With all the talk of side hustles for extra income, it’s easy to overlook passive income strategies. Whether you’re pressed for time, are already working on a side hustle, or just want to diversify your income more, there’s a lot to be said for establishing a passive income. Establishing a passive income source will entail work in the beginning, but if you’re looking for another revenue stream, it could be the perfect long-term project to focus on now.
Why Diversify Into Passive Income?
Even if you’re already pursuing a side hustle in addition to a full time job, it’s never a bad idea to add in another revenue stream if you can. Why passive income? Well, besides all the stereotypes associated with passive income streams (relaxing on a beach while watching money roll into your bank account), here are a few more realistic reasons why you might want passive income:
- Recession-proof your income
- Make extra money to put toward debts or into investments
- Network with other like-minded people for more opportunities
If you’re interested in adding to your revenue stream, here is a list of several passive income generators you can pursue.
Do you have a particular hobby, like fixing string instruments or rebuilding tablet computers? Even if its a seemingly small hobby, you would be surprised by the number of people who want to read about what you do! If you are a decent writer with a knack for telling your story clearly, even if it’s about rebuilding tablet computers, you can start your own niche site and build up a following.
Once your niche site has built up some traffic, place some ads on your site and consider becoming an Amazon affiliate. By becoming an affiliate, you can link to products you use and earn a commission if your readers decide to purchase those items too. If you do happen to fix broken tablet computers, you could also link to your Ebay shop or sell directly online – turning your hobby into a profitable site and bringing you more potential buyers.
Although being a landlord isn’t for everyone (or isn’t financially possible, given some expensive housing markets!), you might want to consider buying a small property and renting it out. Nowadays, you can rent it out the traditional way (through online ads or in the paper) or through AirBnB.com. Laws in your state may regulate AirBnB, but renting out your house, apartment, or even a room in your own home is still pretty unregulated in many places, so it may be an option for you if you don’t want a long-term renter.
While not quite as passive as other sources, peer-to-peer lending is becoming a popular way to diversify your investments and income. Peer-to-peer lending is a personal loan made between you and a borrower, through well-known websites such as LendingClub.com or Prosper.com. As a lender, returns can be as high as 8-12%, and you earn income from interest payments made on the loans.
As the loans are unsecured (which means you run the risk of borrowers defaulting) the key to successful passive income through peer-to-peer lending is diversifying your investments in many different loans. Don’t rely on two or three loans to be your ultimate source of passive income. To truly get the most out of your money, do some homework at the beginning and invest in several different borrowers. In addition, try to look for credit-worthy borrowers. While you may not make as much off an A-borrower, you’re also less likely to invest in someone who will default.
By starting a passive income stream early, you can bypass waiting on pension or Social Security income in retirement. Even better, you can supplement your income now and free up your money to work harder for you, either by re-investing in yourself or aggressively pursuing your side hustle. It will take work to set up a lucrative passive income, but having a second (or third, or fourth) income stream will set you up for a more successful future.
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Do you currently have a passive income stream, or are you planning on pursuing one? What would be your dream passive income stream?