10 Ways to Build Passive Income and Boost Your Wealth

Wealthy people often talk about earning passive income for financial freedom. They totally get how having lots of money coming in from different places is key, without having to do too much work for it.

According to studies, a wealthy person does not rely on just one, but rather seven sources of income. They aim for diverse and consistent streams of income that continue regardless of their presence. Therefore, it is not the big money they make that defines their wealth, but rather the amount of free time they have because of these regular incomes. This enables them to purse activities of their choosing.

Now, take an ordinary professional who earns an hourly salary for the work they do. Their income is entirely dependent on their work. That is, they don't get the pay check if they don't work.

This is where the importance of passive income comes to the forefront. You should add one if you don't have regular streams of income.

In this article, we will learn about the following topics:

What is Passive Income?

Passive Income is also known as Residual Income. It is the income that you generate from investment, rental property, or any other business activity without you being involved all the time. That is, the income stream is not dependent on your presence. This means that you reach a stage where income gets generated automatically and keeps flowing consistently.

The famous quote for passive income comes from the world-famous investor, Warren Buffet. He says that,‘If you don’t find a way to make money while you sleep, you will work until you die.’

In other words, you work once and get recurring income for years. Robert G. Alan, in his book ‘Multiple Streams of Income’, beautifully explains two types of income streams one can earn from. These are Linear and Residual.

Linear Income

Say you are a professional and get paid a salary on an hourly basis for your work. The number of times you get paid for the work you decide whether your income stream is Linear or Residual.

Thus, the work you do as a professional gets you paid only once in the form of the monthly salary you receive. That means the income stream is linear if you get paid only once for the effort that you make.

If you don’t go to work for whatever reason, you don't get paid in your absence. Likewise, professionals like doctors and lawyers will only earn professional fees when they see patients or clients. That means they receive Linear Income.

Residual Income

On the other hand, Residual Income is the recurring income that you get over the years by putting in effort once.

For example, if you are a writer, you'll invest ‘x’ number of hours once when you write the book, but you'll earn royalty each time a copy of the book gets sold. That is, you'll earn income over and over again from the work you only did once.

However, earning passive income is not easy, this is because it requires an initial investment of time and money, which, initially, pays very little. In addition to this, there is a lot of disappointment and stress involved, because working for your passive income with a well paying job does not happen easily.

Benefits of Passive Income

Gain Financial Freedom

Financial freedom is nothing but having enough residual income that allows you to spend money on whatever you want. That is an income that keeps multiplying and allows you to take up work you're passionate about.

Furthermore, financial freedom also lets you retire early and not live under the pressure of earning a specific amount of money year-after-year.

Accordingly, passive income lets you manage your finances and make money work for you, and you are not working for it instead.

Also Read: How to start a business in your 50s

No More Trading Of Time For Money

It's not getting rich quickly that people look for, instead it's about earning a good amount of money to lead a comfortable life. They want the freedom of time so that they can spend more time doing the things they are passionate about, or to do something they've always wanted to do.

This could be working on their dream project, spending more time with family, or travelling the world. As Robert G. Alan says, 'the wealthy is not the one who has more money but has more time freedom'.

Since wealthy people have multiple income streams that are passive, they get more time to do anything they want.

Providing For Discretionary Expenses

Discretionary expenses are typically the non-essential expenses that your business, or you as an individual, can do without if required. In other words, you or your business can run even if you don't incur such expenses. For example, these expenses could include things like buying expensive luxury items, or going on a vacation.

If you are a working professional, your salary is likely sufficient to cover the day-to-day expenses. Likewise, multiple streams of passive income can provide for any extra expenses you may incur.

In addition to this, working all the time for a basic salary to cover routine expenses can stress you out. But, with passive income you can take out time to unwind or spend time with your family. This helps in reducing overall stress and thus makes you happy.

Therefore, you can incur such extra expenses for your wellbeing without any stress.

Lending Security For Future

With passive income, you can put your income towards buying a house, investing in financial instruments, or saving for retirement. In addition to this, you can use such savings to further grow your passive income sources easily and quickly.

