Passive Income Ideas
Generating passive income seems to be all the rage these days. Who wouldn’t want to earn some extra cash without effort?
The question is, how do you build a passive income stream that can help you meet your financial goals? We've got a few passive income ideas for 2022 that might help.
What is passive income?
Passive income is a source of money earned from something you don’t actively participate in. Rental properties, for instance, are among the most common passive income investments.
But you don’t necessarily need to invest a lot of money in a venture to start generating passive income.
How much money can I make from passive income?
The money you can make from passive income varies. Some people earn enough to reinvest in other income streams. Others only make enough money to supplement their main income and have a little extra spending cash.
The passive income you make may not seem like much at first, but you may be able to build a substantial amount of wealth over time.
Benefits of building passive income
There are many benefits to building a passive income stream, including:
More financial stability
Passive income provides extra financial stability and freedom. Depending on how much passive income you have coming in, you’ll have something to fall back on if you lose your job, are too sick to work, or have unexpected expenses.
Meet financial goals
An extra income stream can help you meet financial goals faster. These goals can be as small as having enough money to cover your utility bill each month — or as big as buying a home!
A certain level of physical freedom comes with having an adequate passive income.
Just think, if you can earn income without being physically present, you aren’t tied to one location. Passive income can change your entire lifestyle. You can travel overseas, live in an RV full-time, or homestead in a rural location.
If you’re dreaming of early retirement, having a passive income stream can help you achieve that goal. In fact, Social Security benefits and investment returns from your 401(k) can be considered passive income. So, the more you plan for retirement now, the sooner you can get there!
Ideas for passive income
If you want to know how to generate passive income, we have some passive income ideas that can help you get started:
Get a high-yield savings account
High-yield savings accounts offer higher interest rates that help grow your money faster. As such, if you’re trying to reach a financial goal or build an emergency fund, it makes sense to keep your money in one of these accounts.
The great thing about high-yield savings accounts is that interest compounds daily, which means you’re always earning a little extra when you keep money in the account. It’s also easy to find high-yield accounts with no monthly fees and low minimum deposit requirements.
Invest in dividend stocks
A dividend is a portion of corporate profits paid to shareholders. Since dividend stocks make regular cash payouts, even during a market downturn, they can be useful passive income sources.
Many dividend stock investors turn around and reinvest their payouts into more company shares. Understanding the ins and outs can be overwhelming if you’re new to investing, but a brokerage firm can help guide you through the process of getting started.
Open a retirement account
Contributing to a retirement account will ensure you enjoy passive income later in life. If you have a 401(k) through your employer, reevaluate how much pre-tax income you’re contributing each pay period. Thinking about switching jobs? Look for an employer who matches employee contributions.
If you don’t have a job that offers 401(k) benefits, consider opening an individual retirement account (IRA). IRAs allow you to invest in stocks, mutual funds, and other types of investments, but there is an annual limit on how much you can contribute.
Another option is a Roth IRA, which allows you to contribute after-tax money. You can also withdraw funds without penalty before retirement age, making the Roth IRA a smart choice for those dreaming of early retirement.
Sell stock photos
Are you a photographer? Whether you’re a professional or hobbyist, you can generate passive income online by selling stock photos.
Contributing to sites like Shutterstock means you'll earn money every time someone downloads your content, but you'll need high-quality images and videos. And the more content you upload, the more likely you’ll generate a passive income stream.
Create an app
Do you have a brilliant idea for a mobile app? Even if you’re not a programmer, you can bring that app to life by using a do-it-yourself app builder or app development service.
App development can be time-consuming and expensive, but if it's successful, you can earn a lot of money!
Create a course
If you like the idea of selling a product but don’t want to go through the trouble of developing an app, create an online course.
Ask yourself what topics you’re knowledgeable of. It can be anything — from indoor plant care to electronics repair. Research your chosen topic thoroughly to add to your own expertise, plan a course outline, and create the course content.
Once completed, you’ll need to market your course and cultivate an online learning community to generate interest. The course will practically run itself as long as you make the occasional marketing effort!
Rent out a room in your house
Rentals are a tried-and-true passive income source, but most people can’t afford to purchase investment properties. Renting out space in your home may be more realistic.
If you have an extra guest room and don’t mind living with a housemate, you could earn a few hundred extra bucks each month. An even more lucrative idea is converting a basement or entire floor into a separate apartment. You might need to take out a loan to complete home renovations, but the payoff can be well worth it.
Rent out your car
Renting out your vehicle isn’t a common solution to generating passive income, but it’s an option if you own a car that you don’t use often.
Companies like HyreCar let you rent your vehicle to Uber and other on-demand delivery services. You can even set your own rates and list your car within minutes.
Which passive income method is right for me?
With so many passive income ideas, how can you know which one will work for you?
First, consider how much time you can devote to establishing a passive income stream. If you’re too busy to create a marketable product, investing is probably the better option.
Next, ask yourself how much money you’re willing to invest. If you don’t have any cash to spare, you’ll need to get creative and produce something people will be interested in.
Passive income scams to watch out for
As with any way to make money effortlessly, passive income scams abound. Here are a few to watch out for:
How many times has an old high school acquaintance messaged you about an “exciting new career opportunity?”
Multi-level marketing (MLM) strategies are a common type of pyramid scheme. Although they promise you the ability to be your own boss, you only earn significant money for recruiting more sellers underneath you. So, you get stuck in a cycle of constantly begging friends and family to sign up as “consultants.”
Other types of pyramid schemes include chain letters, lending circles, savings clubs, sou-sous, and blessing looms. These may sound innocuous, but behind the cute names are scammers plotting to steal your money.
A Ponzi scheme is a type of fraud that takes money from investors to pay off earlier investors. Ponzi schemes can be difficult to spot, but they tend to offer high returns on your investments with little to no risk.
Avoid any type of investment that advertises a “guaranteed” return. If it sounds too good to be true, it probably is.
Anyone who tries to convince you to pay money upfront and promises even more money in return is attempting an advance-fee scam. These scammers often target investors who have lost money, offering a way to recoup their losses. The catch is they take your “refundable” deposit or advance fee and run with it.
Offshore investing scams
Saving money in an offshore account to avoid taxes may sound like a smart move, but you could end up owing back taxes, penalties, and interest. As such, don’t trust any scheme that promises riches for transferring money to an account outside the country.
Start earning passive income today
Understanding how to generate passive income is important for anyone wanting to achieve financial stability. Whichever method you choose, the right time to start your passive income idea is now.
Need help financing your passive income strategy? Advance America offers a variety of online loan options for all levels of credit. Get started today!