Earn money while you sleep – that’s the promise of passive income. However, the additional income cannot be generated without any effort. Marco_de_Benedictis / Getty Images
Passive income is money that you earn without having to actively work for it.
It can allow you greater financial security, more free time, and independence.
Popular ways to generate passive income include renting out real estate or investing in stocks.
Earning money without having to do anything for it – that sounds too good to be true. In fact, there are a few ways to fill up your bank account a little without much effort. With a clever strategy, you can even generate passive income in the long term and enjoy a lot of freedom. You can find out which methods could help you here.
What is passive income?
Most people have an active income. This means that they do physical or mental work as employees or self-employed and get paid for it. The idea behind passive income, on the other hand, is that it generates itself – i.e. without you having to actively work for it.
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Theoretically, thanks to passive income, you can earn money around the clock – even while you’re on vacation. Depending on how much you earn with it, the additional source of income may also give you more freedom. Maybe your extra income is so high that you can reduce your weekly working hours in your regular job and spend more time with your family. Or you manage to build up a long-term fortune.
However, passive income cannot be generated entirely without work. As a rule, you have to invest some time or even money, at least at the beginning, in order to then benefit from recurring income without much effort. Here are five ways you can build passive income.
1. Rental of real estate
A popular way to generate passive income is to rent out real estate. The monthly rental income is easy to plan and therefore represents a reliable stream of income in the long term.
However, to buy a property, you have to spend a lot of money first. Interest is usually also charged on loans, which is why this option is more appealing to people with a high starting capital. In addition, there are also costs for the maintenance of the property.
2. Dividend Stocks
Equities are also considered an attractive source of additional income. However, you must carefully analyze the stocks you want to invest in. That can cost time and nerves. In addition, there is always a certain risk of partial or total loss with equities. With the right strategy, however, you can spread risks and build passive income with dividends.
P2P (peer-to-peer) lending is another way to get extra money. You can invest in loans from private individuals on special platforms and achieve comparatively high returns. Interest payments flow directly to you, while marketplaces earn a one-time fee.
However, this method also carries a risk. In contrast to banks, private individuals have no deposit insurance. So you have to reckon with the fact that the loans may not be repaid to you and you could lose the money you invested.
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4. Online Products
It doesn’t matter whether it’s online courses, self-sewn clothing or unusual cuddly toys: you can earn money on the Internet with your own products. Of course, you have to produce them first, which takes time and effort.
In the best case scenario, you only have to record an online course, for example on photo editing with Adobe Photoshop, once and then you can sell it to numerous people via websites such as Udemy or your own website. In this way, you generate a continuous stream of income that flows in along the way.
If you have a website, blog or social media channel with a large number of followers, you can also generate passive income through affiliate marketing. This is a partnership between you and a seller whose products or services you are promoting. You do this via a tracking link, which you include on your blog, for example, and which leads people directly to the company’s online shop. If your followers buy the product, you will receive a commission of a predetermined amount.
However, affiliate marketing is not a 100% secure source of income either, since you never know if and how many customers will ultimately buy something on the website you are promoting. In addition, it can sometimes be difficult to find affiliates that exactly fit your target group.
Disclaimer: Stocks and other investments are always associated with risk. A total loss of the invested capital cannot be ruled out either. The published articles, data and forecasts are not an invitation to buy or sell securities or rights. They also do not replace professional advice.
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