How to Make Passive Income

The Story

As noted philosopher Monica Gellar once said, jobs are how we buy stuff. Usually. Turns out, you don't always have to work so hard for the money. Enter: passive income.

Sign me up.

If you invest, you might already be in on the game. Because it just takes a little research and cash upfront to earn dividends (fancy word for shareholder payments) from stocks. The same goes for bond and CD interest payments. 

Related: theSkimm on Investing

So I need money to make money?

Sometimes. But it's a set-it-and-forget-it type deal. Eventually, you can sit back and relax while your earnings roll in. Take money market accounts and high-yield savings accounts. You just deposit an amount, and watch it grow thanks to compound interest. 

More examples, please.

Rental property is a big one. If you have a spare bedroom, apartment or house...charge someone else to stay there. That could mean an Airbnber you host for the weekend or tenants who stay for years.

Putting money into a biz you aren’t actively managing might count, too. But it could be even simpler. Got a truck or lawnmower in the garage you aren't using? People might be willing to pay to borrow it. You could also give money to your friend’s Kickstarter, make products to sell on Etsy, create content on the web and sell ad space, earn commissions from affiliate marketing, sell a skill set on an e-learning site, etc. Almost any talent or asset can bring in the money. 

Don’t discount credit card rewards. You can earn points and miles just for buying something you would anyway. Very passive.

So what's the catch?

It could take time (and effort) to turn a profit. And there is some risk involved. Maybe the stock market hits a rough patch, your rental goes vacant for a few months (maybe because of a pandemic?) or your e-book isn't an instant bestseller. That's why experts recommend diversifying your passive income streams as much as possible. Because you’ll still have to pay the bills if one falls through.

Plus, you’ll have to pay taxes on your profits. Sometimes even more than you would for your salary or side hustle checks.

theSkimm

Making money without doing (much) work may sound like a fantasy. But passive income is very real. Even if it won’t help you quit your day job anytime soon, every extra cent is one you didn’t have before.