By Maddie Panzer ,Farran Powell, Alana Rudder
Original Article by USA Today is HERE
Key points
- Passive income Ideas can provide a steady stream of earnings with minimal involvement.
- Passive income can be an effective way to diversify and build wealth.
- Most passive income streams require some type of initial investment.
As the world evolves, so do the opportunities to generate passive income, especially in the digital era.
In this uncertain economic environment, diversifying your income streams is not just a wealth-building strategy. It can be a survival tactic.
Passive income provides an additional earnings source and acts as a financial safety net, making it a cornerstone of financial stability. From cushioning against job loss to funding life’s luxuries, the benefits of passive income extend far beyond having an extra paycheck.
With an initial investment — be it time or money — anyone can start generating passive income. The key is choosing the right passive income ideas that align with your interests, skills and financial goals.
Setting up a passive income stream may require effort initially. But once underway, passive income pays out automatically.
Best passive income ideas for 2023
Bonds and bond funds.
High-yield savings account.
Dividend stocks.
Rental properties.
Real estate investment trusts (REITs).
Other passive income ideas
Peer-to-peer lending.
Ad space.
Content creation.
What is passive income?
Passive income can be generated with little to no active involvement. Unlike active income, which includes salaries or wages, passive income streams require an initial effort or investment, followed by minimal ongoing work.
The allure of passive income lies in its potential to generate continuous earnings without trading time for money, a concept usually associated with traditional employment.
How to get passive income
Creating passive income streams takes time, money or both. For instance, you could invest money into income-generating assets like dividend-paying stocks, rental properties or peer-to-peer lending platforms.
On the other hand, investing time might involve creating a blog, writing a book or developing an online course, all of which can yield income long after the work has been done.
“Creating an online product one time that you can sell for life, such as an e-book, a notebook or a course, and then selling it on your own platform or Amazon are popular and relatively easy ways to generate passive income,” said Jacqueline Schadeck, a certified financial planner professional.
Generating passive income often follows a sequence of steps. First comes the idea — identifying a potential income source aligned with your skills, interests and financial goals. Next is the investment phase, where you put in the upfront effort or capital required to kick-start the income stream.
This is followed by the development phase, which may involve building a website, buying and refurbishing a property, or writing a book.
Finally, there’s the maintenance phase, where you manage your income stream with minimal effort, allowing you to earn while focusing on other ventures or enjoying your spare time.
While passive income streams can be rewarding, they are not without risk. It’s crucial to research, understand and carefully manage that risk when investing in any passive income ventures.
This might involve diversifying your investments, regularly monitoring your income streams or seeking professional advice. Remember, the goal of creating passive income is to increase your earnings and achieve a sustainable and balanced financial lifestyle.
5 passive income ideas
By exploring these options, you’ll be better equipped to venture into the world of passive income, bringing you one step closer to achieving financial freedom.
Bonds and bond funds
Bonds and bond funds can be a reliable source of passive income. When you purchase a bond, you are lending money to an issuing entity, such as a government or corporation.
In return, you receive periodic interest payments throughout the bond’s life. Bond funds simplify the process by investing in a diverse range of bonds, providing regular income and spreading the risk.
High-yield savings accounts
While not an investment in and of itself, a high-yield savings account is an effortless way to earn passive income.
These accounts offer higher interest rates than standard savings accounts, allowing your money to grow over time. It’s a safe, low-risk option for those starting their passive income journey.
“Although it may be an easy way to earn passive income, at the moment, it’s not yielding enough to make an income for most people, and that’s why they will turn to dividend stocks as a next step with the potential to earn more money,” Schadeck said.
Dividend stocks
Investing in dividend stocks is a popular passive income strategy.
Companies distribute dividends to their shareholders as a portion of their profits. Once you invest in a dividend-paying stock, you can earn a steady stream of income based on the company’s profitability and dividend policy.
“(This is a) popular way to earn passive income because you get income in the form of dividends and, in addition, you can earn capital gains if the stocks appreciate,” said Deva Panambur, a certified financial advisor and planner at Sarsi.
Dividend stocks tend to be popular among investors because little effort is required.
“When an investor determines they’d like to invest in dividend-paying stocks, they only need to establish the account and then transfer money into it, and then they can purchase the stocks they’d like to invest in,” Schadeck said.
You can reinvest the dividends to buy more shares and increase your income over time.
Rental properties
Investing in rental properties can generate significant passive income but requires a substantial upfront investment. Once you own a rental property, you can earn a regular rental income minus expenses like mortgage payments, property taxes and maintenance costs.
Being a landlord isn’t entirely passive. It may require dealing with property management and tenant issues, but hiring a property management company can help reduce the workload.
Real estate investment trusts
If you’re interested in real estate but prefer a more hands-off approach, consider investing in real estate investment trusts. REITs are companies that own and often operate income-producing real estate.
As an investor, you can buy shares of a REIT and earn a share of the income produced, just like dividend stocks.
“One of the biggest benefits of real estate are the tax advantages,” said Marc Alan Lescarret, owner and founder of Marc Alan Wealth Management.