The Truth About Passive Income (And 4 Ideas to Chew On)

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No two words can simultaneously make your heart flutter and eyes roll quite as intensely as “passive income.” These words are overused, grossly misunderstood, and rarely portrayed in an honest fashion. Bloggers and YouTube stars will tell you that you can generate $1,000, $3,000, or even $5,000 per month without lifting a finger.

But they’re wrong.

While it’s possible to reach a point in your life where you’re generating these types of figures without putting in much effort, the reality is that you aren’t going to stumble upon them overnight. You’re better off buying a scratch ticket or placing a bet on a longshot horse.

But that’s not to say the concept of passive income is a fraud. There’s certainly some truth to it. However, you’d do well to shift your definition/understanding to one that’s more reflective of the truth.

Passive income is about making money while you sleep. But that doesn’t mean you aren’t doing some work while you’re awake. In order to generate income on autopilot, you have to program the flight system. It takes real energy and real time. Plus, in addition to the work, most passive income streams also require a starting supply of money. Whether it’s a few hundred dollars or tens of thousands of dollars, some seed capital is necessary.

In short, there are opportunities. But the passive income that most people tout isn’t possible for most – at least not on the front end. Having said that, this article is about genuine passive income streams. It’s a realistic look at how you can put in the work to generate money while you sleep. Just be forewarned that these methods are not 100 percent hands-off.

Try These 4 Tactics

You won’t find any totally unique ideas on this list. These are passive streams of income that populate nearly every other online listicle. But what makes this list different is the fact that we’re going to be real with you. Beneath each heading, you’ll find an honest assessment of what it takes to actually generate money while you sleep. Take a look:

Passive Real Estate Investing

Real estate investing is often touted as being passive. And while it can be a fairly hands-off form of generating income, there are three specific steps you must take to make it happen.

First, you need some cash up front to invest. Whether you’re buying your own rental property or investing in a real estate investment trust (REIT), cash is a necessity. Second, you have to choose the right types of investments. (Rental properties tend to do the best.) Third, there has to be some sort of system for streamlining the time-consuming manual tasks. (Hiring a property manager is a good start.) On top of all this, you’ll likely need to forgo any profits for the first few years and put all of the money earned back into the investment to snowball your efforts. Otherwise, you’ll fail to generate more than a few bucks a month.

High-Interest Savings Account

Okay, let’s talk about the old “high-interest” savings tactic. While this is technically a way to generate passive income, it requires having a lot of cash on hand. Unless you have roughly $30,000 in the bank, you aren’t going to move the needle much.

At the $30,000 mark, you can find a high-interest online bank and possibly (at the time of writing this) earn somewhere around 1.3%. That would allow you to make roughly $390 per year (or $32.50 per month). That might not sound like much, but it’s better than the paltry $27 you’d likely make with your current savings account.

Dividend Investing

A better way to leverage your money (assuming you have at least $10,000 in extra cash lying around) is to invest in dividend paying stocks. These stocks actually pay you a percentage of their profits every year just for owning stock. This money can then be reinvested. Theoretically, this allows you to supercharge your earnings via compounding interest. Eventually, many people are able to make thousands of dollars per year strictly on dividends. (Again, the caveat is that you’ll need cash to begin with.)

Flip Products Online

If you follow the internet marketing guru Gary Vaynerhchuck, you might have seen him talk about garage sale flipping. Even today – as a multimillionaire – Gary will occasionally go to garage sales on the weekend, buy items he knows will sell well, and then turn around and sell them on eBay. He does this just to show people that it’s possible to make a quick $300 to $500 with just a few hours of hard work on the front end.

Put in the Hard Work Today

If you aren’t willing to put in the hard work while you’re awake, you probably won’t make money while you sleep. That’s a gross generalization, but it’s something that most people who actually generate passive income would agree with. Put in the work today and you’ll exponentially increase your odds of success!