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Is Passive Income Right for You?

If you’re like most people, you work a lot. These days, a growing number of Americans are working multiple jobs. Either the gigs are all part-time, or people are working on side hustles to earn extra income. is passive income right for you

One of the issues with the standard model of earning money is that you have to work for it. This is what’s called active income. You put in the hours, and you get a paycheck at the end of it. The more work you do, the more money you make. 

Passive income is when you can get a paycheck without having to put in extra hours. On paper, getting passive income is like having a golden goose at your house. Imagine making a few hundred or thousand dollars each month without having to lift a finger.

Unfortunately, the reality isn’t as simple as “push a button, and money appears.” However, if you make the right moves and put in the initial time and effort, you can start to earn passive income regularly. 

So, with that in mind, we want to take a look at some of the ways you can begin earning money while you sleep. Again, these aren’t get-rich-quick schemes, as most of the options won’t make you a millionaire overnight (if ever). However, whether you’re looking to get out of debt or you simply want a revenue stream that requires minimal maintenance, let’s see if passive income is right for you. 

What it Takes to Earn Passive Income

Before we get into specific strategies, it’s imperative that we underscore how much work will be involved upfront. No one who makes passive income today was able to achieve that goal without putting in some blood, sweat, and tears. 

Obviously, making a paycheck while you sleep sounds good to everyone. All of us would love to be able to live a carefree lifestyle by getting free money around the clock. However, to get there takes time, dedication, and perseverance. 

So, when thinking about whether passive income is right for you, the real question is: what will you do to get to that point? Depending on your situation or the method you choose, it can take a couple of years to start earning passive income. If you imagine that you’ll be making $1000 per month within a few weeks, you need to reevaluate that estimate. 

Still think that passive income is right for you? Let’s see how it can be done. 

Option One: Put Your Money in High-Paying Investments

If you have access to some substantial funds, the best thing to do is invest it. Whether it’s a settlement from a lawsuit, inheritance from a family member, a trust - no matter where the money came from, putting in into a high-yield investment is going to offer more in the long run. 

The other thing to remember about this is that you can reinvest any earnings to grow your balance until it’s big enough to offer the kind of passive income you want. So, don’t assume that you need to invest $50,000 or more to get started. Even if you only have $5,000, it can build over time, offering more flexibility. 

Here are a few ways that you can let your money literally work for you. 


Ideally, you won’t be doing much lending yourself; instead, you’ll let other, more qualified people take care of that. Peer-to-peer lending has become much more popular in recent years, both for investors and borrowers. While the yields aren’t going to be life-changing, it’s enough to make it worthwhile. 

There are a few peer-to-peer lenders out there, so do some research and figure out which one is right for your money. Some of them have minimum investment amounts, so be sure that you have enough to get started. 

That being said, you can offer personal loans, if you’re willing to take on the risk. If you have money sitting in a retirement account, for example, you can borrow against it and loan it to someone you know and trust. You will have to pay interest on that loan, but fortunately, that interest goes back into your account, not a third party. 

So, for example, if you loan someone $10,000 from your 401k, you may get charged 12 percent interest on it (or $1,200). You may decide to charge 18 percent to the borrower so that you get a little bit of profit off the top. 

As you can imagine, the primary issue here is if the borrower never repays the loan. Banks and other lenders can assume that kind of risk because they have a variety of accounts and investments.

However, since it’s your retirement fund, you can’t afford to lose that money. Nonetheless, if you trust the borrower and receive protections like collateral, this kind of lending may be an excellent way to earn passive income. 

Dividend Stocks

Again, you’ll probably want to leave it to the professionals to find the right stocks for you (unless you have time to research them yourself). However, putting a significant chunk of change into a stock that pays dividends is an easy way to get a check without having to do anything. 

The amount of your dividends depends on the market, the amount you invested, and the company(ies) involved. If you’re not earning as much as you want right away, the best thing to do is reinvest those dividends until your principal balance is sufficient enough to get a sizeable check. 

High-Interest Accounts

Most savings accounts don’t pay enough interest to be considered as “income,” but if you have a sufficient nest egg and you can find the right option, you may be able to earn some reliable income from it. The best we’ve found offers just over two percent interest, so you can do the math to see if it’s worthwhile. However, when it comes to growing your money over the long term, putting it into high-interest savings is the best choice for that safe money. 

Option Two: Create Something

In this case, we’re not referring to physical objects that require time and raw materials to make. Sure, you could build canoes and sell them online, but unless you can buy a machine that produces the boats (or other product) for you, that’s much more like active income. 

Instead, you can create a digital product that can be sold an unlimited number of times. Here are a few examples. 

