Having a passive income can be a real game changer, but first, let’s talk about money. Believe it or not, the money you make today doesn’t only affect your future. It can also have an impact on the lives of your children, your grandkids, their grandkids…you get the picture.
Generational wealth is a term that refers to assets, such as cash, investment funds, stocks and bonds, mutual funds, real estate, or businesses, that can be passed down to other family members as a way of securing their financial standing long after you’re gone.
It’s much more than an inheritance. It’s a way to share your money mindset and skills with your loved ones so your financial legacy lives on.
Sounds pretty nice, right?
However, it can be difficult to know how to start laying the foundation for long-term financial success, let alone sustaining it for years. With the right knowledge, though, it’s easier than it first appears.
The key to building generational wealth starts with acknowledging that your active income should not be your only income stream.
In fact, in many cases, it’s more work to earn money at your 9-5 job! However, when you discover more income streams, you can earn more and build wealth overnight without having to subscribe to the 24/7 hustle culture that surrounds our society.
Here’s where the idea of passive income streams comes in.
Let’s walk through what passive income is, how you can generate passive income, and how you can use passive income to supplement your monthly income, build generational wealth that lasts, and gain financial independence.
What is Passive Income?
Simply put, passive income is money that you earn easily. It doesn’t require a large amount of ongoing effort to maintain these additional revenue streams.
And, that’s what we love to hear.
Though this is great, it’s important to keep in mind that most passive income ideas require you to invest money, time, or resources in order to get started. Once you make the decision to begin, though, you and your wallet will reap the benefits of these investments.
How to Make Passive Income & Build Wealth
Earning passive income is an opportunity to make money doing things you enjoy. There are various strategies for earning passive income and there’s no one-size-fits-all approach.
Below is a list of some of the most popular methods you can use to create passive income. Try some out to see which passive income ideas you benefit most from.
You may have heard of a magical thing called compound interest.
Essentially, the power of compound interest is its ability to increase your money automatically right before your eyes. No added effort is required.
Let me tell you what I mean.
Money in a savings account automatically earns interest—or more value (money when you think about it tangibly) that you pocket just for keeping your savings account active. If you make just 1% interest on your savings annually, you have $100,000 in your account. Within just one year of building interest on your current savings, you’d earn an extra $1,000 in interest alone.
And, it gets even better. Because compound interest builds upon itself to give you the most value for your money, the next year you would earn an additional 1% on the total from the year before (the original amount of money plus the interest that was earned the previous year). This cycle then continues every year.
To increase your earnings, you can also contact your bank or financial institution to open a high-yield savings account since they are federally insured and earn rates that are higher than the national average.
As a top-yielding savings account, a minimum investment on your end will earn more in a high-yield savings account than it would in a normal savings account since rates start at 1.5% APY.
Income generated through savings accounts is free money. If you haven’t already, open a few different savings accounts in order to increase your cash flow and make the most of this passive income source.
In addition, compound interest also applies to your investments. Most investments earn about 10% each year, so if you do the math, your $100,000 would become $110,000 within the same calendar year…without having to personally contribute any more money toward your investment.
Pretty cool, right?
Take advantage of how effortless it is to earn passive income through compound interest, especially when it comes to increasing your cash flow through investing.
When you know how to choose investments that generate consistent returns, your money will continue to grow without you needing to put in any extra work.
Real Estate Investing
Real estate investing is another lucrative way to generate passive income, and many people find it familiar and comforting since real estate is a tangible asset.
Making passive income through an investment property can be done in various ways. The first of which involves no upfront work.
Most real estate accrues value over time, so if and when you decide to sell, you’ll most likely make a profit that accounts for the difference between the value of the selling price and the value you initially paid for the property.
Additionally, you can also act as a landlord for property you own and rent out rooms or entire buildings to prospective tenants. In this instance, you can make rental income through real estate by collecting monthly payments from your tenants.
Though this is also an option, it does require you to be more involved. As a landlord, you’re responsible for maintaining your real estate property and must pay for any expenses and upkeep to ensure your tenants are taken care of. Depending on the situation, though, choosing to be a landlord can be quite rewarding.
Last, but certainly not least, stock investments are some of my favorite ways to generate passive income.
