Earn while you sleep
No matter how good you are at earning money, you’ll always be racing against the clock for how much work you can do in a day. Yes, working for money is a must on your journey to financial freedom, but if you really want to boost your earning potential, you should look at increasing your sources of income.
Passive income vs. a job
The vast majority of people in this world make money in a simple way: they exchange their time and labor for money. To increase the amount you earn under that model, you’ll either have to work more hours, or make more money per hour. While many jobs do offer upward mobility in terms of salary caps, the reality is, you’ll likely have to work for many years to reach to top rung of the your field. Even then, you’ll always have a hard ceiling when it comes to time. You will never be able to work more than 24 hours in a day. Believe me, I’ve tried.
But this blog is not about doom and gloom. It’s about opportunities. So how else might you increase your earning potential? I’m glad you asked.
Passive Income
Passive income can be summarized as the money you earn whether you’re working or not. Now, don’t get me wrong, this is not to say there is no work involved–far from it, but with these approaches to earning money, you can put in a few hours here and there, and collect earnings for weeks, months, or even years after. Some of these strategies require money up-front, but others just require an investment of your time and effort. Depending on where you’re at in life, one, or several of these might be great options for you.
Without further ado, let’s take a look at the top sources of passive income.
1. Invest in Dividend Stocks
Want to literally get your money to work for you? Dividend stocks are a great way to do it. Before diving in, let’s explain what dividends are.
Essentially, dividends are payments companies make to shareholders. Generally speaking, companies paying dividends are either profitable or paying out from reserves. While many dividend stocks pay every quarter, there are some that pay on a monthly basis.
Like with all stocks, there is an element of risk involved, but historically speaking, dividends stocks are resilient to volatile moves in the market. When you invest in dividend stocks, your focus isn’t on the growth of the stock price itself, it’s in the the soundness of the company and how much per share that company is paying. This is very different from speculating on growth stocks. Your goal with dividend stocks is to own more shares.
Let’s look at an example:
In 2008, as the great recession unfolded, WFC’s (Wells Fargo Bank) stock price reached a high of nearly $30 per share dollars in the summer. By early 2009, the stock had dropped to $15. Even through the hard times, WFC was still paying a dividend of about $0.05 per share (down from $0.34 per share), meaning for every 1000 shares, WFC would have paid you $200 that year. Both, the stock price and the dividends have rebounded since then, and the same 1000 shares would be paying you $380 per quarter at the current dividend yield of $0.38 per share.
This strategy is most effective when you take those dividends and reinvest them right back into your dividend stock portfolio. Check out our post on DRIP here to learn this strategy.
Want to start with dividend stocks but don’t know where? Look at guide on how to get started investing, and our top dividend stock picks.
2. Become a Lender via Peer-to-Peer Lending
While Peer-to-Peer Lending (P2P) has dropped in popularity as of late, it’s still a great way to get your money working for you. The average credit scores have been steadily climbing since 2009, meaning there are many well-qualified customers out there, which in turns means less risk.
The P2P model essentially matches people with money to lend (you) with prospective borrowers. Don’t worry, this isn’t just you going out there to find someone to lend money to and hope they pay you back. The P2P platform will pool money from groups of lenders, and match you to various borrowers on the platform. You get the pick how much money you put in, and how much risk you’re willing to take on. Going with higher-risk borrowers, of course means a higher return, whereas going with solid, high-credit-score borrowers will pay less to borrow, but are more likely to pay on time.
Unlike a traditional investment, this is a loan, not only are you getting back what you put in, but you’re getting paid interest on that loan. As long as you diversify, and don’t take on too much risk, P2P lending can be a relatively safe way to get a steady return. Be sure to compare various P2P platforms before jumping in to make sure you’re getting the best terms for your situation.
3. Make Online Courses
People are always looking to learn new skills, and various platforms, like Udemy have popped up all over to give people a platform to learn online. I’ve personally created a couple of Udemy courses through a publisher (shameless plug here), and while it’s definitely helpful to have someone publish your course and handle a lot of the marketing and editing, you definitely do not need to go down that route.
All you really need to get started is a computer, a microphone, some video editing software, and something you want to teach. Whether it’s programming, finance, cooking, language, sewing, etc., there’s likely a niche out there for you.
