Active income is the money you make from your day work. Earning needs a concerted effort for so many hours per day. Passive income, on the other hand, allows you to earn money without having to work hard.

Making automatic passive income is more than just a means to financial stability; it offers additional advantages. It can improve your quality of life by relieving financial stress and anxiety. It can also provide you more time to pursue your interests, such as starting a new activity or giving your time for causes you care about. If you are successful in earning passive income, you may be able to retire earlier than intended.

Passive income is simply money that you earn without doing any work. So, the income you earn on your investments is passive income. The interest on your savings account is also passive income. When you automate your savings and investing, you’ll earn passive income.

Automatic Savings

“It takes money to make money.” It’s an old adage, but it’s true. Before your money can make money for you, you have to save some money. Here are some ways to automate your savings.

• Direct Deposit

You likely have your paycheck directly deposited, but does the whole thing go into your checking account? Put your savings on autopilot by having part of your paycheck directly deposited into your savings account instead. Most companies allow you to allocate your paycheck to several different accounts.

Pro tip: Keep your savings account at a different bank, and don’t link it to your checking. When you’re tempted to move money from savings into checking to spend it, you want to really think about it.

• Saving Your Bonuses and Raises

When you set up your direct deposit to send some of your pay to your savings account, you can usually choose a flat dollar amount or a percentage of your paycheck to go to savings, and the balance to go to checking. If you choose the percentage option, you’ll save a little extra when you get a bonus or a raise.

Pro tip: When you do get that annual salary increase, be sure to increase the percentage you’re saving, too. You can split your raise between your savings and checking accounts. For example, suppose you’re putting 5% of your salary into your savings account, and the other 95% into checking. Then you get a 6% raise. Increase your savings percentage to 8% — you’re adding half of your raise to savings, essentially.

• Rounding Up

Many banks will let you “round up” your debit card purchases to the next dollar and put the “change” into savings. So if you use your debit card for $32.45 worth of gas at the gas station, your bank will round up to $33.00 and put $0.55 into your savings account. It doesn’t sound like much, but it’s painless, and it adds up over time.

Automatic Investing

Investing is a great way to generate passive income, and it’s easy to automate. It’s a two-step process. First, set up an automatic transfer from your savings account into your investment account. Set this up for a day or two after your paycheck hits your savings account. Second, set up a systematic purchase of stock in your investment account. The money lands in your investment account, and then a few days later, you’re investing that money. Even if you’re lying on the beach or skiing in the Alps, it still gets done.

Pro Tip: Automated investing goes hand-in-hand with dollar-cost averaging. When you set up your investment account to buy a certain dollar amount of security regularly, you’re buying more shares when the price is low, and fewer shares when the price is higher, reducing your average price per share.

Automating your finances not only generates passive income, but it also sets up good habits for financial success in the future. Regular saving and investing will help you reach your financial goals.

How to Make Automated Passive Income

Making automated passive income is not just the key to financial stability; it has other benefits. It can improve the quality of your life by reducing financial stress and worry. It also can allow you more time for pursuits you enjoy, such as starting a new hobby or volunteering your time toward causes you care about. If you’re successful at earning passive income, you could even retire earlier than you might have expected.

Here are six ideas for making automated passive income after you put them in place. Try one or try them all to start earning without having to think about it.

Dividend Stocks

“Invest in dividend-paying stocks that consistently provide income,” said Jenna Lofton, certified financial planner and founder of Stock Hitter. “By holding these stocks in your portfolio, you’ll receive regular dividend payments without needing to manage the investment actively.”

Consider high-yield dividend stocks from companies with strong financial backgrounds and a long history of increasing dividends.

Peer-to-Peer Lending

“Platforms like LendingClub and Prosper allow you to lend money to individuals or businesses in return for interest payments,” Lofton said. “Once you’ve invested, the platform handles loan servicing, minimizing your effort.”

According to Prosper, its personal loans carry an average historical return of 5.7% for investors. Be aware that P2P lending does carry risk. If the borrower defaults on the loan you invested in, you could suffer a financial loss.

Real Estate Investment Trusts (REITs)

“REITs are companies that own and manage income-producing real estate properties,” Lofton said. “By investing in REITs, you can earn passive income from rent payments without dealing with property management.”

You can invest in publicly traded REITs or non-traded REITs. Publicly traded REITs are traded on a stock exchange and you can buy shares by using a brokerage account. Non-traded REITs require you to work with a financial advisor or broker to invest.

High-Yield Savings Accounts or CDs

“Place your money in high-yield savings accounts or certificates of deposit from reputable banks,” Lofton said. “You’ll earn interest on your deposits with minimal effort on your part.”

Typically, you’ll find the best rates for high-yield savings accounts and CDs at online banks. Online banks have less overhead than traditional brick-and-mortar financial institutions because they don’t have the expenses of staffing and running physical branches.

Create and Sell Digital Products

“Write an e-book, design a digital course or create a mobile app, then sell them on platforms like Amazon, Udemy or the App Store,” Lofton said. “Once your product is up and running, it can generate passive income without much maintenance.”

Nicole Miller of Finance + Freedom suggested creating and selling printables.

“These can be very lucrative as well since, once created, they can sell over and over again,” Miller said. “The printables can be created by you or even sourced out and uploaded into an online platform like Etsy.”

Try Car Sharing

“Renting out your car via services like ZipCar or Turo is a way to make great passive income without doing much work at all,” said Andy Kalmon, CEO of Benny. “You can offer contactless pickup by means of a drop box or lockbox for your keys, and the service is very customizable as to how you want your car to be used.

“Car rental companies are still struggling to get enough cars for their fleets, and that, combined with high rental prices, is making a lot of people look for alternative car rental options.”

