on demand allows you to create and sell unique products (that no one else is selling). Thus, giving you the ultimate competitive advantage. You’ll need to hire a graphic designer to design your custom items. Some graphic designers may be great at designing products while struggling with the marketing aspect of this. If this is the case for you, you can use print on demand apps to create products and sell them through platforms like Shopify to help you generate passive income.. Remember, you’ll need to be creative to make this passive income idea a success.
6. Jobs Board Website
Thousands of companies will be looking to hire in 2021. If you can build a platform where they can list jobs and connect with potential candidates, it could be a consistent passive income source. Creating a jobs board website requires some programming experience, but you can always outsource this aspect of the business to a freelancer. But make sure the person you work with builds a site that makes it easy for employers to upload roles (and easy for job seekers to sift through the job listings). When it comes to money, you can charge employers a monthly fee where their job posting stays active for a full 30 days.
7. Affiliate Marketing
One of the passive income 2021 ideas that could make you a ton of money is affiliate marketing. If your marketing skills are top-notch, you might choose to help other businesses promote their brands. Most affiliate marketers have their own blog or website where they create content around branded products. You can outsource this part to a freelance writer, and hire a virtual assistant to upload the content for you. Some affiliates choose to promote ecommerce products through programs like Amazon Associates. Other affiliates partner with SaaS companies such as Shopify, where they earn commissions for helping people become entrepreneurs.
8. Online Education
Selling online education can be a great way to earn some additional passive income. You might start off by creating digital products such as ebooks, online courses, games, or videos. Depending on how hands-on you want to be, there may be some upfront work when it comes to creating digital content. But it’s possible to turn it into an entirely passive income project by outsourcing the work to experts who create and market the products on your behalf You can also choose to sell your digital items on marketplaces if you’re looking to be completely hands-off to create a truly passive income stream. However, with marketplaces, you’ll typically have less control over the promotional campaigns run, so it may be more profitable to host your digital content on your website if brand control is important to you.
9. Instagram Influencer
Did you know that you can get paid for posting on Instagram? Several businesses out there are looking for people who can come up with creative content for their products. You can outsource the content part and just manage the posting to earn passive income. The key to getting yourself noticed is to build a following that interacts and responds to everything you post. You can create a media kit highlighting your follower count, engagement rate, and samples of your post to share with potential clients. And when posting, remember to use Instagram hashtags to help your content reach a wider audience.
10. App Owner
Owning apps is another great passive income idea. You can grow it to an exponential level. Depending on who your app targets, you could create something that reaches millions of people. Most app developers focus on various marketing strategies beyond organic search in the iOS or Android app stores. If you have an idea for an app, you can hire someone to build it for you. Alternatively, you can use a free app development platform if you know how to code. You might have someone on your team work on promoting your app to the media. Another person on your team might focus on content marketing to gain more organic search traffic to your app website. And someone else might focus on promoting your app via Google and Facebook ads or grow social media followers to further their reach. Thus, making it a completely passive income stream.
11. High Yield Savings Accounts
One of the safest but potentially slowest ways to earn passive income is through a high yield savings account. In today’s age, interest rates are quite low, so finding a high yield savings account is a challenge on its own. In most cases, the savings account caps out at about 2%. And depending on how much money you have in the account, you could make some extra money. To benefit from such savings, you’ll likely want to continue pouring money into the account to benefit from the compounding of the money earned. You shouldn't, under any circumstances, withdraw money from the account. That means no withdrawing when you're short on cash or in an emergency situation. Instead, if you find money is tight, you’ll want to find other ways to generate passive income for the short-term problem. Why? This passive income idea is more of a long-term strategy instead of a short-term one.
12. Peer to Peer Lending
In times of hardship, there are always people who are looking for financial assistance. Knowing that most bad times are only temporary, you might turn to offer some financial help through peer to peer lending. This passive income idea is a classic example of money making money. You can offer a loan with interest tacked on to help you make passive income. In most cases, businesses asking for a loan have previously been rejected by banks or other lenders, which means that your money is their last hope for getting the financial assistance they need to keep their business afloat. Of course, you’ll want to do some due diligence to ensure that you’re not making a bad investment. You can find peer to peer lending websites that are looking for lenders. This is one of the best ways to make passive income because of how hands-off the process is.
13. Renting Stuff
You probably own some things that you haven’t used in a while. Instead of just letting them lay around gathering dust, consider earning some passive income by renting them out to people who’re looking for such items but don’t want to get them at full price. There’s this site called Fat Llama where you can rent almost anything. Popular items to rent are drones, cameras, and household tools. But can you trust people to take care of your stuff? Well, the site has a verification process in place where it confirms a renter’s identity before sharing their profiles with the lenders. You can choose to rent items for just a day or extend the rental to a week or month, depending on when you need the things back.
Using the passive income ideas on this list, you can help ensure that you’re building out your income streams. Even if you’re still working a 9 to 5 job, adding a couple of sources of passive income can help protect you financially in the event of a sudden job loss or medical emergency. Whether you trade stocks, flip websites, or build a dropshipping empire, there are ways to automate or outsource tasks to create a truly passive income stream. The goal of passive income isn’t to be merely self-employed. Instead, those seeking passive income should aim to become the owners of assets such as websites, online stores, or apps.
Have you tried any of these passive income ideas? Which has worked out best for you?