By investing in wonderful companies, you’ll put yourself on the fast track to financial success. Finding the right companies to buy into does require more upfront investment research time than relying on compound interest or real estate for passive income, however, let me prove that it’ll be worth your while.
As I mentioned, stock investments function very similarly to the way compound interest works. The only difference is you get higher returns on your investments.
Certain investments can generate 10% returns year after year, which is about 10 times the percentage that compound interest typically yields. When you choose the right businesses to invest in, you can easily achieve these kinds of returns.
Once you do some initial research, monitoring and adjusting your investments can be done in as little as 10-15 minutes per week, so you don’t have to be as actively involved in the process if you do not want to be.
That’s left completely up to your discretion. If you want to be an active participant, there are also plenty of options that will allow you to do so.
Either way, investing in wonderful companies is a no-brainer.
One of the best passive income ideas that you can pursue is making the decision to invest in the stock market. It’s a proven, simplistic way to help you ensure that you have money to cover unexpected expenses, contribute to a retirement account, provide for your family, and enjoy life without a second thought.
Another way to generate passive income in the stock market is through dividend stocks.
Dividend stocks are distributions of a company’s earnings to its shareholders. The rate of the distribution is determined by the board of directors and can be in the form of cash, stock, or property. It is the money the company pays out to its shareholders in cash.
You may have heard that many people live solely off of dividend stocks they receive from companies. In other words, their income streams are reliant on outside income streams!
As Rulers, we think of dividend stocks as a return on capital instead of a 2-3% return on our investment each year.
In other words, the goal is to lower our stock market investment risk each year by receiving dividend stocks to reduce our basis. Our basis is directly correlated with the risk of owning that business, so if your basis goes down, so does your risk.
All good things if you ask me.
Additional Passive Income Ideas
Still, searching for your next great passive income idea?
Outside of these popular passive income sources, there are many other ways to earn extra income. When coming up with a passive income idea, it’s important to remember that it doesn’t have to be complex.
A passive income idea is simply a strategy you can use to make more money through minimum investment.
To get you started, I’ve listed some additional passive income ideas that are more closely related to personal interests or things you may already be doing even if you’re not already capitalizing on them!
Think of this section as your own passive income FAQ that will walk you through how to find the side hustle that fits your lifestyle and will provide you with the financial independence you’re seeking.
Teach a Course in Your Industry
What are you an expert in? Is there a subject matter that you would be eager to teach those willing to learn? Make your knowledge one of your passive income sources!
Create an online course or live session to start sharing with others. Knowledge is a barrier to entry for so many people looking to try new things, so teaching online courses or live sessions on anything from personal development to marketing to cooking or finance can be quite lucrative.
For example, I offer an online course that is designed to help attendees learn how they can grow their market wealth in any condition through a monetary investment.
This Virtual Investing Workshop workshop is usually well-attended, is offered at a number of different times to suit people’s needs, and is completed from the comfort of home.
However, this business model is not the only one available to you. Whether you choose to create online courses that can help you launch your online business or organize a live session in a spare room, this creates a great passive income opportunity.
I briefly mentioned renting real estate to tenants as a way to increase cash flow, but the real estate market as a whole is a much larger passive income source.
Long-term rentals require tenants to sign a lease guarantee that they’ll earn money on a monthly basis through passive income. In addition, you can also list a rental property rent for short-term visitors.
For example, if you have the ability to rent out a vacation home or a part of your full-time residency to vacationers, platforms such as Airbnb, HomeAway, and Vrbo are popular among travelers for their convenient booking processes and reasonable rates.
If your car is in good condition, you can rent it out to those in need of a vehicle to get around. Using apps like Turo, GetAround, and Fetch, you can place an ad and daily rental fee on your car.
As with many vacation rental apps, you’re able to provide a description of your vehicle, a list of features, add any rules you’d like renters to follow, and the distance they’re permitted to drive under the pricing that you set.
From there, renters will be able to provide you with a rating based on their experience. And, these ratings are important because they will help you gain credibility, generate more business, and keep this passive income stream alive and well!
Parking space rentals
Similar to renting out your vehicle for a few days, you can also generate income by renting out an extra parking space.
People will pay a premium for a secure parking spot so they can have peace of mind knowing that their car, motorcycle, or van is parked in a safe space, where it will not fall victim to theft or vandalism.
