The idea of passive income can seem daunting for someone who only has experience with working a 9 to 5. Most of us have heard about investing, opening a high-interest savings account, rent out useful household items, or a CD as a means to make passive income.
Oftentimes these methods require long waiting periods and give only a small percentage in return, making them impractical for the working class.
Luckily, there are many other methods to generate a passive income that do not involve lengthy waiting periods or a large initial investment.
This article will explore several smart passive income ideas and give some tips on how to decide which ideas are the most suitable for your lifestyle.
Passive Versus Active Income
a. Defining Passive Income
Before jumping into the passive income business ideas, it is important to understand what passive income actually is? How it varies from active income? Passive income is typically considered to be income that comes from limited involvement or participation in business affairs.
This does not mean that there is no involvement in business affairs, as passive income often involves some effort and work to establish in the beginning, as well as maintenance along the way.
Some examples of passive income that fit this description include vending machines, online courses, and book publishing.
b. Defining Active Income
Active income is money that is actively worked for, usually by spending time rendering service in exchange for money. Commission work is a good example of active income since the income stops flowing when the project is complete. Most careers are considered active income, regardless of the industry.
There are several advantages to maintaining both passive and active income streams simultaneously, as both types of income have benefits and drawbacks. One advantage of active income is that it tends to be consistent.
Active income also usually has a lower risk associated with it since the money comes directly from an activity.
Practical Passive Income Ideas
a. Informational Content
At this point, you may be wondering how to add a passive income stream into your life while keeping your day job. Perhaps you don’t have the startup capital available to buy a vending machine or invest in real estate.
Also Read: Innovative Marketing Ideas For Local Businesses
Don’t worry; there are plenty of options to start building a passive income stream with little or no startup costs.
- Creating informational content, such as an ebook or online course, is perhaps one of the best ways to build a passive income empire on a budget.
- Unlike blogs, online courses and ebooks only need to be created once.
- There is no printing, publishing, or shipping of a physical product, and the potential client reach is unlimited.
- While an online course or ebook can start earning money as soon as it is published. It is important to maintain the relevance of the content and periodically update it when needed to ensure that your passive income stream keeps attracting new customers.
- Many platforms are popping up online, which help to advertise and promote online courses that are written by various instructors. These platforms take a percentage of the total sales in exchange for promoting the course. Once the content is created and uploaded, the profits will automatically start coming in, with no advertising or marketing needed!
b. Paperback Books
Writing and publishing a printed book is also a good way to create a passive income, although this method will require more effort upfront and possibly more cost.
The main benefits of publishing a printed book over creating an ebook is- that it is less likely to be pirated, more likely to have exposure to certain demographics, and the information likely will not need revising as often.
Writing paperback children’s books is a fantastic way to create a steady stream of passive income in a short period of time. If you try this method and find that the paperback books are selling successfully, it could be a good idea to make a series of them. Even if your base clientele remains the same, the chances are that they will want to purchase the other books in the series, increasing your revenue. This could eventually increase your social media exposure, which raises your chances of success with other passive income ideas.
c. Affiliate Programs
Another option for building smart passive income streams is to join an affiliate marketing program.
- Many businesses offer an affiliate marketing program, where you can earn a commission for each sale that is made through an affiliate link. This method is especially suitable for people who already have large social media followings.
- You could start bringing in cash simply by adding an affiliate link to your favorite product or service on your social media pages and website!
- Affiliate marketing is a truly passive way to make extra money with minimal effort by utilizing your preexisting online presence.
- Writing a blog can also be used to generate passive income, as the articles remain on the blog long after you write them.
- Many people place affiliate links within their blog posts so that they will receive a commission for any purchases made from those links, even if the blog was written years ago.
Also Read: 6 Best Passive Income Ideas Requiring an Upfront Time Investment
Other Creative Passive Income Business Ideas
Some other smart passive income ideas include crowdfunding, audiobook narration, advertising a brand, and creating an app. With the popularity of freelance platforms such as Fiverr and Upwork, finding skilled professionals in any industry is available at the tip of your fingers.
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- It is possible to build an app with the help of independent freelancers and charge a small fee for advertisers and consumers using the app.
- It is even possible to outsource the occasional maintenance and updates, making this income stream even more passive.
- Audiobooks are extremely popular. You can use this trend to create a passive income stream that will likely continue to grow for years.
If you have already created an ebook, you can narrate yourself reading the book and sell the audio version as well. There are also options to record yourself narrating other people’s books. Narrating guided meditations is another great way to create passive income.
d. Crowdfunding And Brands
Crowdfunding involves soliciting small donations from the public that go towards a specific cause. Some people use crowdfunding to sell products, such as t-shirts, only printing the shirts if a certain financial goal is reached. This can be a potential way to create a passive income; however, crowdfunding appears to be rather competitive. Another option for building passive income is to advertise a brand or logo on your car, clothes, etc.
Different companies have different ways of configuring the way you will get paid, with some brands treating this advertising as an affiliate commission while others give you a monthly incentive.
Investing is a time-tested and popular example of passive income. While there is usually some risk involved in investing, this method may be suitable for some people. Investing does not usually require much effort to get started. However, there is an upfront cost. Most investments have a timeline in which the initial amount must remain unavailable.
Cryptocurrency is becoming a popular form of investing, although the risks are higher than other more ‘traditional’ forms of investing. The volatile nature of cryptocurrency gives it great potential for creating passive income, yet simultaneously there is a large risk of loss.
f. Real Estate Investing
Real estate investing is based on the housing market and can be a wonderful way to create passive income. There are several different approaches to real estate investing, including flipping, wholesaling, and rentals. The main idea behind real estate investing is that land and houses are always worth something. If you can buy a house at a discount and repair it so that its value increases or appreciates over time, then you can sell it for more than it was purchased for and make a profit.
Wholesaling involves selling the houses as-is at a slight markup to another investor rather than repairing the house. Rentals are a great way to make passive income. However, you will be responsible for upkeep and maintenance.
There are ways to automate the majority of these processes so that the income stream becomes passive over time.
Which Passive Income Ideas Are Right For Me?
Some passive income ideas are more suitable for certain lifestyles than others. For example, someone who has a strong social media presence will likely find more success with affiliate marketing and advertising a brand than someone who rarely uses social media.
Similarly, creating an ebook or online course may not be the best option for a person who dislikes writing. Extremely busy people might prefer to build an app through outsourcing freelancers rather than put the time in to narrate books or write a blog.
For some people, investing in real estate or the stock market might be a feasible option that yields good results.
There are many different options that can be utilized to create a lasting passive income, each one with a different lifestyle focus. It is a good idea to carefully consider your personal situation and lifestyle prior to deciding on a passive income business idea.
This article covers some beginner-friendly examples of passive income ideas; however, it is by no means an exhaustive list of the opportunities that are available.
Earning passive income can be seamlessly built into your routine, working to diversify your financial portfolio while bringing additional peace of mind.
Utilizing passive income can be a powerful tool for financial freedom and lifestyle independence, especially when a multifaceted approach is taken.