As stated earlier, your salary can be used for day-to-day expenses, but, whenever needed, you can use some of the money from your passive income to undertake routine expenditures.

However, you can save a good amount of money for the future if you set aside your passive income and avoid using it for daily expenses.

As a result, having passive income helps you in planning for the future in many ways.

Early Retirement

Typically, people only think of retirement in the latter part of their life. This is because that's usually the time when they can earn financial security for themselves. But you can easily retire earlier if you have multiple passive income streams.

That's because passive income gets you recurring income without you making much effort to earn the same. For example, investing in the stock market, becoming an influencer, or writing a book are all ways of earning passive income.

Thus, building passive income sources can take away the stress and anxiety of earning a specific amount of money. And since money keeps coming in, you can easily retire earlier than the time you orginally thought of doing so.

How Much Money Can I Make From Passive Income?

As mentioned earlier, earning passive income is not easy, and it's also not a means to get rich overnight. You'll need a good amount of initial investment in order to build sources of passive income.

And if you do not have sufficient funds, you can invest time and effort in building passive income sources that will grow over a period of time. As you earn more money, you can group that amount with your effort to grow your passive income.

That is how rich people amass wealth, along from their primary income source, they also invest money in sources that grow over a period of time.

Unlike your primary source income, that has limited potential, a passive source of income gives you multiple incomes consistently. That is, you'll earn more recurring income without being present at all times as a result of the increased level of income invested in building your passive income sources.

10 Passive Income Ideas

There are multiple ways in which you can create passive income. Here are some of ideas to help you build your own passive income streams:

1. Buying A Rental Property

Real Estate has always been a good investment, this is because you benefit from earning passive income, consistent cash flows, and tax breaks.

You get passive income in the form of monthly rental income if you own real estate properties. This also helps you to gain financial freedom as you can save the entire amount you earn from rental income.

This means you can use your primary source of money for routine expenses and keep rental income as a buffer. The only issue with buying property to generate passive income, is that you'll need large sums of money initially to buy the property.

If you do not have large sums of money, you can go for Real Estate Crowdfunding websites. These are online platforms that allow you to pledge a small amount of money towards a property. Plus, it also makes you the owner of such a property once it gets crowdfunded completely, meaning you'll receive your share of earnings along with any capital gains from the property.

Another option is to commit your funds towards a Real Estate Investment Trust (REIT). Much like Mutual Funds, REITs collect money from a number of investors which is then used to finance real estate projects.

Therefore, as an investor, you can earn your share of dividends without having to buy or manage a property of your own.

2. Renting Out Your Property

Affiliate Marketing is one of the ways in which bloggers and influencers generate passive income. As a blogger, you can register with various Affiliate Marketing Programs offered by various brands, online influencers, etc.

These programs allow you to partner with them and sell their products on your website through a link. That is, you as a blogger earn a certain percentage of revenue. Provided the people coming on your website happen to click on the link and purchase the product of your affiliate marketer.

Likewise, various search engines allow you to display ads on your website or blog for which you earn a commission on a per-click basis.

3. Affiliate Marketing

Affiliate Marketing is one of the ways in which bloggers and influencers generate passive income. As a blogger, you can register with various Affiliate Marketing Programs offered by various brands, online influencers, etc.

These programs allow you to partner with them and sell their products on your website through a link. That is, you as a blogger earn a certain percentage of revenue. Provided the people coming on your website happen to click on the link and purchase the product of your affiliate marketer.

Likewise, various search engines allow you to display ads on your website or blog for which you earn a commission on a per-click basis.

4. Becoming An Influencer

You can become an influencer and create passive income if you have knowledge and expertise in a niche are. As a result, you can create content around that niche and build authority as well as strong relationships with your audience. This relationship is built in such a way that you can have influence over the buying decisions of your target audience.