Parking rentals are extremely popular in major cities where traffic is heavy and street parking is limited. If you have access to an extra spot and are willing to loan it out to visitors for a day (or on a per-month basis), you can easily list it on CurbFlip, ParqEx, or Pavement.
Got a garage full of clutter and household items that you only use on rare occasions? Think about creating an online store where you can loan out your household items to make passive income.
You can list your power tools, home renovation equipment, sporting goods, bikes, scooters, etc. on apps like Zilok, RentNotBuy, FatLama, Loanable, T’Work, and FriendWithA.
On the flip side, if you’re more of a minimalist, you can also rent a spare room or space out for others in need of storage space. Neighbor is a great app to look to for this. The app requires an initial monetary investment, but once you pay the service fee, you will be able to set your rates and start using their system.
Create a Blog or YouTube Channel
Do you have a way with written or spoken words? Perhaps you could be the next Nobel Peace Prize Winner or a budding YouTube star.
It’s incredibly simple to begin blogging or filming about your passions, and going back to the “knowledge is a power” train of thought, there is an audience for any topic you’d like to share. You can make relatively passive income through these sources.
Though the setup may require you to invest money and time to get started, you’ll begin to see extra income flood into your account in no time.
Creating a blog has never been easier.
If you’d like to create your own website, you can. However, in this digital age, there are a number of free-standing platforms that you can use for free (or at a very low price point) to begin pouring your creative juices onto the digital page.
To make sure your blog reaches the right people, you’ll also want to focus on defining your niche, target audience, and the topics you want to cover.
If writing isn’t your thing, a YouTube Channel might be a better fit for sharing your stories and ideas with upwards of tens of thousands of people!
Creating a YouTube Channel is convenient and does not require a monetary investment. Since Google owns YouTube, you do need a Google account to get started, but after that, you’ll be able to begin filming.
As with blogging, in order to make your YouTube Channel profitable, you’ll also want to follow the same steps for success and define your “why” for producing your specific type of videos.
Make an Ebook
Ebooks are in high demand because they provide a sufficient amount of space to cover more information on a complex topic than a blog post, but not so much information to turn it into a full-length text.
They provide a way to drive traffic to all of your other offerings.
And if your ebook is thorough enough, you may also be able to earn income from the document itself.
People are drawn to ebooks because they give them the perfect amount of information that they can use to make an informed decision about what they would like to do next. So, whether or not you make a profit from the ebook or not, it’s likely that you’ll see some profit come back in the form of one of your other products.
Knowing how to speak and strike up business deals with others can be a great money-making tactic as well. If you have a background in sales, enjoy pitching products to others, or convince your friends that “this new latest item will change your life,” maybe it’s time you made marketing your income stream.
To start strengthening those connections you already have with people, I’d recommend leaning into affiliate marketing and network marketing.
Affiliate marketing is where publishers earn a commission by promoting a product or service made by a separate retailer or advertiser.
If you’re good at pitching products to your friends or like reviewing new items and sharing those details with others, you might be great for this.
Conversely, if you own a business and would like to get more eyes on your products, using affiliate marketing strategies to partner with others who have a large following might cost you some money upfront, but the payout will be plentiful from this income stream and you’ll generate more without having to lift a finger.
On the other hand, network marketing is a business model that relies on in-person sales generated by independent representatives to make passive income.
As with affiliate marketing, turning prospective customers into paying clients requires building a network of business partners or salespeople to assist with lead generation and closing sales.
This is a more traditional income stream that falls under the marketing umbrella, but it’s important not to overlook the power of genuine, in-person connections when trying to sell items or services.
Both of these methods are also easy, effective ways you can earn income by putting other businesses to work for you.
Build Financial Freedom Today
The idea that building financial freedom is difficult is a myth. There are more passive income opportunities out there than may have originally thought!
Now that we’ve reviewed some of the best passive income ideas, you can see that the only difficult part about generating passive income is knowing where to start and discovering which passive income strategy will help you build wealth and move you one step closer to achieving your financial goals.
Now that your brain is filled with passive income ideas, it’s time to put those into action. If you want to learn more about my favorite way to generate passive income and make extra money, then you need to check out The Complete Guide to Investing for Beginners.
This guide will walk you through seven easy steps you can take to reach your financial goals, identify the most common types of lucrative investments, and develop the confidence you need to continue growing your wealth year over year.
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.