7 passive income ideas to help you make extra money
Are you looking to earn some extra cash amid record-high inflation? Then you may want to find ways to make passive income - a stream of funds that typically needs little regular effort to maintain.
"In this modern world, where even if you have a salary, it's still good to have multiple sources of income," says Cynthia Meyer, a certified financial planner (CFP) with Real Life Planning in Gladstone, New Jersey who works with real estate investors.
There are dozens of ways to make money online. You should be able to keep your day job while generating passive income. Explore ways to make extra money now.
7 passive income ideas
You may have heard the phrase "earn money while you sleep." That's passive income, whereas active income involves trading time for money. Here's a list of some passive income ideas to get you started.
- Make money online via activities like starting a blog, taking online surveys or testing apps.
- Regular interest from a certificate of deposit (CD), U.S. savings bond or high-yield savings account.
- Dividends from stocks or other investments.
- Royalties from a creative endeavor like an online book or website.
- Affiliate marketing, earning cash for running advertisements or posting monetized links on your website or social media account.
- Selling items on marketplaces such as eBay or Amazon.
- Money from a rental property or renting out your home short-term.
"They're all not necessarily passive. They might involve some activity, But once that kind of side-hustle is up and running, it may require not too much effort," Meyer notes.
You should always thoroughly research your idea before jumping in. Weigh the time and effort versus the potential profit. Paid surveys, for example, don't take an enormous amount of effort. Plus, you can determine how much time you want to spend on them. Start taking surveys now to earn some easy money.
"Most people severely underestimate how difficult it is to consistently make money from books," says Erin Hadary, a CFP with Denver-based Moneta Group Investment Advisors.
And in some cases, such as buying stocks or property, you need upfront cash. Others, such as affiliate marketing, take setup time and plenty of sweat equity. You should also weigh risks against the likelihood of regular income. Lending money can be riskier than buying dividend-bearing stocks or a savings bond, experts note.
A dividend, for example, "provides a decent return on investment and is very reliable, with zero effort," explains Hadary. "However, you need a lot of money to earn money. $100 [per] month would take roughly $40,000, invested in a 3% dividend stock basket."
Still not sure where to start? Reach out to a financial adviser for some advice.
How much up-front time will I need to invest?
Setup varies depending on the kind of income stream. Take real estate. Unless you're in the real estate business as a profession, like real estate agents, the IRS generally considers these kinds of investments passive income, Meyer says. Be sure to check the IRS website for details on passive income, like renting out property.
Practically speaking, it's both passive and active," Meyer says. "It's passive in the sense that you're getting rents every month, but you still have to run your real estate like a business. That would be the caveat there. If you own property and are renting to tenants, for instance, there might be work up front to set everything up as well as regular maintenance."
"Whether or not the tenant pays the rent, you still have to pay the mortgage, the property taxes and insurance and things like that," adds Meyer. Some investors hire management companies to take care of those details, making the investment more passive.
Can you earn enough to make a living?
In some cases, yes, experts like Meyer say. But it takes time to build.
"To live off your real estate, you're looking for positive cash flow," Meyer says. "So even in an environment like now where the rents are generally going up - it takes a while to build up any compound return. It takes a while to get to the point where you're like, 'Oh, wow, that's really a lot of money.'"
Depending on the passive income mechanism, setting up an income stream can be daunting (or even temporary). Instagram accounts and blogs can lose popularity, for instance. And remember, most passive income streams require some serious exploration and work to set up. Still, others can be risky, experts note.
"Unfortunately, it's next to impossible to find a true passive option," Hadary says.
