‘Earn money while you sleep’ and ‘make your money work for you’ are just two of the famous phrases linked to passive income. But how does it work?
Read on to find out more about how to make passive income streams, types of passive income, and the best passive income ideas. What is passive income?
When we earn money through a salaried job, this is known as ‘active income’. On the other hand, ‘passive income’ is a way of earning money without having to work for it every day.
Most passive income streams require some work or investment up front, but if you’re successful you can keep earning an unlimited amount of money over time.
Rental property income, royalties, affiliate marketing, and investments are some of the most popular passive income streams.
Earning passive income is appealing as it’s less labour intensive and the earning opportunity is unlimited. However, it’s likely to take a while to earn enough money to live off and the market is increasingly competitive. How to make passive income
If you want to earn smart passive income, here are some of the first things you’ll need to do: research your options – work out which passive income stream best suits your skills and circumstances
invest the necessary time and money to get started – you’ll usually need to invest startup cash or time before you can start earning from passive income sources
don’t expect immediate results – most passive income ideas take time to start making money, so you’ll need to be patient
keep your day job – although it may be tempting to quit your job, it’s best to keep earning active income while setting up your passive income streams
diversify your income streams – if you have the time and/or money, it could be worthwhile to work on more than one passive income stream so you can still earn if one idea doesn’t work
Types of passive income
There are two main types of passive income stream: low investment and high investment .
Low investment income streams will need less money to get going and are likely to be lower risk. However, your earning potential will be limited and it could take longer to start making money.
Blogging and affiliate marketing are two of the most common types of low investment passive income streams.
In contrast, high investment income streams will need more money at the start. The earning potential is higher, but there’s also a greater risk.
The most rewarding high investment passive income streams are buy-to-let property and dividend-paying stocks. How much can I earn from passive income?
It depends what type of income stream you choose. It could take longer to start earning money from a low investment option, such as blogging, and your income is likely to be lower.You can earn more from a high investment income stream such as property investment, but you’ll need more capital to get started and the risk is higher.The key thing to remember is that unlike active income, there’s no limit to how much you can earn from passive income. That’s why people find it so appealing.Some people manage to make a living from passive income, but it’s useful in the early stages to keep active income from a regular job as there’s no guarantee you’ll earn enough money to live off. Passive income ideas It doesn’t matter how much you have to spend or where your expertise lies, there are plenty of options for making money through passive income.Here’s an overview of some of the best ways to make passive income: Property investment It’s a high investment strategy, but buying a property and renting it out is one of the most reliable and profitable ways to make passive investment income.When you enter the world of property investment, you’ll need to think about things like rental yield (your return on investment), compliance (such as meeting electrical safety rules), and finding the right tenants .Unless you pay for a letting agent to manage the property , it’s likely to be more hands-on than some passive income streams.Read our useful guides to help you get started: Making money from YouTube A very popular way of making passive income online is to publish videos on YouTube. Once your videos are uploaded, you can generate revenue for years to come.The most common way to monetise a YouTube channel is to include ads in your content. However, you can only start doing this once you’ve got 1,000 subscribers and more than 4,000 hours of your […]