TAMPA, Fla. - It's the dream we all wish was our reality. We're sitting on our couch at home, searching Netflix for the next series to binge out on. Hours in, it sinks in and you realize you've been able to make money without doing a thing.
Better yet, after you turn off the TV and head to bed, it's still happening. You're still making money. Is this a reality, or are you stuck in some alternate universe where all your dreams are coming true?
It may sound too easy, but if you play your cards right, it could become your reality. What we are talking about is passive income. First, let's start with the basics.
What is passive income?
Passive income is the ability to earn money. It requires very little to no effort on your part to maintain. Some passive income ideas, like dividends from stocks or renting out a piece of real estate, will take some time to get going. But after you get the hang of it and build a successful process, then you could eventually make money while you're sleeping.
Why is building passive income important?
The two basic ingredients to building wealth are keeping your debt in check and finding strategic ways to increase how much you make. Increasing your income is a vital ingredient of your wealth-building recipe, but there's only so many hours in the day.
One of the tactical ways of increasing that income is focusing on building passive income streams. By focusing on building your passive income plan, it can allow you to retire early, protect your family from income loss, provide additional source of income when you're no longer able to work, or help others who may be in dire need.
What is the most important aspect of building passive income? The golden rule of passive income is, beyond all measures, protecting your time. Time is the most valuable commodity that we are given. Ensuring that we are protecting that time is crucial.
On the onset of building a passive income stream, you are going to do more work upfront until you figure out a plan that works for you. But if your initial passive income idea is generating $500 for 10 hours of work, and if you're doing the same thing years later, then it's time to figure out something else.
What doesn't make the passive income list?
There're a few obvious ones, but your current nine-to-five job is not passive income. Yes, it provides a steady source of income to provide for your family. But if you're not there clocking in or putting in the hours, you're not going to get paid. Side hustles, as sexy as they may sound, are also not passive income, although a side hustle could be a potential gateway into uncovering a passive income stream.
But delivering food or groceries via delivery apps is not a passive income use of your time. Consulting is another popular way to generate freelancing income and potentially make money fast. But if you are offering consulting services, either one-on-one or even to a group, you still have to show up to get paid.
And finally, investing for speculation is the furthest thing away from passive income. Whether that's investing into a start-up, analyzing call options on Tesla stock, or trying to figure out if investing into Bitcoin or cryptocurrencies is right for you, it requires a significant amount of time.
Passive income examples
Now that we understand what passive income isn't, let's look at a few examples of what passive income is, as well as some ideas that you can start today. Number one, investing into dividend paying stocks. Dividends, starting that sentence over.
Famed investor Benjamin Graham, had this to say about dividends, "The true investor…will do better if he forgets about the stock market and pays attention to his dividend returns and to the operation results of his companies."
He was definitely on to something here because dividends paidout can be one of the greatest and also simplest ways to earn passive income. By investing into stocks, typically known as blue chips, you get the best of both worlds. If the stock price continues to increase or appreciate, you're making money.
But that stock also pays an attractive dividend. Guess what? You're also making money. This is what I call a double win. If you are interested in investing into dividend stocks, but don't know where to go, look up the dividend aristocrats, which is a database of dividend paying stocks that have a history of not only paying their dividends, but also increasing them. And if you're not sure on where to start investing, you can check out my guide that shows you the best online brokers to get started investing.
A second way you can build a passive income stream is utilizing your experience. You could do this by creating a blog, selling an online course or guide, or become a social media influencer. For me, starting my blog, GoodFinancialCents.com, was my path into earning a sizable passive income stream. I relied on my experience as a financial planner and also personal finance topics to share my expertise to those who were interested.
This led to other opportunities such as offering digital products in the form of online courses and also brand sponsorships through social media promotion, starting any online business could potentially lead to countless opportunities. But the key is to pick one idea and just start.
Lastly, another form of passive income that also is very popular with many affluent investors is real estate. But if you're new to the real estate game, trying to pick out the perfect property could be nerve wracking. One of the easiest ways to invest into real estate is by utilizing online crowdfunding platforms.
One popular choice is Fundrise.com, which allows you to invest into multiple real estate investment properties. But the best part is you don't have to do any of the research. Their management team will identify what properties are going to make their investors the most money.
The only thing that you have to do is fund your account. You can get started for as low as $500 and then choose your investment strategy. Did I mention that you can do this all from the convenience of your own home? There's not an easier way to become a real estate and passive income investor all in one.
The bottom line
Passive income is something many people desire but don’t know how to get started. The key is doing is doing your research and begin experimenting with a few ideas until you find the idea that works for you.