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12 Passive Income Ideas to Make Money While You Sleep

Last updated: June 27, 2019
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One quick gander through any financial blog across the web and you’re bound to stumble across the topic of passive income ideas. It’s easy to see why so many experts give high praise to having your money work for you rather than you working for your money. After all, who doesn’t like the idea of making money while you sleep?

In this guide, we’ll show you how to implement different passive income ideas as well as 12 ways you can start making money now with varying degrees of effort.

What Are Passive Income Ideas?

The term passive income — or residual income — refers to the ability to generate income without expending much effort.

The best investors will tell you that it’s all about diversifying, creating multiple revenue streams, and letting your money work for you. Instead of plodding away for a paycheck and putting your earnings into a standard savings account, you can explore other investment opportunities that will bring in greater returns over time. There’s no point in sitting on assets when they could be generating more income for you.

The catch is that you can’t just start from scratch. You’ll need to invest one thing or another to get the passive income ball rolling. This will require an investment of one or more of the following — money, time, effort, or additional assets.

What Are You Willing to Invest?

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The first step to building a passive income stream will be deciding what you’re willing and able to invest — money, time, effort, and/or additional assets.

We’ll classify these options into two categories. The first is investing money, which is self-explanatory. The second is investing money along with time, effort, and more support.

The first option — investing money — is probably the most effortless income idea provided you have some capital to invest. These are the opportunities where you take money in the bank and put it into a financial investment. Over the course of several months or a few years, these investments can steadily grow with next to no effort being expended. Examples would be high-yield savings accounts, CDs, or index funds.

On the other hand, there are passive income ideas that require more than a monetary expense — they also need time, effort, and maybe other resources. For these, you’ll typically invest time and energy to set up everything and provide some general maintenance along the way. Examples in this category include affiliate marketing, building an online course, or creating YouTube videos that make money over time.

Invest Your Money

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These passive income investments only require cash up front. Once you make that initial investment, you can sit back and wait to collect months or years down the road.

1. High-Yield Savings Account

Savings accounts aren’t a sexy investment to write home about. But the truth is that you can find online high-yield savings accounts that have much higher interest rates than the brick-and-mortar banks you’re used to. Since online banks don’t have the same overhead costs as standard bank accounts, they’re able to give you interest rates in the range of 2-3% — over 20 times more than the national average interest rate of 0.1% on savings accounts.

2. High-Dividend Stocks

Stocks that pay quarterly dividends are another way to maintain predictable income. When buying stocks, you obviously want to cash in on big gains from a company. But with high-dividend stocks, you get paid just for owning shares. Big blue-chip companies like GM and IBM are two dividend paying options you can explore on the stock market. Ally Invest is a good place to get started if you’re interested in high-dividend stocks.

3. Peer-to-Peer Lender

Instead of going to a bank to borrow money, many consumers are turning to peer-to-peer lending groups to take out a loan. By joining a P2P lending platform, you can earn interest on the money you make available for others to borrow. In a way, you’re becoming the bank and are able to bring in returns between 5-10%.

4. Robo-Advisors

Traditionally, people would find a financial advisor in their area, meet with them, and discuss their financial strategy to build a brighter future. These meetings with real advisors often come with high monthly service fees that are intimidating to first-time investors. Instead, you can go online and sign up to use a robo-advisor.

A robo-advisor is an online investment software that makes financial decisions based on algorithms and calculations with little human advisor intervention. You can receive personal finance recommendations automatically and let the software do its job. Monthly fees are much lower and more approachable than your standard financial advisor.

5. Real Estate

Real estate investing sounds like a complete headache. The thought of buying a home, fixing it up, and then flipping it sounds almost overwhelming and not passive at all. But you can invest in property without ever having to show up at the property. With real estate investment trusts — or REITs — you can join a pool of other investors who also want to invest in real estate. A professional real estate broker like Fundrise will handle all of the logistics and make investments on the group’s behalf. No need to worry about fixing things up or being an on-call landlord for a rental property.

6. CD Ladders

CD ladders are strategic short-term investments that allow you to consecutively collect money as each investment matures. This means you plan out a series of CDs that each mature at different times. Once your first investment matures, the rest of your investments will continue to stagger in, putting some cash back into your pocket. CD ladders keep your money relatively liquid and not tied up for long periods of time and make for an excellent passive income idea.

Invest Your Time and Effort

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These types of passive income ideas will require you to put in a much larger amount of time and additional work up front, but the earnings that roll in over time might be worth it.

7. Affiliate Marketing

Affiliate marketing offers many ways to make money without ever owning a product. One way is to create your own website or blog that generates steady traffic. You can then set up affiliate partnerships and send your readers to partner sites to purchase items. You’ll receive a commission for every referral. You can also use affiliate links on social media channels like YouTube.

8. YouTube Videos

If you’re able to garner high viewership on a YouTube channel, you can turn it into cold hard cash. The trick is to create content that’s useful, entertaining, and engaging. This isn’t the easiest idea to execute, but if you’re able to pull it off, there are plenty of ways to monetize your YouTube channel.

9. Create an E-book

Self-publishing an e-book is becoming a dated notion, but if you can create compelling content that resonates with people, it might be worthwhile. Granted, it’s not the most passive method to generate income in the beginning, but it can be an effortless source of revenue once the book has been written.

10. Online Course

Creating online courses is another passive income idea that requires hard work and a great amount of effort up front. To create a course, you should be an expert in one particular area. Your topic should also be something that people find useful or enjoy learning. After you create your course, you can collect fees for years to come without much intervention.

11. Rent Your Home or Vehicle

If you’re sitting on assets like a home or vehicle, then why not get some extra money when they’re not in use? If you have a spare bedroom in your home or an entire extra house, then you could list your property on Airbnb and collect rental fees. Own a vehicle that barely gets used? List it on an app like Getaround, which lets people rent your vehicle for hourly or daily rates.

12. Sell Photography

Fancy yourself a shutterbug? Making some extra cash from your photos can be a fun passive income idea. With sites like Shutterstock and Getty Images, you can list your pictures and collect royalty fees every time someone uses your photo. Sure, one purchase of a single image isn’t going to make you rich. But if you have thousands of high-quality images that make you a few dollars here and there, that can add up over time.

Passive Income Ideas With Huge Potential

If you’re ready to level up your investment game and start making money on the side, you can take one or more of these passive income ideas and put your money to good use.

By establishing one or more sources of passive income, you can set yourself up for a brighter future. A future where you can make money without much long-term effort.


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