Growing up, I was told that to succeed in life, you have to first go to an excellent college and then get a high-paying job. I followed this formula almost to a tee, going to graduate school and entering the field of education.
I found immense joy in my work as a classroom teacher and a “school-building leader.” Although it wasn’t the highest-paying field, I never starved. In fact, all of my needs were met, and I even indulged in many of my wants.
For close to two decades, I fully subscribed to this active-income model as the sole method for financial success and career fulfillment. In exchange for my time, I would be compensated with money.
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But this model started to feel stale and confining when I wanted more control over my time so that I could spend more time with my family, pursue creative interests, and travel. I was money-rich and time-poor.
What Is Passive Income?
After reading books like Rich, Dad, Poor Dad by Robert Kiyosaki and Money: A Love Story by Kate Northrup, I updated my formula for success to include a passive-income model.
So what is passive income? It’s money that you make without having to show up to a certain place for a certain period of time to earn it.
In other words, even if you stop working, your passive income streams can still generate money for you.
Once I was at a networking event for financial bloggers, and the topic of passive income came up. One financial blogger, Shay, was exhausted by her freelance work. She was writing at least 20 articles a month for various online and print publications and wanted the madness to stop.
“I want 30 percent of my monthly income to come from passive methods,” she said.
This conversation stuck with me because of the specificity of her statement. If you’re thinking about replacing a portion of your active income with passive income streams, it’s important to be as precise as Shay. Ideally, your goals should be “SMART” — specific, measurable, accurate, realistic, and time-bound.
Top Passive Income Ideas
Here are 10 passive income ideas that you may want to try, depending on your abilities and resources.
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In some cases, these models create residual and recurring income. Residual income is the type that you receive again and again for work that you’ve done once. Recurring income is similar, except that payments arrive on a set timeline, which isn't the case for residual income.
1. Write a Book
You can write a short e-book or a lengthy novel and receive royalties or payouts on it for years to come. To increase the chances of hefty dividends, it’s important to first spend time building an on- or offline following that you can eventually market to using automated tools. Platforms like Shopify, Sellfy, and Gumroad make it easy to sell your print and digital copies without a middle man.
2. Invest in the Stock Market
If you have some extra money lying around, leverage it so that it makes you money. Speak to a financial adviser, research how to get started with peer lending, or take the robo-investing route with a service like Stash Invest or Wealthfront.
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3. Rent Out a Room
The conventional advice is to buy a piece of rental property. That’s an excellent idea if you have the money to offset the initial costs of repairs, a mortgage, and insurance.
If you’re not able to start making passive income through home rentals, start by renting out a room in your home, a parking spot, or even underused baby gear.
4. Become an Affiliate
All you really need to start making this passive income idea a reality is a computer and an internet connection. There are tons of companies that will compensate you for being an affiliate partner who spreads the word about your experiences with their products. Sites such as ShareASale and Amazon Affiliates are great places to begin the process. You can market using your social media platforms or your email list.
You can also enlist the help of digital influencers with large followings. In exchange for a commission, the companies will link to your product to increase your chances of bringing in more revenue.
5. Invest in a Vending Machine
Placing vending machines in high-traffic areas is an excellent way to create passive income. Depending on the numbers and types of vending machines you invest in, your profit will vary from month to month.
6. Start a Business and Let Others Run It
You can purchase an existing business or start your own. If you’re looking for low-cost start-up ideas, check out The $100 Startup by Chris Guillebeau.
7. Become a Backer
Peer-to-peer lending platforms such as the Lending Club and the Funding Circle allow you to invest in people and businesses. You can use this to generate passive income from interest payments.
8. Make YouTube Tutorials
“I continue to receive checks for videos I created years ago,” says Kamilah O’Brien, YouTuber and the founder of Focused Spender. “I also get at least 10 new subscribers a day without doing anything new.”
9. Buy Domain Names
Even though it takes a bit of luck and good timing, buying domain names that are niche-specific or attached to a celebrity or trending topic can result in your owning hot commodities. You can sell them for a big profit later.
10. License Photos and Music
You can upload your photos to stock photo sites and receive a commission every time someone buys one of them. Similarly, you can earn royalties from music you’ve created anytime someone wants to use it for a video, movie, film, or commercial.
Which Passive Income Ideas Should You Choose?
Okay, so you probably shouldn’t quit your day job. Still, passive income could be a great supplement to what you’re already earning. Plus, it could even help you stay afloat during an unexpected emergency, such as a lost job. (Make sure you've also got an emergency fund, though!)
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Do your research to figure out which options are good fits for you. Are you a natural in front of the camera? Do you love to write?
Also make sure that you’ll have the time and access to necessary resources to get your pet project off the ground. After all, some passive income ideas may require a certain amount of active care at the beginning. But once you get started, the sky’s the limit!