Passive income is an excellent way to prepare for the future and and a boost to regular income. Creating several sources of passive income is an excellent idea. Normally, passive income is a long term in that it does not generate income instantly. The time it takes to start generating returns vary from one investment to the other.
Read also: Poor financial habits holding you back.
What is Passive Income?
Passive income is money that you get without having to continually work for it. Passive income is continuous, and you get returns whether you are sick, on vacation, and working or not. To be clear, it is that income that is continuously there even when you stop working. Note, it is different from a side hustle. However, passive income is not free; you need to invest your time and money before you can start getting returns.
Consider this example; if you are an employee and you stopped working, then your income gets stopped. If you have some rental houses and stopped working on your regular job, the rental income will continue. Hence, rental income is considered passive income.
The following are some sources of passive income.
Dividends from Stocks and Other Investments
To start generating a passive income from stocks, you need to open a brokerage account. Once you have invested, after some time, you will start getting dividends. However, there is no fixed percentage of dividends you can get; the rates can go up or down. It is best to diversify investment in stocks since assets can crash and you make losses. Therefore, make sure to invest in different stocks and assets.
As mentioned in the example above, rental income is an excellent source of income. There are minimal risks involved in rental income, making it among the best sources of passive income. There are many assets you can let out like buildings, land and space.
It is also best to diversify your sources of rental income. If you can manage to let out several of your properties, you can push your income higher. It is capital intensive, but you can start small and keep growing your rental buildings.
Interest from Savings Accounts and Bonds
Bonds and savings accounts generate interest. Interest is the yield you get from money you deposit in a savings account. The interest rates are usually not very high. As such, to make significant interest from bonds and savings account, you need to invest large sums of money.
To make a significant returns from bonds, you need to invest in highly risky bonds. This is not advisable because you can lose lots of money. You can invest large sums of money in low risky bonds to maximize your returns.
Real Estate Investment Trusts (REIT)
A real estate investment trust is like a mutual fund that deals with real estate projects. Professionals operate the investment trust and you do not need to worry about how it works. You get an interest from REITs, which is usually much higher than that offered by bank accounts and bonds. You can sell your interest from REITs anytime you want to.
Income from Royalties
You can generate passive income online through music, YouTube, app, e-books, videos and photography. You need to know how to monetize your online content to start generating a passive income.
Read also: How to make money in the music industry.
Start a Blog
Blogging is another source of passive income. You need to have a website and create high-quality content. You also need to have SEO skills to have your pages rank high on search engines. Update your blog with new content from time to time. There are many ways to monetize a blog, among them affiliate marketing, advertisements and Sponsored searches.
Seek to add value to your readers and provide them with solutions to their problems. This way, they will keep coming back to your blog.
Read more: How to make money blogging.
To start generating passive income through affiliate marketing, you need to have an online presence. You may need to have a website with a large audience. You need to market third party products through your website. For any product bought through your affiliate link, the website owner is paid a commission. You need to have high-quality content on your website. Also, keep updating your content to attract more audience.
Start an E-commerce Store
An e-commerce store is a great way to generate passive income. You only need to take care of security, hosting and credit card processing. You also need to promote your website to have more people purchase products on your e-commerce store. Shopify is a good example of an e-commerce store.
Read more: How to make money on Shopify.
Besides your regular source of income, it is best to have a passive income. It can be a boost to your regular income and a security when you retire or resign from your work. Passive income can be a long term goal. However, you need to invest time and money in the initial stages. Once the investments are up and running, you do not have to work continually to generate an income.