How do I Turn my Business Into Passive Income?

Are you constantly on the lookout for new ways to grow your business and increase your income? You’ve probably heard about the benefits of adding passive income streams, but maybe you’re not quite sure where to start. The good news is that there are countless options available, depending on your interests and skillset.

Read Also: Passive Income for Writers: Freelancing and Beyond

Whether it’s creating digital products or investing in rental properties, the possibilities are endless. With a little research and some strategic planning, you can start generating passive income that will help support your business over the long term and give you more financial stability.

Don’t let the prospect of adding a passive income stream intimidate you. With the right approach, it’s a smart and manageable way to take your business to the next level.

You know that time and money are two of your most valuable commodities. And while most entrepreneurs are used to working long hours and hustling to make ends meet, there’s something to be said for generating passive income that requires minimal effort on your part.

Here is a list of some of the best passive income ideas that can help you make money while still being able to focus on your core business:

1. Rental properties

Investing in rental properties is a smart way to increase your income and build your wealth portfolio. While it may require some initial investment and effort, having rental properties can provide a steady stream of passive income that requires little ongoing work.

It’s important to do your research and choose properties that are in desirable locations and have good rental potential. However, with thoughtful planning and management, rental properties can be an excellent way to diversify your income and achieve financial stability for the long term.

2. Affiliate marketing

Affiliate marketing is one of the most popular and lucrative forms of passive income that requires minimal effort. As an affiliate marketer, you will promote other people’s products or services through your website or social media channels. Every time someone clicks on one of your affiliate links and makes a purchase, you earn a commission. The commission percentage varies from program to program, but it can range from 10-50 percent.

3. Sell digital products

Selling digital products such as e-books, courses, or audio files is a great way to earn passive income. The initial cost to create digital products is typically low and once the product is made, it requires minimal effort to maintain it. Once they’re done, they can be a steady source of passive income.

You can sell digital products on a variety of online marketplaces, making it easy to reach a large audience. Whether you’re a seasoned seller or just starting out, digital marketplaces offer an incredible opportunity to showcase your products and connect with customers.

4. Create a mobile app

Developing a mobile app can seem like an intimidating task, but it can be an excellent source of passive income. There are a variety of mobile app ideas, such as games or business applications, that can generate a passive income stream.

The key is to conduct thorough research before creating an app to identify the most promising niche to target. It’s not enough to simply have a great idea. As an app developer, you must take the time to identify a promising niche that hasn’t been saturated by existing apps.

This requires conducting market research, analyzing user needs, and identifying potential gaps in the market. By taking these steps, you can ensure that your app stands out and appeals to your target audience, leading to increased downloads and higher user engagement.

5. Invest in stocks

Investing in stocks has become a popular way to earn passive income, and rightfully so. If you’re looking for an opportunity to grow your wealth over time, then stocks can offer the potential for significant returns. However, it’s important to keep in mind that investing in stocks does require some initial capital.

It is crucial to conduct thorough research and seek professional advice before investing to minimize your risks. A skill learned in investing is patience, as it takes time to see a return on your investment. If you’re willing to take the necessary steps to learn and invest in stocks, it could certainly pay off in the long run.

6. Peer-to-peer lending

As the financial world continues to evolve, more and more investment options are becoming available to the everyday consumer. Peer-to-peer lending platforms are one such option that has gained increasing popularity in recent years. These platforms allow individuals to lend money to others, earning interest on the loans in return.

In a world where traditional investment options can come with high levels of risk, peer-to-peer lending offers a relatively low-risk alternative with the potential for high returns.

While it’s important to do your research and fully understand the platform and borrower before investing, peer-to-peer lending can be a viable option for those looking to diversify their portfolio and earn some extra income.

7. Royalties

For many people, creative works such as books, music, and artwork are a passion and a form of self-expression. However, they can also prove to be a valuable source of income. With the rise of digital media, it’s easier than ever to distribute and sell your creative works.

That’s where royalties come in, as they are a form of passive income that allows you to earn money every time your work is used or sold. This doesn’t just benefit artists and writers, but it’s also the perfect opportunity for entrepreneurs to continue focusing on their core business while still earning money from their creative endeavors.

The bottom line is that it’s essential to identify and adopt passive income strategies that fit your business model and lifestyle. Passive income may take time and effort up front, but the long-term benefits are significant. Don’t be afraid to explore one or more of the ideas mentioned above and start building a reliable financial future for your business.

Summary

Passive income is a money stream that requires little or no continuous effort. As a business model, it’s largely self-sustaining. Often, passive income involves some kind of upfront investment that generates long-term steady gains.

There are two categories of passive income, with various options and channels under each: 

1. Low investment streams require less money to set up and are low risk but have a lower earning potential. Examples include affiliate marketing, drop shipping, and selling digital products.

2. High investment streams require more capital to start and are higher risk but earning potential is greater. Examples include buy-to-let property, stock market trading, and investing in cryptocurrency.

When people talk about “earning money in your sleep,” they’re referring to passive income. Traditionally, you would do this through financial investments. However, today, there are so many more options for starting and maintaining a passive income. For example, many creatives start a passive income stream by creating a digital product that they sell repeatedly.

Here are some things to consider if you want to start earning passive income:

• What kind of upfront investments can I make (think in terms of money, time, and effort)?
• Do I have any skills or knowledge that other people may find helpful?
• How can I automate the process of sharing my skills or knowledge?

Depending on the passive income stream you choose to pursue, there may be things you can do to increase your short-term earnings. For example, some people who sell digital products will use various marketing strategies to enable more people to discover their products, which leads to more sales in a shorter period. Others may scale the scope of their passive income business with new products that further their initial offerings to recapture an established client base.