Two Ways to Create Passive Income

As we talk about over and over on this site, there are many ways to create a passive income. We have shared many ways to accomplish this. Yet, most of these creative ways depend on one thing: having money to invest. For those of you who are poor college students or people without a lot of liquid assets (like most Americans), you may be wondering if there is another way for you to generate some cash without having to get a second job.

When looking at passive income, there are two general ways to do it. The first is use money that you have sitting around and put it to good use to create an income from that money. The second, and only option for many of you, is to invest your own time. This means starting a business with little to no overhead. I’m going to look at these two ways more closely in this post.

Traditional Way of Creating a Passive Income

The traditional way of creating a passive income involves using your own money, as I mentioned. But what form can this take? This can mean investing in dividend stocks, where you are not only building capital, but earning money from the dividends paid by the company. While everyone’s dividend yield is different, experienced investors average 3-5%. So, for every $100,000 you invest, you can get $3,000-$5,000 each year. Not bad considering that you are also (hopefully) earning money through the stock value increasing.

While this is just one way to use your investment to create an additional income stream, it is more than nothing. It also helps investors diversify their income a little bit, which in turn (theoretically) reduces the risk.

Creating a Passive Income with No Upfront Investment

The only catch to the traditional way of creating a passive income is that it requires upfront money. Many of us don’t have $100,000 sitting around and if we did, $3,000-$5,000 hardly seems worth it for locking up our money. If it’s hard to generate more income from your liquid assets, creating a passive income without this upfront investment would seem impossible, right?

As it turns out, it’s not impossible. With a little hard work and determination, almost anyone can use their skills to develop some passive income. A great example of this is a passive income from writing. An author can work really hard for a couple years, publish something that goes viral, and live off the income for the rest of his/her life. It doesn’t happen too frequently, but even if it is a fraction of millions of dollars, you are on your way. As long as your book does not go out of date, you have the potential to earn money while you sleep.

Yet, publishing a book isn’t your only option. There are many other options available – you just have to be willing to put in the work now to create a sustainable source of income when hiring out the rest of the work. This is the idea of making a passive income from a website or blog.

If you are convinced that you don’t have the money that it takes to start developing other income streams, it’s time to re-consider your understanding of a passive income. Sure, it won’t mean a couple hours of work and then thousands of dollars each month later, but it is possible to build up an income.

3 Responses to Two Ways to Create Passive Income

  1. Years ago I started on the second path you listed to passive income. I wouldn’t say it was passive income with no investment, but it was certainly minimal investment.

    I have my main source of income from my self-employed business and I love that, but it’s nice having some extra coming in each month more or less on auto-pilot.

    For me this includes niche websites, video marketing, and a few other things. All required a bit of work to set up and some money spent to outsourcers just to speed up the process, but now they run themselves and have almost no maintenance costs in time or money.

    It’s really rinse and repeat and if you have the time you can do it 100s of times over. Even if each site only earns $100 a month it will add up.

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  3. [...] Passive income is all about using your ideas to chase profitable ideas. Don’t chase ideas that won’t make money and at the same time, don’t follow what everyone is doing. By finding a happy medium, you will be able to make money while you sleep which is one of the tenets of creating and preserving wealth for the future. Filed Under: Passive Income← 5 Reasons why Passive Income is too Good to be TrueThree Low Risks Ways To Earn Passive Income → [...]

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