How can I make money while I sleep?
This question has been on my mind since I first started a valet job at 17 years old.
Remember, while you have a job you’re always tied to trading your time for money. Doesn’t matter if you’re earning $15/hr or $150/hr. If you have to physically be present while doing the work then you’re earning what’s called “active income”.
Before we get into passive income ideas, you need to look in the mirror and seriously ask yourself: “Why am I trying to create passive income?”
If your “Why” is to build passive income for freedom, you’ve come to the right place. Only when you look at passive income ideas with a long-term view will they work for you.
A good “why” will help you figure out any “how”.
This will help you when you’re actively building passive income. When things get confusing or hard to understand, a good “why” will catapult you through any obstacle.
However…
If your “why” is to pay overdue bills right now, you need to leave and find something else. Not trying to be harsh, but passive income is something best for when the basics of your financial situation is handled.
If you can’t pay your rent, insurance, car payment or whatever else is necessary for living expenses then building a passive income stream WILL NOT work. You’ll always be strapped for cash and it will hurt the compound interest you’ll gain on these income streams.
If you have the basics figured out, welcome to the greatest secret the rich have known since the beginning of time.
Make money while you sleep.
Let me repeat this.
Make money while you sleep.
Let it become your mantra while you actually fall asleep!!
Why should you trust me?
Because I’ve built passive income streams that pay for my living expenses.
Here’s an example of 1 passive income source I’ve built which has made over $1,500 for me and I’m not doing anything.
I wake up and just see more money added. Trust me when I say it definitely motivates you to get out of the bed!!
Plus, that’s just one. I have many now building up, slowly accumulating compound interest.
Here’s the good news, you can get these results too, and relatively quickly.
How Much Do You Actually Need?
I think a lot of people get mixed up about this. They see all these people on Instagram driving lamborghinis (which are almost always rented) with Patek watches on and think it’s impossible to get to that level of income generation.
Here’s the deal.
You really don’t need that much passive income to become “financially free”.
This is what I ask people when they talk about creating MASSIVE amounts of passive income.
- Do you know what your living expenses are?
- Do you have passive income built up to pay those expenses?
If you don’t have those 2 figured out then you need to start with building passive income until it pays for your expenses. When I first got started building passive income I only wanted to pay for my rent. I figured the feeling of knowing my living situation was handled without me needing to work would help eliminate my anxiety.
And it did.
Start with your living expenses as a reasonable and attainable goal. Then work up from there.
Income Stacking
I touched on this point earlier. You should do your best to produce passive income stacks.
Obviously focus on 1 particular path until you get it working, but once that’s complete go down another income idea to create a second or third source.
When they start to stack up you’ll be getting income from many different angles. Think of this as you building a foundation for your castle.
What Is Passive Income?
Passive income is money you earn with little to no daily effort on your part. That’s a very important distinction which most people get confused on.
It will take time to build up the asset to become passive, but once complete it should require very little work on your part.
2 Ways To Build Passive Income
There are fundamentally 2 ways to build passive income streams.
- Heavy Upfront Financial Investment
This is best for people with years of work experience and a nest egg built already. Typically you fall into this category if you’re over the age of 35 and have minimal time to pay attention to some of these ideas because of your career. If you can invest over $100,000 then you fit into this category.
- Heavy Upfront Time Investment
Most people will fall into this group. These types of passive income streams are best for those with little work experience, no nest egg, and more time available to them. Typically between the ages of 18-35 with under $100,000 available to invest.
Now, these are not hard and fast numbers, just a distribution I’ve found from helping people out.
With that in mind, let’s start with the heavy time investment route.
Beginner Passive Income Ideas (Best For Students and People With Time)
1) Freelance Arbitrage
Can you code and develop websites or apps? Can you write content or copywriting?
Can you design graphics? Maybe you’re good with Salesforce and can help as an admin?
It doesn’t matter what your skill set is. Someone is looking for help with it online via Upwork and Freelancer.
This is one of the best ways to build a passive income stream over time.
Let’s take a coding example: let’s say you know how to create webpages because that’s your day to day gig. Maybe you know HTML, CSS, and JAVA for example. There are going to be a lot of solopreneurs and small businesses who will need your help.
They will almost always go online to job boards, like Upwork, in order to hire for this work.
Once you put in a couple months and get good reviews you’ll be in a position to start outsourcing the work to young and hungry workers outside the United States.
All you need to do is train them with small projects and let them gradually improve their skills and you’ll quickly have a team working for you on freelance projects.
At this point you become a manager where you just double check the work and send off to the client. You profit from the difference in what you charge on your end, and the expenses on the backend.
You can do this with basically any skill, and it becomes a lucrative passive income source.
