Passive Income Ideas
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This overview is based on my 10+ years of trial and error, exploring virtually every successful method of achieving passive income that I have personally tried.
This article is broken down into five parts:
So while your results may vary, this is a good article for those looking for new passive income ideas.
In my quest to develop passive income sources over the past 10+ years, one of the only consistent patterns that has emerged is that everyone succeeds utilizing different (and often times unexpected) methods of achieving passive income.
Someone who can quickly write eBooks and make millions of dollars on Amazon KDP, may struggle making a single penny from affiliate marketing.
Your content goals. Are you trying to make money? Build an audience? Experiment with writing? Market a product or service?
Your financial goals. If your primary goal behind blogging is making money, how much money are you trying to make? Are you just looking to make an extra $100 per month, supplement your income, or become a full-time blogger?
Your available time. Are you willing to commit 10-20 hours per week on a consistent basis to writing or are you looking to write the occasional post with little pressure to do so regularly?
What is Passive Income?
Passive Income is generally defined as a stream of income earned with little or no ongoing effort needed from the individual receiving the passive income in order to grow the stream of income. Passive income is income that is not proportional to the time you physically put into acquiring it. Active income (typically one’s regular job or additional part time jobs) is a direct exchange of your time and skills for money.
Examples of passive income include royalties earned from stock photography or from a digital course you create.
In both cases, the content, whether self hosted or on a larger website, generally require little or no maintenance or additional financial investment to maintain the source of income.
The intriguing thing about passive income is that it can be generated literally while you are sleeping, freeing up additional time for hobbies or allowing you to increase your earnings by performing some other form of work while still generating previously established streams of passive income.
An example of this would be a person working a 9–5 office job where they are paid a fixed salary. This same person also receives regular passive income from an eBook that he wrote on gardening over two years ago. The office job requires direct effort to produce the agreed upon amount of income. The employee, whether hourly or W2, is trading their time for money.
The eBook is different.
Regardless of what is going on in the office employee’s life, the book is listed for sale in its digital form on Amazon KDP and the author does not have to perform any work (beyond the initial creation of the content) to maintain this stream of income. The employee can literally never check on that book and they will still receive their royalties, every month.
Why is Passive Income Important?
There are many articles dedicated to exploring the various ways to make passive income. But many fail to consider the underlying question — why is passive income (as opposed to active income) important?
The answer is actually a fairly simple relationship between time and money. Time is the most valuable commodity. There are only 24 hours in a day.
Time is the greatest equalizer because not a single person can have more of it. It can never be recreated or re-spent. It exists once, then it’s gone. And that’s precisely why passive income is so important — because time is more valuable than money.
Unlike money, which can be earned, saved, spent, invested, squandered and lost, we can’t tuck away minutes on a clock. We can’t expect dividends on seconds or hours in the bank, or invest the time that we didn’t use on something else. Considering that most of the free world needs to work for a living, consuming much of the time they do have, this precious commodity needs to be prioritized.
Passive income is one of the most important strategies that that the rich utilize to get richer. It’s how you detach your ability to earn from the limited time that you have in a day. With passive income, you make money while you sleep. You also make money while you’re awake. It’s automatic and simply keeps coming in.
“If you don’t find a way to make money while you sleep, you will work until you die.” — Warren Buffett
However, creating a passive income stream is far from easy. It takes an enormous amount of effort and investment of your time with very little return in the beginning. It involves an overall sense of frustration and an enormous learning curve. Still, it’s one of the most worthwhile investments of your time that you could possibly engage in.
As the chart below illustrates, any amount of passive income earned is exponentially more valuable than the equivalent amount of money earned through traditional work (trading time for money).
$100 in passive income per month may not sound like a lot. However, to generate the equivalent of $100 in monthly passive income, you would need to have $30,000 invested earning 4%. This 4% return is fairly conservative when compared to the historical average annual return of the S&P 500, which is around 7% (after inflation).
While passive income might not be the answer to all of your immediate financial problems, it is a pathway to success and most certainly the foundation for wealth and financial independence.
When you’re not stressed out focusing on just making enough money to pay the bills and you’re no longer living from paycheck-to-paycheck, there’s a mental clarity and an emotional catharsis that sets in.
You become free to spend your time doing things you actually care about. You can spend more time with your family, focus on improving your health, have the freedom to escape a job you hate, or pursue a creative passion that you otherwise would relegate to the few hours of your free time on the weekend.
What is NOT Passive Income
Some ideas commonly touted by financial “gurus” as passive income which are not actually passive income. I hate to see these ideas misrepresented as I have been involved with many of these businesses myself, and know that they are time and capital intensive.
- Vending Machines /Laundromat— I had a contract to provide food and vending services to Accenture. I purchased, managed, and restocked a number of vending machines. I can assure you that vending machines are far from passive income. You either need to spend enormous amounts of time fixing and restocking the vending machines or you need to pay someone to perform this function on a regular basis. Just because something is automatically dispensed to consumers does not mean it is passive income.
- Real Estate/Rental Properties — Real estate development, speculation, or even renting out property is not passive income. Unless you pay someone to manage your properties every month, you will be responsible for a wide range of tenant issues. And if you’re paying a person or company to mage your property, this is no different than any other traditional business.