Now, there are a number of ways in which you can create passive income from your huge number of followers, such as:

• Creating your own YouTube Channel
• Starting a podcast
• Starting a blog
• Selling third-party products or services
• Selling stock photos

5. Selling An Online Course

Another great way to generate passive income is to sell an online course. You can monetize your specialized knowledge in a niche in the form of an online course and sell to an audience seeking such knowledge.

People go online for many reasons, not only for online shopping or socializing. They also use the web to learn, seek answers, or gain knowledge in a specific field.

For instance, if you know how to play the violin, you can give violin lessons to your target audience via an online course. Or, if you have expertise and experience in the field of web development, you can give coding lessons to your target audience.

Now, you could sell online courses through your own website or social media platforms. But you can also upload your courses to an open online course providing platform in order to sell your course to your target audience.

6. E-Commerce

E-commerce is a great way to generate passive income, as you can sell either your own or third-party products online to earn passive income.

Dropshipping is a great example of this. Dropshipping is an order fulfilment system where you, as an online retailer, are not required to store, manufacture, or ship the products that you sell to your customers. Instead, you partner with dropship suppliers, so when your customer places an order on your online retail store, you forward the orders to dropship suppliers.

Therefore, when your customers place an order, these suppliers are responsible for manufacturing, stocking, and shipping products on your behalf.

7. Investing

As mentioned above, one of the more common ways that you can create passive income is by investing in real estate. However, there are other investment avenues that can generate passive income for you:

8. Digital Products

Selling digital products is another great way to earn passive income. These typically are the products that are sold and delivered to your customers electronically and not physically. Some of the popular digital products include, online courses, PDFs, ebooks, photos, templates, worksheets, icons, or illustrations.

As stated earlier, creating such content requires initial investment of time and effort, but once created, these digital products can be sold over and over again.

It's also less risky to create and sell such products, as the only thing that you lose out on is time invested and, if your customers don't happen to buy these products, some of the money you've invested.

In addition to this, you get time on your side to create more such products since you need to put effort only once.

Furthermore, producing such goods is less expensive since the products are not being shipped physically.

9. Instagram Sponsored Posts

Instagram is one of the fastest-growing social media platforms. From what was once just a photo-sharing app, it has now turned into the top-most social media platform since its lauch. You can build a following on Instagram and sell either your products or third-party products to your followers.

Furthermore, the organic reach of an post on Instagram is relatively high when compared to other social media platforms, this happens when you use the right hashtags and post content at the right time. As a result, you can generate passive income via Instagram through a number of ways once you have a highly engaged audience.

You can sell physical or digital products through the app. Instagram offers business accounts that have features, like a shop button, product tags, and in-app checkout, which make it really easy to sell both physical and digital products.

Likewise, you can register with the affiliate marketing programs of brands that offer higher payouts for promoting their products. All you need to do is add their affiliate links to your Instagram account and you'll receive commission by generating sales for the affiliate products that you promote.

Therefore, you can also create passive income via sponsored content if you have a good number of followers, meaning, you can reach out to brands who are willing to promote their products via influencers and pay you for the promotion.

10. Earning Royalty

This is another great way to make money without working, especially for those who are good at writing or have a lot of knowledge on specific subjects. Once your book is chosen for publishing, you'll sign a contract with the publisher, meaning the publishing house promises to pay you royalties, which is a specific amount of money that you'll get paid when a copy of your book is sold.

So, once your book gets published, it will continue to give returns for years. And if you don't want to wait for a publisher, you can also publish your e-book yourself through platforms like Amazon Kindle direct publishing. This way you can quickly and easily publish your book and reach more people in order to make money from it.

How to Find the Best Passive Income Source

Identifying the best passive income source for you depends on many factors, the most important being how much time and effort you want to spend.

Passive income sources that are easiest to start with are usually hardest to make money from, as more people are trying to get involved with the opportunities that are available.

That’s why we recommend trying to identify your niche and going from there. This can help you find an option that suits you‌, is one that you will feel motivated to get started on, and is one that you will be most satisfied with upon it’s success.

So consider the avenues you see yourself in, and go with your gut!