Mobile App

When you go on Google Play or the App Store, you will see hundreds and thousands of apps for different things. Best of all, these apps require minimal maintenance and can be sold (potentially) millions of times. If you create an app that you sell for one dollar and 500,000 people buy it, you’re looking really good. 

Unfortunately, building an app can take time, energy, and money to do correctly. If you’re not a programmer, you will either have to learn how to do it, or you’ll have to pay someone else. Realistically, you can cut that person in on your profits, but you will also have to provide some kind of compensation regardless of how well it sells. 

The other issue is competition. With high-end companies producing tons of apps and considering that many of them are free, making money from an app can be challenging. However, if you have the next Angry Birds idea, you could become a millionaire after all. 


These days, it’s never been easier to build a website from scratch. There are plenty of sites that can assist you, meaning that you don’t need any kind of coding or programming experience to make it look professional and captivating. 

When building a site, there are a few ways that you can earn an income from it, including: 

  • Affiliate Marketing: you promote a product on your website. Whenever someone clicks on it and buys the product, you get a commission. The more traffic you have, the more you can earn this way. 
  • Digital Ads: marketers and companies will pay you to post their ads on your site. 
  • Dropshipping: you can sell products without having to maintain inventory. A user buys the product, the order goes to the manufacturer, and you get a small profit for being the middle person. 
  • Offer Digital Products: whether it’s an ebook, an online course, pictures, a digital graphic novel - whatever it is, you can sell it on your site. Because it’s digital, you make money without having to create anything else. 

Overall, producing a website will take hard work to build it up and generate traffic. Advertising and affiliate marketing only works if you have tons of people coming to your page, so until that point, you won’t be able to make much money. 

Realistically, building your site can take several years to do properly, and depending on the kind of website you have, you may have to continue to produce content or update it regularly. While the work may be ongoing, it will get easier to do overtime. 

Video Content

If most of the content you’ll be producing is video, why build a website at all when you can use platforms like Vimeo or YouTube? In this case, you can create a channel and build a subscriber base around your videos. 

We highly recommend finding a niche you’re passionate about for two reasons. First, making new videos won’t feel like work, and second, niche content can generate more views and subscribers. Simply put, you can get a decent following in a lot less time. 

When it comes to making money this way, you can still use advertising to earn passive income. AdSense is the primary method, but affiliate marketing can also work. Finally, you can tie your YouTube page to your personal website to increase traffic, thus helping you earn from digital ads as well. 

Option Three: Invest in Real Estate

As far as industries to invest in go, real estate is a good one. Even when you have a massive crash like the recession of ‘08, real estate has bounced back. Thus, if you put your money into the right property or company, you can make reliable income for years down the road. 

Putting money into real estate can work in a few different ways. Let’s break them down. 

Crowdfunded Real Estate

Whether you don’t have the money to buy a property outright or you don’t want to assume all of the risks, crowdfunded real estate is an increasingly popular option. Platforms like Fundrise enable you to invest in money-making opportunities without taking as much risk. Your money is mixed with other investors, and the property developer pays interest on it. 

Rental Properties

If you can buy a home or commercial property outright, then one of the best ways to earn passive income is by renting it out. Either you can manage the property yourself (acting as a landlord), or you can hire a management company. The latter option saves you all of the hard work and effort, but it will cut into your profitability. 

Ideally, you can use any profits to invest in more rental properties until you earn enough from all of them to live the life you want. 

Flipping Properties

You are probably familiar with this process if you pay attention to cable shows about it. The idea is that you buy a home, fix it up, and then sell it for a profit. There are a few benefits of working this way in real estate. 

First, you can use other people’s money to do it. Find an investor who wants to fund your enterprise and get a cut of the profits.

Second, you can get more income faster than you would with rental properties. Finally, if you strike while a particular market is hot, you could make a great profit. 

As you can imagine, the work involved in flipping homes is a lot, depending on the type of property you buy and how good of shape it’s in currently. However, you can use the profits from these flips to invest in other ventures and turn them into passive income. 

Bottom Line: Find the Right Path For You

We’ve shared a lot of different ways that you can earn long-term passive income, but each one comes with its share of pros and cons. Also, depending on your current situation, you may not be able to do some of them right away. Nonetheless, these options should allow you to start on generating some passive income in the future. 

This is a post from Clint Haynes, a Certified Financial Planner® and Financial Advisor in Kansas City, Missouri. He is also the founder and owner of NextGen Wealth. You can learn more about Clint at the website NextGen Wealth.

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About the Author

Aurtho Clint Haynes, CFPThis article was written by Clint Haynes, CFP®. Clint is a Certified Financial Planner® and Founder of NextGen Wealth. You can learn more about Clint by reading his full bio here.