What Is Passive Income?

Passive income is a way of making money from something that you don’t need to actively work on or manage regularly. In other words, whereas most jobs pay you for time spent carrying out a particular function (usually by the hour), passive income allows you to earn money for one thing, even while doing another.

One of the most common forms of passive income is stock dividends, because it’s one of the oldest. Stock dividends are regular shares of a company’s profits, which you can get if you buy into the company. However, not all of us have the money needed to spend playing the stock market—or the willingness to risk our savings. Fortunately, there are many other opportunities to generate an income passively.

Read on to learn more about the kinds of people who can make passive income, the benefits of passive income, and some examples.

What kinds of people make passive income?

Anyone can make passive income. You don’t have to be a seasoned entrepreneur with deep business knowledge. All you need is an idea, an internet connection, and the commitment to bring your idea to life. Many students, stay-at-home parents, and workers who want to top-up their income dip their toes into potential ways to make passive income.

Typically, people looking to make money focus on a particular skill so that they can sell different aspects of it. That skill might be one they use in their job or enjoy as a hobby, and budding entrepreneurs will often develop multiple passive income streams so that, together, it’s easier to earn a total amount that they’re happy with.

For example, a professional accountant may earn money by writing an e-book about doing your own taxes. Because the accountant is also a great amateur guitar player, they might also run a paid online course about how to play the blues.

Neither of these activities requires the accountant, beyond creating the content itself, to work outside of regular hours. They simply upload the content to their website, make sure the content is behind a paywall or in an online store so that people have to pay to access it, optimize the website for organic search, and then promote the content on their social media.

Any money made from this point on is all passive income because the accountant doesn’t have to keep working on this content for it to start generating regular, ongoing income.

What are the benefits of passive income?

Making income passively has many benefits. It allows you to:

• Turn your hobby into an income stream

• Build your professional reputation for thought leadership/subject expertise

• Spend more time doing things you enjoy

• Develop skills beyond your job or hobby (e.g., writing or teaching)

• Increase your annual income 

Passive income gives entrepreneurs the opportunity to get back some of the freedom that working full-time for an employer takes away—without sacrificing financial security.

Examples of passive income

There are many ways of earning passive income and they don’t all require you to produce new content every time you want to sell something new, like the guitar-playing accountant in our above example.

Some types of passive income, such as drop shipping or affiliate marketing, allow you to make a profit when other people spend money. You just act as a broker who takes a commission when the transaction has been completed.  

Here are a few different passive income ideas for you to explore.

• Selling stock photos on your website: If you’re a photographer, or if you want to offer other photographers a place to make money from their photos, licensing photos to media outlets and brands for set periods is a great way to earn money from pictures.

• Setting up an affiliate marketing website: Affiliate marketing means writing about products and linking to them so that, whenever anyone clicks through from your website to buy the product, you get a commission.

• Writing an e-book: If you’re a subject matter expert, it’s very likely that there are other people who could benefit from learning from you, so think about writing and selling an e-book for that audience.

• Running online courses and classes: Selling access to an online course or class on your website is simple to do, and it will help you to build your reputation as an expert in your field.

• Creating and licensing music: If you’re a musician or producer, you can use your website to add audio blocks so that people can hear snippets of music they may wish to purchase or license from you for TV soundtracks, commercials, or other business uses.

Whichever passive income streams you decide to explore, it’s important to understand that some effort is involved. But, for those who put in the time to develop valuable websites and content, it’s wholly possible for a passive income to become your main source of income.

Learn more about the benefits of passive income