What is Passive Income?
Passive income is money earned with minimal activity through any venture that requires little daily effort or upkeep on the individual’s part.
Let’s break that down a bit more:
Passive — requiring little or none of your most precious resource, your time!
Income — generating cash inflow to you that either represents income you use in the course of daily life or that you re-invest.
A good litmus test is that you should be able to go out and get a full-time job, that takes up the majority of your working hours, and still be able to run your passive income streams.
The golden rule of passive income – protect your time.
Passive income is more about time than anything else. You could do a lot of things to make money, but not all income streams are passive. I’m all for you actively building a business or a side hustle, but for the income stream to truly be passive, it must require less and less effort to produce income, eventually requiring no effort (or very little to maintain).
For example, if it takes you 2 hours to generate $100 today, and it takes you the same 2 hours to generate $100 next week or a year from now, that income stream is not passive, because it takes the same effort (money, time, etc).
On the other hand, if I open an investing account today that takes some effort. But as that account grows and I check it 4 times a year, my returns go up, and my effort goes down.
Same if I build an online course. At first, I’m earning no money and my effort is very high. But I expend a ton of effort at first. Once the course is complete, I do some continued marketing and client support which amounts to just a few hours per week, while sales roll in month after month.
How to Start Building Passive Income
There’s no magic trick that turns your time directly into money. Instead, you plant seeds so your money will grow, even when you’re sleeping or at the park walking your dog.
The initial downtime you put into passive income can be as involved as starting a blog or as simple as logging into a robo-advisor platform and investing $100. You can earn passive income whether you’re an entrepreneur with a brilliant business plan, a talented artist, or just happen to have extra cash to invest.
1. Start building a nest egg
Remember earlier I said to create passive income you need time, money or skills? Let’s start with money. Open a high interest savings account and park even $100 dollars in it. Boom, you just made passive income! It may not be much, but you’ll earn interest on that money and many online banks even offer cash bonuses for opening accounts. Our favorite right now is CIT bank.Get up to $300 from CIT with code “Spring20”
2. Assess your skills
When I started Goodfinancialcents.com I was a Certified Financial Planner looking to grow my business and answer common client questions. I figured out that I could use these skills to create great content online, and that I could make money with this blog over time.
I have friends who were stock traders and now have communities around that skill or write for financial publications. Other friends have gotten good at management, and now are building career websites.
What are you good at? What are you passionate about? Take a quick inventory, and research the ways others have used those skills to build income streams.
3. Assess your time, money and effort. Be realistic about your commitments
Time is a tricky one, because it’s our most limited resource. Trying to make more money or create passive income can be a trap because it usually requires you to learn new topics or new skills, and that can be a time suck. Remember, you may have to bite the bullet in the short term, but in the long term your goal is to minimize your time investment.
Are you fully committed? Current work, family and social activities eat up a lot of time. If you don’t have much time, you’ll need to lean more towards investing or getting someone else to do the work for you.
In this guide, we’ve labeled each idea with an effort level (1-5, 5 requires the most effort) to help you match your current abilities to the idea.
4. Ideate and choose
The final step is to put some ideas down on paper and choose how to begin. We created the following list to help you kick off your brainstorm. To help with that, we’ve created this list of ideas to get you started. Here’s to your wealth and freedom!
28 Passive Income Ideas
Generate Passive Income With Money Investment (Effort Level: 1-2)
1. Invest In Real Estate From Your Couch
2. Peer to Peer Lending
3. High Yield Savings
4. Passively Invest In The Markets
5. CD Laddering
6. Buy a Blog
7. Invest in a Business
Generate Passive Income With Time Investment (Effort Level: 3-5)
8. Start A Blog
9. Build An Online Course or Guide
10. Sell An E-book
11. Sell Stock Photos
12. License Your Music
13. Build An App Or Product You Can Sell
14. Become A Social Media Influencer
Semi-Passive Side Hustles
15. Deliver for Instacart
16. Deliver for Postmates
17. Rent Out Your Home
18. Rent Your Car
19. Get Paid For Your Opinion
20. Network Marketing
21. Rideshare Driving
22. Advertise with Your Car
23. Sleep Studies
24. Car Detailing Service
25. E-Bay Seller
26. Drop Ship With Amazon
Easy Wins To Boost Your Income Or Start Your Nest Egg
27. Refinance Your Debt
28. Online Rebates
Read more at Good Financial Cents