Passive income streams are a hands-off way of gaining financial freedom and growing wealth. Most people spend their entire career working hard, receiving a weekly or monthly paycheck in return for our time.
What if you could generate income without putting in face time for every single dollar, earning money in your sleep? It may seem unlikely, but many people have completely transformed their personal finances this way, drastically enhancing their quality of life and freeing up their days for more pleasurable pursuits.
Most of us are familiar with the concept of active income. We work part-time jobs as teenagers and full-time jobs as adults, receiving hourly rates, salaries, or commission in return for all our hard work. Active income requires continuous effort to generate pay. If you stopped showing up for work, before very long, your employer would stop paying you.
Passive income may sound far-fetched, but there are numerous ways to generate an income without continuous effort. In this article, we explore five tried and true methods of generating revenue on autopilot.
#1: Use a Cashback or Rewards Card
Banks check prospective borrowers’ credit ratings before issuing mortgages or loans. For individuals with a limited credit history, spending with a credit card can be an effective method of boosting their credit score.
Today, many credit card providers offer incentives like cashback, enabling shoppers to earn air miles or discounts in certain stores just for paying for purchases using a particular credit card. Over time, these discounts and other incentives add up.
Like any form of credit, it is important to settle outstanding bills every month, however, since interest repayments can quickly outstrip the benefit gained from discounts, cashback, and other rewards.
#2: Dropshipping
Dropshipping can be an easy way of earning money with little effort. Though the idea of creating an online store may sound daunting, there are numerous digital platforms available to help you quickly and easily set up an ecommerce store.
Choosing the right niche takes a great deal of careful research and effort, with many markets already saturated or dominated by the big brands. You need to choose your product very carefully, with many dropshippers selecting items that are inexpensive to ship, that they can price competitively while still achieving a high markup, eliminating many of the operational expenses incurred by their bricks-and-mortar opponents.
The key to creating a profitable e-commerce store is finding a reputable wholesale company willing to ship direct to customers. Wholesale companies that ship too slowly, or run out of stock, will impact your reputation, so it is important to select a company with positive reviews.
Although building a dropshipping business does require a fair amount of work upfront, once it is up and running, it could attract a substantial income with minimal input.
#3: Dividend Stocks
Investors in dividend stocks receive regular payments representing their share of the company’s earnings. So long as the company makes a profit, shareholders receive dividend payments, which are typically distributed every quarter.
By investing in companies with good fundamentals, it is possible to achieve a solid income this way with little to no input, drawing down the proceeds, or reinvesting them in other assets to boost earning potential still further. So long as the company continues to keep performing well, you can earn money without doing anything.
What makes dividend stocks so attractive can also be a drawback. Dividend stocks can be incredibly volatile. While stocks can increase in value dramatically overnight, their value can also plummet. Investigating companies requires time and effort, and even then, there are no guarantees that business performance will not deteriorate.
#4: Digital Products
Selling eBooks, stock photos, music, or digital courses can be an effective method of boosting one’s income. Although creating a quality product requires an investment of time, effort, and possibly money to cover advertising costs, etc., selling digital products can be an excellent way of generating passive income, requiring minimal effort further down the line.
For those with specialist understanding of a particular niche, be it angel investing or animal psychology, provided there is a market for their expertise and knowledge, there is scope to transform this information into a valuable commodity.
#5: Real Estate
If you have a spare house, or a spare room, renting out your property can be extremely lucrative. Nevertheless, investing in a rental property is not for the fainthearted, requiring a substantial financial outlay, as well as a great deal of investigative work.
When investing in a rental property, experts generally recommend purchasing a property local to you, enabling you to not only keep a close eye on your investment, but also avoid falling foul of state rules, regulations, and tax laws you might know nothing about.
Buying a foreclosure can be an effective way of maximizing your investment, but for a first investment property, it would be prudent to avoid a huge project unless you have a background in construction.