Passive income is the opposite of active income. With active income, you are actually doing something to earn money. Passive or not, it’s a good idea for anyone who wants to build wealth and retire comfortably to have some form of passive or residual income in addition to their salary. Passive or residual means that the work has been done upfront and there is no need for additional input from your end – this type of work requires very little time on your part after initial setup. This way, even if you stop working one day, you will still be able to maintain an adequate standard of living through these sources of passive or residual monthly streams of revenue. In this article, I’m going to provide a few examples which will help you understand passively generated income better. Let’s get started.
1) Finance and Stocks
There are multiple good examples of how you can invest in the stock market and earn passive income through dividends. These include index funds, mutual funds, and most types of bond investments. A word of caution though – many investors buy high and sell low, so make sure to do your own research before investing in finance and stocks for large sums of money into a particular company or industry. Stocks are a great example of passive income. If you know what you’re doing, it can be very easy to make money in the market since all you have to do is buy and hold! It’s simple, but it takes a lot of time before you get your money back out. The stock market is probably the best example of a place to build up passive income.
2) Rental Income
Renting out property to tenants, whether it’s through Airbnb or your own home, could also be considered passive income. If you’re not cleaning up after guests and making beds, then it’s passive income. That means your house is working for you while you’re not there and can become a source of regular monthly income. For example, if renting out your home generates $2,000 and the mortgage payment runs another $1,000 per month in total (including taxes, insurances, etc.), then that’s $3,000 in passive income.
3) Royalties Or Dividends
These are much more common in the business world. If you have a book or song that becomes popular, then all the money it generates goes to you as royalties for passive income. Same if your invention becomes a hit and sellable – all the money is residual, or passive, coming to you. Royalties are the best example of passive income I can think of. You write a book and it sells well enough to generate royalties – that’s pretty much it. You don’t have to do any additional work and the money is automatically deposited into your bank account.
4) Apps & Online Businesses
The modern-day gold rush is happening right now and it’s called “mobile apps”. There are several unique ways to make money through mobile app development including offers, subscriptions, and pay-to-download apps. Some companies like Google even pay upwards of $75 per app you submit.
5) Affiliate Marketing
This is a good example of a passive income stream that requires some work upfront but can pay off in the long run. If you have a blog, then affiliate marketing could be your ticket to financial freedom. You can write about products or services and endorse them on your blog or website. Impressively, a top affiliate marketer can earn about $3-5k per month in recurring commissions.
If you have a high savings rate, it quickly becomes passive income. Because if you’re not spending the money that’s earning interest or being invested, then you’ve already achieved a sort of passivity by having your money work for you in the financial markets instead of using your efforts to earn it at a job. I have read that the average rate of savings worldwide is under 3%, and that’s a reason for concern. It means most people aren’t earning enough passive income via interest to make their money work for them.
Passive income is defined as any type of revenue that you do not have to work for. Passive income could be anything from savings interest, rental properties, royalties, and dividends on stock investments. The key to passively making income is knowing what will give you the most return with the least amount of effort. If you’re looking for a way to earn money without working hard or at all – then passive income may just be your answer!