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Initially you may only be making a small amount of money passively, and you may even want to re-invest that money so that it compounds and grows faster. But with some time, its possible to make enough passive income you could quit your job or retire early.
Passive income can be a bit of a divisive topic. In general, passive income is any money you earn without putting in much effort. The money will flow in without too much being required of you. In some scenarios it might be long-term recurring income, and in some other instances it might be short lived or inconsistent.
In some cases youll need to put in some effort up front, but then it wont need as much effort in the future when youre making the money.
What qualifies as passive income is up for debate. Most lists which youll find online will include things such as blogging, writing e-books, or creating your own course. Im not including those ideas in this post because, in my own opinion, they all require an excessive amount of effort to be considered as passive.
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Blogging will always require on-going work, either by yourself or by other people that youre paying. Selling ebooks or courses will require on-going customer support, plus youll need a consistent traffic supply in order to continue to create sales. It's possible and there are people who've been able to do it , but they compose a small percentage of individuals who really set out to get it done.
Ive been blogging fulltime for ten years and Ive sold ebooks and classes in the past. Theyre great ways to make money, I just dont consider these to be more passive, in most cases. .
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Just about any business can be a source of passive income when youre paying others to run the business. This is true with both online and traditional businesses. This opens up even more possibilities than what will be recorded here.
Now lets have a look at some of the best ways to make passive income. A number of them are investments which will require some money to begin with. Other folks wont need any money to begin. In case you dont have the money to invest now, consider starting with the approaches that dont need any money, and then use that money you make to invest. .
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Your very first financial priority should be to build up an emergency fund that will cover all of your living expenses for a couple months. But dont put this money is a checking account or savings account at a local bank that pays you a terrible interest rate. You can open a high yield savings account or money market account with an online bank that will earn a much greater return for you.
My spouse and I maintain our emergency fund in a money market account with CIT Bank. At the moment (October 2018) CIT money market accounts are earning 1.85percent APY and CIT savings accounts are earning 1.55% APY. Thats 22x the national average! Opening an account with CIT is quick and easy, and can be done online. .
Some companies consistently pay dividends to their shareholders. As a shareholder, you can re-invest the dividends to buy more shares of the stock, or take the dividends in cash. Reinvesting look at more info will let you own more stocks, which contributes to greater dividends in the future (ideally).
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The companies that consistently pay dividends tend to be large companies with a long track record of success. Because of this, these investments tend to be considered less risky than the stock exchange in general.
Dividend stocks can be a terrific investment whether or not you want to reinvest each the dividends on hold on to the stock for quite a long time, or make use of the income generated throughout the dividends.
For much more detail on the subject read Investing in Dividend Stocks at Investopedia. To get a list of those shares, see this collection from Dividend.com and this collection from DividendValueBuilder.com.
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Peer-to-peer lending (or P2P) has become extremely popular in recent years. Borrowers and lenders can be paired up via a website or marketplace. Instead of going to a bank, the debtor receives a loan from an investor.
In some situations the borrower may not be able to qualify for a loan via a traditional bank. And in many circumstances the borrower gets a better interest rate than they might get from a bank. As an investor, you can earn a good return too.