- Paying off Debt — While it is a good idea to pay off high interest debt, this is often falsely classified as passive income. Paying off debt offers little in the way of systematization, scalability, and unlimited income potential.
- Raw Land Flipping — I am still shocked when I see other authors include this on their list of passive income ideas. Raw land flipping (or renting) is not only extremely difficult, but it requires a ton of active effort on the part of the owner.
- Refinancing Mortgage — Like paying off debt, this is potentially a good idea (depending upon interest rates, market conditions, and your opportunities to invest in certain ventures). However, this is by no means passive income. It cannot even be classified as income, let alone passive income!
- AirBNB/Rideshare — While renting out unused space in your house or driving your car for Uber can be profitable, both of these ventures require active effort. Uber is especially time intensive and requires drivers to work 60+ hours per week to scrape by in many cities. There is also the additional maintenance and depreciation that occurs when you drive your car more than you normally would. While some of these costs may be fixed (car payment, insurance, etc.) the additional wear and tear on your car can be devastating to people who rely upon their car for day to day transportation.
What is Considered Passive Income?
So if the ideas above are not considered passive income, what are some examples of true passive income streams?
For the purposes of this list, passive income ideas must meet the following criteria:
Recurring Payments — Passive income is income that requires no effort to generate on a recurring basis.
Systematization — Passive income streams must be derived from a systematic process. The ability to develop and perfect these processes is a key element of passive income.
Automation — The ability to outsource or rely upon automated systems allows passive income streams to remain truly passive.
Scale and leverage — After establishing a system that successfully generates income, this system must be able to be grow quickly, through the introduction of automation and other methods that allow you to scale a process.
Income Potential — Passive income cannot be constrained by the total potential income it generates. This is one of the basic qualities that separates passive income from a traditional salaried job.
Comprehensive List of Passive Income Ideas
1. Stock Photography
If you’ve got an eye for the lens, or a decent self-shot photography archive, then stock photography is the perfect place to start looking at passive income ideas. Once you’ve snapped an image, edited it and published the photo to a stock photography website, sit back and let it do the earning for you. Platforms like Shuttershock generate revenue by charging people a fee to use your images, a portion of which goes straight to you.
Thousands of photographers are earning healthy passive incomes without lifting a finger, or changing a lens, by publishing their photographs for use by others. Getting started is easy. Choose a platform, create a portfolio of your work, upload the images, and start earning.
2. Write an eBook
Believe it or not, putting an eBook together is a whole lot easier than you think. And they’re great revenue streams – if you know how to get them right. With eBooks, you can write about pretty much anything you want – from ‘how-to’ manuals and educational content to children’s stories and travel guides. The best part? eBooks keep paying long after they’ve hit the digital shelves, paying out for as long as people are buying them.
There are many new online eBook tools available to aspiring authors which take the editing and formatting trickiness out of creating an eBook that people want to pay for. Yes, you’ll have to dedicate time, research and energy to making sure your eBook looks great, offers value to readers and reaches the market, but once published, eBooks are the passive income gifts that keep on giving.
You can choose between self-publishing your eBook, selling it on a big platform (like Amazon) or even taking it to print. And if you want to take things to the next level – consider creating an eBook series with regular updates and follow-ons, these often earning even more than the original editions.
3. Creating an Online Course
In the post-pandemic era, digital courses are bigger than ever. During lockdown and work-from-home orders, people realized that they could upskill themselves with all the extra time they had on their hands. Before long, everyone was diving into courses offered on Udemy, LinkedIn Learning and Gumroad.
What makes online courses such great passive income ideas is their profit potential. People are prepared to pay well for upskilling themselves, and if your online course offers authentic value and is presented well, you’ll soon be smiling all the way to the bank.
Creating online courses means doing a lot of research, carefully planning your course structure and making sure that your content is relevant is helpful. Choose a field you know and understand, and don’t pirate others’ work – keep things original.
Pricing online courses right is critical to your passive income success, and choosing the ideal platform on which to publish them is vital to hitting your goals.
4. Affiliate Marketing
Is your website traffic booming? Why not monetize it? Many people are managing thriving websites, drawing hundreds, if not thousands, of unique visitors and views every day. Many of them, however, don’t realize that they’re sitting on a passive income idea goldmine.
Affiliate marketing means collaborating with brands and companies who pay you for generating traffic or leads to their products and services. It’s simple. Every time someone clicks on a link on your site, uses a promo code or is referred to a vendor from your webpage, you earn. Whether simply sending people to your partners’ sites or enabling them to purchase products sold by other brands through yours, affiliate marketing is one of the more popular passive income ideas out there.
5. Print on Demand
This less-know passive income idea can be a lucrative one. If primed correctly, with good automation and some original designs, print-on-demand can earn you a lot of money. You’ll need to have some great designs on hand, an eye for good-looking merchandise and access to a print-on-demand platform or website.
With the print-on-demand passive income model, every time a customer orders a piece of merchandise featuring one of your custom designs, you make money. Simply integrate a print-on-demand service with your eCommerce store, choose what you want to sell, set your profit margins and let the service take care of everything else, from packaging to shipping.
