Having an additional source of income is beneficial, regardless of whether your financial goals involve saving for retirement, paying off your debt, or even taking a vacation with your loved ones. When inflation increases or your primary source of income changes, you’ll be especially glad to have additional money to help you meet your needs and the needs of those you support. If you’re looking for a way to earn passive income in 2023, we’ve compiled a few ideas that can help you reach your financial goals faster.
Key Takeaways
- Passive income comes from a source that requires minimal effort to obtain, maintain, and earn.
- To start earning passive income, an individual must make an upfront investment of time or money. In some cases, they must invest both.
- Various passive income sources are available, including real estate investments, dividend stocks, high-yield accounts, goods sold, and commissions through affiliate marketing.
What Is Passive Income?
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- Passive income.
- Active income.
- Portfolio income.
The IRS also refers to passive income as unearned income. For income to fit into the passive category, it must align with rules issued by the IRS.
What Does It Take To Earn Passive Income?
Various sources of passive income are available to those willing to put in the initial effort to get started. The two requirements for obtaining passive income include upfront monetary and time investments. You don’t always have to give both, but you must have at least one to start earning income.
An Upfront Monetary Investment
An upfront monetary investment refers to a sum of money given at the start of a new venture. You might use your funds to purchase real estate, invest in product inventory, or sell goods to consumers.
An Upfront Time Investment
Making an upfront time investment involves using your free time to learn a new skill or become an expert in a particular area. You might also apply your time to build a business or develop a following that increases your ability to earn ongoing income. Although a passive income source typically doesn’t require much time or effort going forward, it might require more time at the start of the venture.
Passive Income Investments Requiring Money Upfront
With a better understanding of what passive income means, let’s explore some opportunities that require an initial cash investment:
Real Estate
Investing in real estate is an excellent way to earn passive income. If you have the funds to purchase a property, you can rent it to one or multiple tenants, ensuring you have money coming in every month. Some investors opt for residential real estate, while others purchase commercial buildings and rent the space to businesses and individuals. The type of real estate you purchase will depend on how much money you have to spend.
You don’t necessarily have to buy real estate outright, although different tax and lending regulations apply to a property that doesn’t serve as the buyer’s primary residence. If you can qualify for a mortgage to purchase property, you can use the rent payments you receive each month to pay off the loan, keeping any extra as passive income. Before you take this route, research what you could reasonably charge in rent for the property. With this figure in mind, you can determine what mortgage payment you can afford without losing your income source.
Dividend Stocks
Building your investment portfolio requires an upfront cost. However, if you add dividend stocks, you’ll gain a source of passive income. Companies that offer dividend stocks pay investors based on performance and revenue. These payments, known as residual payments, might come monthly, quarterly, or annually. Because you don’t have to buy or sell dividend stocks once they’re in your portfolio, the money you get on a regular basis serves as passive income.
High-Yield Accounts
If you have extra money available to invest in a high-yield account, you can earn passive income from interest. Both savings accounts and money market funds offer higher interest rates than other investment opportunities, making them more appealing to those who want to earn regular interest.
Passive Income Investments Requiring Time Upfront
Other investments require more time commitment than money:
Selling Materials
You can sell a range of materials to earn passive income. This route requires an initial investment upfront, whether you’re writing and selling an e-book, capturing images to offer as stock photographs, or producing an online course. The key differentiator between selling materials as a passive versus active income source is you won’t continue to invest your time. Once the materials you plan to sell are available to consumers, you no longer have to do much work. For example, you could record your online course to allow students to take it on demand.
To succeed in this arena, you must demonstrate the value your offering brings to members of your target audience. If you’re teaching a course, you might need to show your credentials or experience in the educational area.
Affiliate Marketing
Affiliate marketing involves partnering with an existing business to receive commissions on its products or services. To become an affiliate marketer, also known as an influencer, you typically need a significant online following. After all, you can’t sell to people if they don’t already follow you and see your posts. Working as an affiliate marketer involves a time investment because you’ll curate content that sells products or services.
By taking a smart approach to financial management, you can earn income regularly without much ongoing effort. Explore some of these passive income sources to determine what aligns with your goals for the future. At Infinity Investing, we can help you work toward your financial goals with investment-focused workshops and events.
Bonus Video:
Infinity Investing Featured Event
In this FREE event you’ll discover how the top 1% use little-known “compounders” to grow & protect their reserves. Our Infinity team of experts show you how to be the best possible steward of your finances and how to make your money and investments work for you instead of you working for them. Regardless of your financial situation today, you’ll have a road map to get to where you want to be.