What is Passive Income?
Passive income is money you earn that doesn’t require constant upkeep or ‘active’ work. In most cases, you perform the majority of work upfront and start generating passive income once it’s complete. This can then be reinvested or supplement your short-term employment income.
Some broad examples of passive income include cash flow from a buy-to-let property, dividends from stocks or royalties from a book or video content.
While whatever you create (or buy!) will require some work upfront, the idea is that you ‘set and forget’, leaving it to work for you as a passive income stream. You might come back to it periodically to keep things ticking over but it’ll mostly generate money in the background.
This can be extremely useful for people that have long-term financial goals. Passive income delivers the best results when it can build over a long time due to concepts such as compounding and natural market growth.
How to Make Passive Income?
When you’re exploring how to make passive income, you need to consider several things upfront:
– How much budget do you have to invest?
– How much time are you willing to put into your investment?
– Do you have any transferable skills such as writing or web design that could help?
– Do you have a social following that can be leveraged?
– How risk-averse are you and how could this affect your investment?
The answers to these questions can help you decide on which passive income investment is best for you. This is important because there’s plenty of passive income examples that don’t require a large monetary cost upfront. Just remember, while you might not make a large investment, it’s likely you’ll have to commit plenty of time to the investment, something which is just as precious.
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Passive Income Ideas
Here are several investment ideas that can help you start earning passive income:
Create an online course
Selling an online course is one of the most popular passive income ideas in 2022 because of the incredible sales growth that course creators are experiencing. Whether you’re selling the course independently or using online platforms, there’s a huge amount of customers out there looking for a personalised learning experience.
The only outlay that comes with creating an online course is the time it takes to build the curriculum and promote the product, unless you’re distributing it through an online platform. Bear in mind that using online platforms won’t necessarily translate to a consistent income as the product price can change based on the platform owners.
Invest in buy-to-let property
Property is historically one of the most reliable investment assets. It’s less volatile than stocks and represents one of the foremost tangible assets in the market. At the same time, it offers a tremendous amount of flexibility in terms of potential returns, diversification and adaptability.
With the opportunity to generate rental income and build capital growth over time, it can offer value for multiple investment strategies and has shown exceptional value increases over time. In terms of the asset itself, the opportunity to invest in different property types in different locations can provide further diversification.
This can also lead to the adoption of multiple property investment strategies. A buy-to-let property for example can be used for traditional ‘assured shorthold tenancies’ or ‘short-term lets’, depending on the tenants you’re looking to attract.
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Read the ArticleAffiliate marketing
Affiliate marketing is arguably one of the easiest passive income opportunities to get started with, provided you have a suitable platform in the first place. Essentially, you receive a link from a company that you’re ‘affiliated’ with that gives you commission on each sale made from that link. As you’d imagine, this type of marketing requires a platform that receives a lot of traffic, so it’s commonly used on blogs or through website ads.
One negative of affiliate marketing is that the amount you’re paid on commission can vary wildly, meaning it can pay to do plenty of research to find the best program out there for you.
Create YouTube content
One of the most popular platforms for earning passive income is undeniably YouTube. There’s a reason that some of the richest content creators in the world started on the video platform and that’s down to its incredible user base. With millions of users logging on every day, video content is a great way to start building passive income, provided you put the effort in to create fresh, original content and a dedicated community in the first place.
Write a (e)book
Writing a book is one of the oldest forms of passive income in the world. Whether you’re penning the next literary classic or creating incredible ‘how-to’ guides in your field of expertise, the royalties from writing a book means you can literally earn money while you sleep. With ebooks now also incredibly popular, it’s much easier to get started without the need for a publisher.
The downsides of writing? It probably requires the most initial effort and even then, you’re not guaranteed instant success. That said, book royalties remain a true example of passive income and can deliver returns for years if you get it right.
Invest in stocks, shares or indexes
Ask any investor about their portfolio and you’ll no doubt find some form of stocks or shares. They represent one of the most flexible, diverse and accessible asset classes in the market and can be an excellent foundation in a wider portfolio. It’s this flexibility that makes them so appealing for both passive and active investors.
For passive investors, there’s the opportunity to invest in an index or fund that returns regular dividends. These will typically be sourced, packaged and managed for you, meaning you just have to research the sectors you’d like to invest in. If you’re still interested in property, real estate investment trusts (REITs) represent a collection of properties that you can invest in which can deliver a regular return at a much lower initial outlay.
Likewise, if you prefer to do it yourself as an active investor, there’s plenty of opportunity to invest in what you’d like, although this obviously requires a much higher time investment on your part for research.
Related: REIT vs Buy-to-Let Property
Earn interest on savings
This type of passive income is arguably the safest on this list, although it delivers some of the lowest yields. Fixed-rate accounts and bonds are some of the most popular if you’re looking for higher returns, although these generally mean that your money is locked away for an extended period.
The best returns on saving accounts right now tend to be from ISAs, which can see boosts from the government depending on the type you opt for. If you’re looking for a more flexible savings account, an option is opening a current account with a high-interest rate.