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 instead works for earned income.
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.
Earned income, on the other hand, is money you actively earn through employment or freelancing. For example, those working a 9 to 5 job are paid with earned income. That means employees trade their time for money.
Portfolio income is money you earn through stocks or dividends. We’ll include an example of portfolio income on this list as the cash generated is made passively. However, we want to clearly state that there is a small difference between passive income and 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 reinvesting in other streams of passive income 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 in case 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 out 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 experience more life. Life’s short, do you really want to spend your whole life working for someone else anyway? Probably not. Instead, by having more time available, you can pursue your passions, spend more time 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. 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.
10 Passive Income Ideas That’ll Make You Money in 2020
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, someone 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 experiencing financial hardship and choose to sell their website to help keep them afloat. 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. With real estate, there is risk involved, as we’ve seen from the Housing Market Crash of 2008. Plus, real estate doesn’t always go up. In some cases, house prices do drop. 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. But you can also use this as a long-term way to earn passive income. When you’re ready to sell it, you might choose to invest in a bigger property with more rental units, or you might use the money from the sale as your earned passive income.
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 people who are smarter than you. Find experts who have succeeded in their area of specialty to take ownership of your marketing, administrative, or customer service tasks. By hiring the best freelancers, you ensure that your business can perform at a high standard without your help or guidance.
4. Stock Market Investing
The best time to invest in the stock market is when prices are low. Over the past few weeks, there have been a couple of crashes, so many stocks are priced lower than usual. Your money is made from the buying. The lower the stock price when you buy, the more you could potentially make. While some stocks could be traded in the short-term, many are long-term plays. 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.
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 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 products. 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 choose to design custom print on demand websites and sell them on platforms like Exchange to help you generate passive income while helping businesses that lack the graphic design skills. Remember, you’ll need to outsource most tasks to help make this a passive income stream.
6. Affiliate Marketing
One of the passive income 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. 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.
7. Online Education
Selling online education can be a great way to earn some additional passive income. You might be 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 if you want to turn it into an entirely passive income project, you may choose to outsource the work to experts who create the online education on your behalf and market it for you. You can also choose to sell your digital content 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.
8. App Owner
Owning apps is a passive income idea. You can grow it to an exponential level. Depending on who your app targets, you could create an app that reaches millions of people. Most app developers focus on various marketing strategies beyond organic search in the iOS or Android app stores. 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. By owning multiple apps, you can continue to scale the reach of your business. And you don’t even need to know how to code to create the apps in the first place. You can outsource the app development as well. Thus, making it a completely passive income stream.
9. 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.
10. 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. 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.
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 stocks, businesses, apps, or real estate.
Have you tried any of these passive income ideas? Which has worked out best for you?