We all know that money doesn’t grow on trees, but is there a way to grow our incomes that isn’t actively earned by hard labour? The answer is passive income.
By definition, passive income is an income received on a regular basis, with little effort require to maintain it. Basically anything you’re paid for, that doesn’t include full time employment. Sounds too good to be true?
The two resources needed to create passive income are time and money. Some require initial investment (money) to set up and then tick along on their own. Others are free to set up but require ongoing maintenance (time). Ideally you’ll receive a steady flow of money with minimal effort required once the initial work has been done.
The two most common types of passive income are:
- Rental income – A common form of passive income is investing in rental properties to supplement your income. Although it’s consistent money, it requires both resources. Money in the initial cost to buy the property and ongoing costs like repairs, and the time required to maintain your investment. This could include anything from collecting rent monthly, general handyman work around the property or even chasing tenants for rent they haven’t paid. Provided you have screened your tenants well, you shouldn’t have to worry too much and if this is too daunting you could always hire a property manager, for an added cost of course. But if you’re able to get good tenants you could be making money for years of little to no effort.
- Investment income – Investing in stocks, bonds, annuities or even just interest income are a smart way to make money from your money. Investment income is the purest kind of passive income as it requires virtually no direct involvement once you’ve set it up. However it does take a significant amount of initial investment, and you’ll need to do research into dividend income. But once its setup the profits of your original work will continue to make you money for as long as your investment does.
These two options are pretty simple examples of passive incomes but this is a list of some other ways of earning passive income, that don’t require as much investment as they do time:
- Owning a website and earning advertising revenue
- Owning a restaurant and hiring a manager
- Paid online or phone surveys
- Selling old items on Trademe
- Selling crafts on Etsy or at your local markets
- Writing outsourced blog content
- Patent royalties from an invention
- Making YouTube tutorials
Disclaimer: The above information is general in nature and not intended to be financial advice. You should consider seeking professional advice before following any suggestions in this blog/website.