Everyone is looking for passive income examples these days. We know multiple income streams, especially passive ones, can help us reach financial goals faster.
There are so many ways you can make money without putting in a lot of active time and effort. While there’s value in putting in a full day “on the job”, more and more of us need the flexibility and income potential of passive earning.
You might be searching for passive income examples to meet your current budget needs, or simply to prepare for retirement.
While there’s no income-earning venture that’s 100% passive (requiring zero work), it’s great to find ways to make money that are mostly passive. You’ll do some work up-front and sometimes have to spend a little to start. But often you can continue making money for years to come, without putting in much or any extra effort.
Before we get too much farther, what is passive income really?
According to Investopedia, the definition of passive income is this:
“Passive income is earnings derived from a rental property, limited partnership, or other enterprise in which a person is not actively involved.”
In other words, passive income brings money into your account whether you’re actively working or not. Heck, you could be sleeping and the passive income still rolls in!
Either you put in a bunch of work early that you then sell passively for years, OR you buy an asset that produces a passive residual income (like a rental property, or perhaps a business)!
5 Passive Income Ideas:
- Stock market investment
- Dividend investment
- Selling digital content
- Real estate
- Rent out stuff
Passive Income Example #1: Invest In The Stock Market
Investing in the stock market might seem intimidating to some, but it’s really accessible to anybody with the funds to do so. Most people shouldn’t attempt a very active stock-market investment strategy anyway! It’s way too risky and not necessary.
Putting your money in the stock market is a great example of passive income strategy. There are plenty of brokerages these days where you can set up an automatic monthly deposit. You can invest in index funds that give you a slice of a wide selection of publicly traded companies.
Invest regularly each month and leave the money invested for many years. This gives your money time to compound so that by the time you retire, you’ve got enough invested to live off the interest indefinitely. (Plus, you can ride out stock market slumps, corrections, and general volatility.)
Related: Another Stock Market Crash In 2021?
It’s easy to arrange direct or recurring deposits of a set amount. You can make money to use in the short-term, or leave it invested for decades to make the best returns.
One arm of stock market investment is focused on dividend investing. A dividend is a payment made by some companies to shareholders based on company earnings. By buying shares in companies that pay reliable dividends, you can make actual passive income.
You want to select great dividend stocks. Look for companies with stable income and cash flow. According to The Balance, companies paying 60% or less of earnings as dividends are safer options.
If part of your investing in the stock market includes some solid dividend stocks, you can generally expect to generate earnings in the future as well as the present. It’s a great passive income example.
Passive Income Example #3: Sell Original Digital Content
Writing your own e-books or creating a course are two (somewhat) passive income examples to consider. You’ll have to work plenty hard in the beginning. But once the book is written or the course designed, you can earn passive income for years to come.
Your expertise in a certain niche has value to other people. Even if your skills come easily to you, they’re challenging to many others.
Digital products are great for passive earning because there’s no expense or storage for physical materials. You can sell an unlimited number of e-books or other items without increasing your workload.
Take your time to create worthwhile products and get quality people to help you edit and prepare them for sale. And remember that marketing will take time and effort.
But the great part is the bulk of the work happens in the beginning, and you can reap financial rewards for many years.
Here are some other ideas of content-related products you can create once and sell indefinitely:
- printable handouts, lesson plans (TeachersPayTeachers.com), checklists
- courses teaching a niche skill
Passive Income Example #4: Real Estate/Rental Property
Real estate investment is another option that isn’t a purely passive income strategy.
You have to:
- research property,
- save up a down payment,
- find tenants,
- deal with repairs, and more.
Owning rental property does, however, have the potential to provide solid returns on your investment...if you handle it well. If you’re going to buy a rental property, this typically requires a pretty hefty up-front investment of money.
You’ll also need to be able to manage ongoing expenses such as home maintenance and repairs. If you’re into DIY, you might perform some tasks yourself to save some cash, but that means investing more of your time and energy. If DIY isn’t your jam, you’ll have to spend more money on this stuff.
So owning rental property is certainly not a true passive income example. You can’t just buy a property and let it sit and grow in value. There’s quite a bit of work and money involved.
But, if you hold property long-term and manage it wisely, it can become a relatively passive form of income. It’ll earn rental income month after month.
A couple of other real-estate related endeavors might be to invest in a real estate investment trust, or REIT.
This enables you to bypass much of the hands-on work, making this more of a passive income example.
Passive Income Example #5: Rent Out Something You Already Own
This means of earning passive income can apply in various ways. Think about any assets you own that people might want to rent instead of buy.
- Spare bedrooms/living space
- Storage space
- Tools or equipment
- Special-occasion apparel
- Specialty hobby gear (kayaks, ATVs, sporting goods, musical instruments, and more)
Get creative about the things you already own but might not use frequently. This passive income example lets you make money without much effort.
Passive Residual Income – A Final Word
Here’s the thing about passive income: if it sounds too good to be true, it probably is.
Plenty of people are selling some concept of earning passive income, and many of them are scams.
There’s no “easy” button in making more money. Are there ways to increase your income that are easier than others? You bet! But if you want to get something for nothing, you’re going to be disappointed.
You can find ways to make income passively, but in many cases, you need patience as well as an investment of money and/or time. Figure out the best passive income options for your situation, and get to work!
What’s your favorite of passive income examples above?
AUTHOR Kate Underwood
Kate Underwood loves reading, talking, and writing about all things in personal finance. She made the switch from her high-school teaching career a few years ago to become a full-time freelance writer and editor and can be found at kateunderwoodwriter.com.