Passive income has been a trending topic over the last couple of years. Social media and the internet in general made it easier to grasp what is possible and also opened up many opportunities.
In this article, we’ll discuss 3 great passive income ideas you can get started with immediately. You’ll also get a brief overview of what passive income is, as well as how to pick the right idea for you.
Definition of Passive Income
In essence, passive income is defined by money flowing to you, without actively doing something for it. So if you go to work and get your salary, that’s active income. But when you invest your money and earn income from it, that would be considered passive income.
Many times also building a business with the prospect of later earning from it without actively working is considered passive income.
Benefits of generating passive income
The benefits of generating passive income are manyfold, including:
- Income not time-bound: The day only has 24 hours and if you actively work for your money, there are only so many hours you can work. With passive income, the hours in the day don’t matter, the money just comes.
- Not dependent on job: If you build up passive income, then you are less susceptible to changes in your career, breaking your bank. If you earned less because of sick days or vacation leave, it won’t affect you as much.
- Possibility to retire early: When thinking about retirement, there is likely a specific amount of money you would want to have every month. Passive income can fill in part of that money, allowing you to retire earlier because your pensions already meet the rest.
Importance of diversifying income streams
If you only have one income stream – for most this is their job – then you’re reliant on this stream not drying up. Once it stops flowing, you’re in big trouble, as there’s no more income and you need to live off your reserves (hopefully you have an emergency fund).
That’s why it’s important to diversify your income streams. The compilation of different income streams could look something like the following:
- Your main job
- A side hustle
- Income from investing
- Pension
3 Great Passive Income Ideas
1. Passive Income Investing
Investing is probably the most well-known way to create a passive income. You earned money through your job and now put it to work for you. There’s a plethora of options to invest your money and make it grow, all depending on your ability to take risk and current capital.
Types of passive income investments
Some prominent investment ideas to create a passive income are:
- Dividend stocks: Dividend stocks distribute a set amount of dividends yearly or sometimes quarterly. That means that every year, a certain amount of money will flow into your bank account, just by holding stocks of that company.
- Rental properties: If you have a bit more money, you could buy a property to rent it out. This gives you more flexibility, as you can choose the price point, location etc. or if you want to rent it out long-term or shorter-term.
- P2P lending: Another way to achieve passive income is through investing into P2P loans. On Lendermarket P2P loans have an average annual return of over 15% and every month the due amount + interest gets deposited into your account. P2P lending is fixed income investing, so you always know what you will get.
Of course, investing always carries a certain risk with it. Stock prices can sink or dividend payouts halted, you could have bad tenants in your rental property and also P2P loans can default. This is why it is important to diversify your investment portfolio.
Worth mentioning that loans on Lendermarket come with a buyback guarantee. Buyback guarantee helps to reduce risk, we recommend reading more about buyback guarantee and extentions here.
2. Affiliate Marketing
Affiliate Marketing means getting paid by recommending products. You’ve likely seen it before on Social Media, when an influencer recommends beauty products, clothes, brokerage accounts or travels – when you click on their link, they earn a percentage of the price it was sold for.
How to make money from affiliate marketing?
To make money with affiliate marketing, you need an audience. How you build that is up to you, but usually, it involves a website and/or one of the social media channels.
- If you’re drawn to video: YouTube, TikTok, Instagram
- If you’re better with pictures: Instagram, Pinterest
- If you’re a good writer: Twitter, Website, Newsletter
Once you’ve found a channel where you want to build your audience, you create valuable content for them. You can then recommend products you have used in the past, create in-depth reviews about software you tried out or even share your investment experience – all while using an affiliate link to guide the user to the product.
Finding suitable affiliate programs
To find affiliate products you could advertise for, first ask yourself, what do you know a lot about or are passionate about? Do you perhaps already have an audience or want to learn more about a specific topic?
Once that is done, you can sign up directly with the affiliate program of the company (many have their own) or use an affiliate network like Awin to get access to a bigger pool of possible companies to work with.
3. Creating and Selling Online Courses
Creating and selling online courses is similar to affiliate marketing in that you need an audience, however instead of marketing someone else’s product, you’re advertising your own course.
How to know what to make the course about?
What topic to pick for the course creation again comes down to your skills and willingness to learn. Where do you know more about others and could help them with your expertise? What is something you want to learn and can document your journey as support for others?
Some ideas to get your creative juices flowing:
- Excel, Google Sheets, Photoshop
- Social Media courses (How to leverage Instagram, Facebook, Twitter etc.)
- Online cooking courses
- Drawing, Painting, Sculpting
- Financial Education
- Web development, Coding
Where to sell your online course?
Of course, to drive traffic to your courses, you have different options. Just refer to the above section on Affiliate Marketing. One stellar example is Kat (Chief Excel Officer) from TikTok, who made 2 million USD in 2022 with her courses!
When it then comes to selling, you have different options. You can list it on course platforms like Udemy or Skillshare, where you pay part of your revenue to the platform, in turn for a better user experience and potentially getting new customers.
There is also software to build your own courses like Thinkific or Teachable. There you create your own course site, where it’s not mixed with thousands of other courses. You pay a monthly fee and keep all the profits.
Lastly, you could also host the courses on your own website and sell them as a package. This requires a bit more finesse to make the user experience good and the website pretty, but if you would rather not spend money every month on a platform, it can work too!
Conclusion
As you see, there are many ways to create a passive income. Many of them come down to monetizing your knowledge, but eventually you will likely have to invest one of two things to create a passive income: time or money.
If you want to invest your time in something, you can try creating courses, building a brand for affiliate marketing and much more.
Passive income investing on the other side can be great if you have already built some cash stack. Put that money to work for you by utilizing dividend stocks, real estate or P2P lending to create an additional cash flow that makes you less dependent on your job.