Selling digital courses online can definitely multiply your income potential in ways one-on-one tutoring cannot. You have to put in some work up front, and do some marketing (sharing on social media, etc.,) and then you can sit back and collect a check. Platforms like Udemy follow a revenue-share model, in which they get a cut for hosting the course. The percentage split varies, but it tends out to work out more favorably towards the course creator, especially if they are driving referrals personally.
4. Write an e-Book
Although the publishing model is alive and well, it has never been easier to write, publish, and sell your e-books online. You can really think outside the box here, especially if you sell directly via your own website. Various platforms out there can help you get your store up and running quickly and without needing to know much at all about making websites. A popular choice is Shopify.
You can really write about just about anything, but as with #3, e-books that teach something tend to do well–diet books, workout books, you name it. Heck, you can do fiction if you really want to (though you’d likely face more difficult competition).
Unlike physical paper-and-ink books, there is no printing to be done here, no shipping, no inventory, or anything of the sort. This means you don’t really need much of an up-front investment, besides your time and imagination. Not too shabby, right?
5. Start a YouTube Channel
I have to be honest with you–I’ve spent more time than I’d like to admit watching cat videos on YouTube. Sometimes, the recommendation algorithm will take me down a weird rabbit hole, and let’s be real–we’ve all been to the weird part of YouTube. My wife has spent way too much time watching back-adjustment videos. What I’m getting at is this: there is an audience for any niche.
The types of content you could build a channel on are really only limited by your imagination–travel, pranks, cooking, comedy, instructional, etc. Granted, some niches are more advertiser friendly than others, but as long as you make engaging content, you can grow a following.
It’s important to set expectations. While you may have heard the ludicrous amounts of money some top YouTubers are making, the vast majority of content creators don’t bring in enough to go full-time. In our case that’s fine! You may not replace your full-time income, but a channel can still generate some cash flow on the side, enabling you to invest elsewhere!
In addition to the ad revenue you’ll generate, you can also seek sponsorships, market yourself, your businesses, and your products.
6. Get Into Real Estate
Full disclosure–generally speaking, we’re not the biggest fans of real estate for the vast majority of people. That being said, it’s undeniable that there is a lot of money to be made in real estate. By this, we don’t really mean that you should go out and get your real estate license and start selling homes. Rather, you can look to make some cash via rental income.
If you already own your place, you can generate rental income by renting out a portion of it–a room, the guest house, etc. If you’re not sure you want to get locked down long-term with a tenant, you can try a service like Airbnb to rent out part of all of your place for small intervals at a time.
If you’re an apartment-dweller, you can think outside the box too! Even a parking spot can make a good rental in cities with poor parking situations. My wife collects a very decent $100/month for renting out our unused parking spot. $1200 a year for doing absolutely nothing is not a bad deal at all.
These are just gateways into the big prize–real estate investing–buying properties with the goal of generating cash flow every single month, while gaining equity.
7. Become a Social Media Influencer
Influencers fall into many categories. From gaming, to fitness, to beauty, to entrepreneurship, there is a niche out there for everyone. So, how exactly do you become an influencer? Generally speaking, you want to start by building communities on social media around specific concepts or topics. For example, if you’re into Corvettes, you may start an Instagram account focusing on rare finds. Maybe you’re a musician and you want to create a Facebook group about music. Chances are, if you’re willing to put in the work, you can build a following.
As odd as it may sound, you don’t even need to personally be influential, as long as your content is engaging and generates clicks, you can leverage your platform to generate money. When your content is getting eyeballs, you can start working with brands and companies that want to get their product or service in front of your followers. At the end of the day, your goal is to build a brand. The brand can be centered around you, or a product, or a concept.
In Conclusion
While this is by no means a definitive list, hopefully it has helped spur some ideas. Whether your journey into entrepreneurship, or just exploring a “side hustle”, you have to try before you succeed. These approaches may not be right for everyone, and you should definitely do your own research before investing money into any venture. Regardless, for many, the path to financial freedom starts with diversifying your income streams. Do you have any ideas we didn’t list? Let us know in the comments!