6. YouTube Partner Program
Ever wondered how to get paid-for ads up on your YouTube channel? YouTube’s partner program allows channel owners to feature ads to their audiences and get paid for doing it! This passive income idea is fast becoming one of the most popular options for YouTubers with over 1000 subscribers and at least 4000 public watch hours.
You’ll monetise your channel through Google’s AdSense, and once you get going, there’s no stopping the revenue from coming in. YouTube’s partner program is a great way to scale your YouTube revenue and, while margins may be low, to begin with, the more views you get, the more you stand to make.
7. Digital Display Advertising
Display ads are everywhere. From banner ads across the top of your screen to pop-ups, strips and interactive videos, digital display advertising has become synonymous with the internet. Digital display advertising is quick, easy and is almost guaranteed to earn you a passive income, no matter how busy your website is.
While display ads usually have very low click-through rates, they do help to boost your brand, allow you to earn passive income for as long as those pages are on the internet, and AdSense pays out every time.
8. Creating a Niche Website
Niche websites are exactly what they sound like – custom-built sites designed to attract a very specific audience niche hungry for website content that is often hard to find. Select audiences usually have money to burn and are happy to do so – if you can give them a site they want.
What makes niche websites such great passive income ideas is you’re far more likely to earn more through affiliate marketing, display advertising and merchandising sales through them than you would on a more mainstream, general website. If you hit your target market, exploit the lack of competition, and offer high-value content to your audience, niche websites can quickly net you good levels of passive income.
9. Pre-Monetized Blogging
Medium.com – where pre-monetized blogs live, is the perfect example of how bloggers can get paid to write rather than having to earn their income by churning out web copy for marketing and sales departments and big-box companies.
But how do pre-monetized blogs make a passive income versus traditional ones? Easy. Because they’re written to make money for the blogger, rather than attracting traffic to a webpage or as copy fillers. Pre-monetized blogging means baking in passive income ideas and techniques from the outset. Whether doing a paid-for feature or review for a client or simply revamping blog content to drive revenue, you can’t go wrong with a pre-monetized blog.
10. Dropshipping and eCommerce Stores
Making money online means keeping your overhead costs as low as possible. One of these traditional money pits is inventory – the need to pay for storing your products. But what if you didn’t have to? Dropshipping allows you to run an eCommerce store without having to store or even ship your goods to customers.
Dropshipping represents one of the go-to passive income ideas out there and is a great way to start earning without having to break too much of a sweat. Dropshipping means receiving an order, buying the products from the original seller, and then having them shipped directly to your customer – easy money.
11. Investment Income
One of the oldest and arguably most lucrative passive income ideas on this list – investment income – is perfect if you’re in it for the long game. But with good potential comes big risk, so make sure you understand what you’re doing before diving in.
Investments range from financing start-ups, trading stocks, or simply setting money aside to accrue interest. Today, investing is easy. Most banks offer user-friendly apps with simple investment features. Most wealth managers will tell you to diversify your portfolio – listen to them. Try not to put all your eggs into one basket. Spread your money across multiple investment options to boost your chances of making even more passive income.
12. (Some) Credit Card Rewards
Most people have no idea how big they can score if they’re able to use their credit cards effectively (and responsibly). Credit companies are desperate to get as many people to swipe their credit cards as possible. Why? Because the odds of people running up debt are higher than the odds of people paying their debt off in time. It’s simple math.
But if you’ve got solid self-control, an excellent credit record and understand how to take advantage of these credit card rewards, then you’re golden. Be wary of which credit cards offer which rewards, payment terms and the fine print.
13. Digital Artwork
While the jury’s still out on whether or not NFTs are the new art form to get in on, digital artworks are one of the dependable passive income ideas that don’t require much to get right.
No, you don’t need a degree in classical art history either. Any digital artwork has value, and platforms like Etsy allow you to connect with people looking for your artwork – people prepared to pay to use it. Whether selling printable wall art, or customized invitations, digital artwork can be reproduced en-masse, making it a solid passive income opportunity.
14. Membership Website
If you’re looking to level up your library of digital product offerings, why not bundle them together and charge membership fees for them? Instead of having to manage each and every sale of your digital products, creating a membership website will allow you to earn a stable, consistent passive income without having to constantly rely on individual purchases.
Simply ensure you’re offering premium content (in other words, content or products that people want to pay for), launch a subscription paywall and provide exclusive use of your content to people willing to pay for it. Subscriptions are great passive income ideas if you’re looking for a recurring revenue stream.
Passive income is here to stay, and as more people discover how to earn money online without having to do too much, it is changing – fast. From growing affiliate and partner programs on mainstream platforms and social media to dropshipping techniques and creating websites nobody has thought of yet, if you’re looking for innovative passive income ideas, you won’t need to look very hard.
Figure out what you’re good at, do your research and find a way to give people products, services and content offerings they’re prepared to pay for. Consider automation options and try to leverage the many tools and options out there that are making earning a passive income online a breeze.
Good luck and happy passive earning!