The concept of passive income has been cropping up all over social media and blogs as people look to find extra ways of earning cash. Nearly one in five American households make passive income, and that trend is starting to expand worldwide.1
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Sometimes called a “side hustle,” passive income is just a secondary way of earning money that could require little added effort. This guide will address how to generate passive income — including the pros and cons — and provide some passive income ideas.
What is passive income?
Passive income, or secondary income, typically requires little effort or day-to-day involvement. Some examples include:
- Renting out the spare bedroom of a flat
- Accruing interest on a savings account
- Selling an e-book online
These are just a few examples, and this guide will get into a variety of different passive income ideas for various budgets.
How to make passive income
It can be overwhelming trying to figure out how to make passive income. There are many options, and the right choice depends on the amount of time one might have available as well as their skill set.
The following are not guaranteed to make money, but they do represent some common ways to get started with passive income:
- Affiliate marketing
- Building an app
- Creating digital products
- Renting out
- Starting a blog
- Affiliate marketing
Affiliate marketing usually refers to making a commission by selling someone else’s product online. Starting a blog about cooking and including product links for the best kitchen accessories is one example of affiliate marketing.
Using affiliate marketing for passive income could take other forms. For instance, there are influencers who often take fees for promoting a product to their followers on social media.
Building an app
Creating an app is another route to generating passive income. But there are some disadvantages to trying to build an app — the main one being it usually requires skill in software programming. But for those creators whose apps succeed, it can be a source of passive income for years.
Creating and selling digital products
Digital products — such as designs, stock images, e-books, and websites — are another way to make passive income. This idea is especially well adapted to people in creative fields, such as web designers, writers, and photo editors, as they already have the skills necessary to make these products. Since digital products are usually created just once and then sold repeatedly over time, they can be a good source of passive income.
Renting out
When people think of rent as passive income, they’re usually thinking about renting out space, such as a flat or room in a home. But passive income from renting can take other forms, as well. Now it’s possible — especially with the help of different apps — to rent out a car, designer clothing, and even appliances such as lawnmowers.
Starting a blog
Passive income from blogging can be a fun secondary revenue stream. Whether a professional blog or one created around a hobby, putting one together is relatively straightforward. Here’s how:
- Pick the blog’s location. There are several free tools and content management systems available for starting a blog, such as WordPress and Wix.
- Choose a theme for the blog. This can be anything the blog writer is passionate about or has some expertise in — from business consulting to knitting.
- Begin writing posts. Publishing at a set cadence — whether that’s once a week or once a month — is a good idea to attract readers.
- Monetise the work. Over time, as the blog becomes more popular, a blog writer can monetise by bringing in advertisers or putting some or all posts behind a paywall.
Is passive income beneficial for reaching saving goals?
The benefits of passive income are numerous. They can include:
- Reaching financial goals. Whether someone’s goal is buying a home or going on holiday, having secondary sources of income may help reach those goals.
- Socking away money in savings. It can be difficult to reach savings goals with just one source of income. By adding in secondary streams and putting that money towards savings, it can help achieve those goals faster.
- Financial freedom. Many sources of passive income can either be done online or at home, allowing for the possibility of remote working.
- Financial security. By diversifying income and not relying entirely on any one revenue stream, it may be easier to establish more financial security. For those who succeed with their passive income sources, that may even mean early retirement.
- There may be disadvantages to earning a passive income, too, such as:
- Startup risk. Many passive income sources are essentially startup businesses, and most startups include a certain amount of uncertainty and risk.
- Startup cost. Most passive income ideas require at least some money and time to get started.
- Fluctuating income. Whether someone’s renting out a property or writing a blog, these sources of income may vary month to month based on factors outside of a person’s control.
Kickstart your passive income journey with PayPal’s digital wallet
The PayPal digital wallet can securely store bank accounts and credit cards in one place. People can use it to start selling in their passive income businesses — whether it’s used books or designer clothes.
The PayPal QR code allows for speedy, in-person payments. Also, PayPal’s personal payment links and invoices can make online checkout easy. All payments on PayPal are end-to-end encrypted, helping that both parties’ transactions are secure.