2) Create & Run A Blog
Find a niche you’re interested in and begin writing about it.
Do a bunch of keyword research where you find what keywords are producing the most traffic, and then create content for those keywords.
Obviously there is much more that goes into this but that’s the basics.
3) Sell Digital Products
Could be anything you can think of, as long as it’s digital and can be sent via the internet anywhere in the world.
I know people who’ve made decent money writing kindle ebooks and still get residual income from it.
Most will go after a Udemy course where they teach people how to do things. Could be anything from simple to complex related tasks. Maybe you’re great with woodworking and want to teach people how to start their own woodworking business. Or, you could be a fantastic photographer and want to help those looking for specific advice.
Whatever it is try to package it into a digital product and sell it online.
4) Youtube videos
Love Youtube videos because you can basically do 1 per day and the skills they teach will be valuable in this new economy. If you have the time, and are willing to do a little research on keywords, you’ll be able to earn a decent income from youtube monetization.
5) License Music
I knew a guy in college who would make beats for upcoming rappers and would get paid royalties on it. He’s still making $500/month passively from it and hasn’t touched it in years.
6) Network Marketing
Say what you want about Advocare and other network marketing companies. Most are going to say they’re a scam, but at the end of the day you’re building a sales team to work for you while the product sells itself.
I know many people who literally do nothing and make great income from their downlines. You have to treat it as a business in the beginning, but it works and there are countless success stories behind it.
7) Create An App
This is great if you have coding experience. It’s also a fantastic way to build your portfolio if you’re starting out.
Advanced Passive Income Ideas (Best For Those With Large Capital)
This is where you can get excellent results. If you’re in the time leverage phase your goal is to get into the capital leverage phase.
It’s here where big moves can happen.
1) Dividend Stocks
This is the most pure form of passive income. You will obviously need to do your research to find high quality stocks.
With dividend stocks you’re not tied to any production numbers. The company will pay out a dividend from the growth they’re experiencing, or from a profit share.
If you constantly invest money into dividend stocks you’ll be able to build a solid financial base paying out every quarter.
2) Rental Properties
A cash flow rental property is another great way to generate passive income. It’s one of the most tried and true methods with building passive wealth.
You’ll need to outsource the running of the property to a management company who will take a monthly fee, but it’s still a great vehicle for wealth.
There are a lot of ways to get into rental property passive income. Most start by doing what’s called “house hacking” where you purchase a single family home and rent out the other bedrooms. This will essentially pay for your mortgage!
Others will just purchase a single family home and rent the whole unit out. You can even invest into larger developments, but that’s beyond the scope of this post.
3) Invest In REIT
If you don’t want to invest directly into real estate, you can leverage a Real Estate Investment Trust or REIT.
These are vehicles which hold property within them and count you as a fractional owner. You’ll benefit from the gains, refinances, sale, income, etc on the property.
It’s great for those looking to understand Real Estate without the hassle of going through the hoops to find property managers and locations.
4) Purchase A Business
With the right amount of capital you can purchase a business already making between $500-$10,000/month in revenue. Most of these businesses don’t need much work either.
People sell websites and businesses all the time. Most often it’s because they’re not interested in the asset any longer and want a one time payout.
Make sure to do your due diligence, there’s a lot of ways to get hustled, but major services like Flippa and Empire Builders do a great job with their vetting.
5) Peer To Peer Lending
I’m not too familiar with this route but from what I can gather you’re lending to your peers with a guarantee of interest to be paid upon completion of the loan term.
Like I mentioned, I’m not overly familiar but I do know it’s a viable method for passive income.
6) Affiliate Marketing
I really enjoy affiliate marketing but you need a decent chunk of capital to make it work, especially to make it passive. Think between $5-$10,000 in upfront capital to understand everything.
The basics of affiliate marketing include finding offers, getting traffic, and monetizing in a profitable manner.
In my personal experience I find affiliate marketing to be a lot like active investing. There are a lot of technical things you’ll need to learn before you can get good. Once you build a team though it can quickly turn into passive income.
7) CD Ladders
A CD (certificate of deposit) from a bank guarantees a certain increment of improvement for return over time.
They’re generally offered by banks with large amounts of deposit required. They’re generally low risk and low yield, but can be a good option for those who are risk averse and want the cash to beat inflation and generate a semi-decent return.
You need a large chunk of capital to be placed for it to make sense.
Conclusion
There you have it!
Those are some of the best passive income ideas for you, no matter the stage of your financial life.
Get started on this now. You’ll thank yourself 5 years down the road when you’re looking at 4 or 5 different passive income streams helping you pay the bills and grow your nest egg!