Have you ever dreamed of making money without having to work for it? That sounds great! But how can you make that happen?
Passive income is a term used in business or investment circles to describe an incoming source of revenue that requires little maintenance once it starts producing income. In other words, passive income is when the “passive” part of your family or home is earning an income while you do nothing but enjoy the benefits. Here are three ways to get started with passive income.
What is passive income?
Passive income is money you make without really doing anything. It's sometimes called residual income because it usually keeps coming in, as long as the initial work continues.
Passive income can come from many sources, such as interest, dividends or royalties from intellectual property. It can also come from rental properties and other investments, including stocks, bonds and mutual funds.
Why invest in passive income?
Passive income investments can be an excellent way to diversify your assets and create a financial safety net for yourself, your children, or any dependents. If you’re already working a full-time job, passive income will help you diversify your portfolio and reduce the risk of losing all of your money if you become unemployed.
Just think about it this way: what would happen if you lost your job? You’d have no income coming in from that source, and that could put a major strain on your finances. With passive income, you can rely on those funds coming in even if you’re not actively working because they’re being created without any effort on your part.
3 ways to get started with passive income
- Invest in real estate: one way to get passive income is by investing in real estate. For example, if you purchase a home for $100,000 and rent it out for $1,000 per month, your monthly profit would be around $500 a month.
- Buy dividend-paying stocks. When you are a shareholder, you are entitled to a share of the profit generated by the corporation. In my wealth-management career, I've seen annual salaries be replaced by dividends, alternatively I've also had entire family vacations paid by dividends.
- Start an online business: my final suggestion is to start an online business. With the right tools and resources, this can be a very profitable endeavor. You’ll have to put up some initial minor capital like your website and lots of sweat equity in order to see any returns. For millennials, this is a no brainer, everyone should be trying to sell their work and/or knowledge online, platforms like Gumroad or Thinkific make this easy peasy lemon squeezy.