5 Passive Income Ideas that really work!
Hello, friends! Today we will be discussing 5 distinct methods through which you can generate passive income. For each of these methods, we'll delve into the initial difficulty of getting started, the challenges involved in earning $100 per month, and the level of effort required to sustain the income stream once it's established.
But before we dive in, I want to clarify something about passive income. When I mention it, I always use air quotes because true passive income, where money magically appears without any effort, doesn't actually exist. However, when I refer to passive income, I mean income that isn't directly tied to the hours we put in. Let's say you decide to write a book. Once you've written and published it, the book is out there on bookshelves. From that point forward, whenever someone purchases your book, you earn money through royalties.
That's what I consider passive income. You could even be earning money while you sleep because your creation is generating income for you. It's important to note that generating passive income often requires a considerable amount of time and effort to kickstart. So, if you encounter any advertisements prior to this video promising quick riches or individuals in the comments section urging you to "WhatsApp this number" for instant wealth, it's all a scam.
Such schemes won't work. There's simply no genuine method for getting rich quickly, so it's best not to waste your energy on them. In my view, money is merely a medium for exchanging value. The only way to make money is by providing value to others. And when it comes to passive income, it involves offering value in a way that isn't directly tied to your time.
Therefore, I strongly advise against attempting to join any get-rich-quick schemes because they don't exist. Remember, the only legitimate way to make money is by providing value. With that in mind, let's explore the 5 different ways you can provide value if you're interested in generating passive income.
1. Investing in Stocks and Shares
Alright, let's begin by exploring the world of stock market investments. In this context, our primary method of providing value is by allocating our money towards stocks and shares. Investing in a service can also be seen as a form of value exchange. When we invest our money in a company's stocks, it is reasonable to expect some form of return on that investment. Starting with stocks is particularly advantageous for generating passive income. If you have savings sitting idle in a low-interest savings account, earning a mere 0.01% interest, they are not maximizing their potential.
However, by investing those savings in stocks, you have the opportunity to earn passive income from your dormant money For beginners, we generally recommend investing in index funds, which represent a broad market index like the S&P 500. When you invest, let's say, $1,000 in the S&P 500, your money is distributed among the top 500 largest companies in the US, weighted based on their market size.
For instance, you would have a small portion invested in Apple, Meta, Google, Microsoft, and various other prominent companies. This approach allows you to diversify your investments across multiple companies. To get started, all you need to do is sign up with a stockbroker. In the US, you can consider using Webull, in Canada there's platforms like WealthSimple. While in the UK, options like Freetrade or Vanguard are available.
Regardless of your country, a quick Google search for "best stockbroker platform" should help you find a suitable option. Investing in an index fund is relatively simple through these platforms. With our 5-star rating system, we rate the difficulty of starting this process at one out of five stars, indicating its ease of initiation. Where one star is very easy, and 5 star is very difficult. Now, let's address the question of how challenging it is to generate $100 per month through stock market investments.
The answer depends on the overall performance of the stock market. On average, over the past 30 to 50 years, the S&P 500 has yielded a return of around 10% annually (excluding inflation adjustments). Based on this average, if you wish to earn $100 per month in passive income, you would need to invest roughly $12,000 in the S&P 500, generating a 10% return of $1,200 per year or $100 per month.
It's worth mentioning the concept of compounding, which can significantly impact your investments over time. If you invested $7,500 in the S&P 500 and left it untouched for five years, assuming an average annual return of 10%, you would be generating approximately $100 per month after five years. Similarly, an investment of $5,000 in the S&P 500 would yield $100 per month in purely passive income after a decade, based on the same 10% average return.
Consequently, the difficulty of achieving $100 per month in passive income from stocks and shares depends on your ability to save and invest $5,000, $7,500, or $12,000. Crucially, this should be money you don't anticipate needing in the next 5 to 10 years. The ease of accumulating such amounts of money varies greatly depending on your country, circumstances, and employment. In the US, Canada or the UK, where the median average
salary is around $45 - $55,000 it is relatively feasible to save $10,000, depending on individual circumstances. However, if you have a family to support or different financial obligations, the situation may differ. Considering these factors, I would rate the difficulty of achieving $100 per month in passive income from stocks and shares at approximately three out of five stars.
Lastly, let's evaluate the level of effort required to maintain this income once you have set up your investment. We assign a rating of one out of five stars to this category. Once you have invested your money, you can adopt a "set it and forget it" approach. The maintenance required is minimal compared to other sources of passive income that demand more ongoing attention.
To sum up, investing in stocks and shares provides an accessible avenue for generating passive income. It begins with allocating your savings to index funds, such as the S&P 500, through a reliable stockbroker platform. The difficulty of achieving $100 per month in passive income depends on your ability to accumulate savings ranging from $5,000 to $12,000, which can vary based on your country and personal circumstances. Once you have established your investment, the maintenance required is minimal, allowing you to enjoy the benefits of passive income.
2. Starting a YouTube channel
Starting a YouTube channel is relatively easy, earning it a rating of one out of five stars in terms of difficulty. Simply visit youtube.com, click on "create a channel," and you can start uploading videos using your phone. However, creating quality content is where the real challenge lies, as it's crucial for growing your YouTube presence. Nonetheless, getting started is straightforward.
The real question is how hard it is to make substantial money from YouTube. Let's say you aim to earn $100 per month in passive income. What does that entail? To be eligible for monetization on YouTube, you need to have 500 subscribers and 3,000 hours of watch time. On average, it takes around 60 plus videos to reach 500 subscribers, making it a difficult task. If you expect to start making money immediately after launching your channel, that's unlikely to happen.
You need to invest considerable effort and commit to creating content consistently, at least once a week, for a minimum of one year before seeing any returns. Now, let's assume you've achieved the 500-subscriber and 3,000-hour watch time threshold. How difficult is it to make $100 per month? On average, YouTubers earn around $1-2 per thousand views. So, to make $100 per month, you would need approximately 50,000 views on YouTube.
If you release one video per week and assume no traffic on your older videos, each new video needs to gather approximately 12,500 views. In terms of difficulty, I would rate this task four out of five stars. Creating compelling YouTube videos and establishing your presence is challenging. However, the rewards make it worthwhile. It provides an excellent skill set, offers enjoyable experiences, allows you to connect with people online, and teaches you camera presence, filming, and video editing.
Lastly, let's consider the effort required to maintain a YouTube channel after reaching the initial milestone of a thousand subscribers. Acquiring the first thousand subscribers is more demanding than maintaining and growing from that point. Once you have a thousand subscribers and your channel is growing, it indicates that you've found a successful formula.
Consequently, maintaining your channel becomes easier compared to starting from scratch. Therefore, I would rate the effort required for maintenance as two out of five stars for a YouTube channel as a passive income stream.
It's worth mentioning that there are other methods of monetizing YouTube, such as brand deals and merchandise sales. However, these revenue streams do not fall under the category of passive income through YouTube, which is why I haven't included them in this assessment.
3. Starting a podcast
Podcasting is generally a more accessible endeavor compared to starting a YouTube channel. However, growing a podcast can be significantly more challenging than growing a YouTube channel due to the absence of an algorithmic support system for podcasts. Interestingly, many podcasts gain traction by maintaining a presence on YouTube, which is somewhat unconventional. So, how difficult is it to kickstart a podcast? Well, on a scale of one to five stars, it's extremely easy, with a rating of one.
You can simply visit anchor.fm, utilize your phone, and even pass it around among your friends to start recording episodes. For remote podcast interviews, you can make use of a platform called Riverside.fm, which simplifies the recording process. While starting a podcast is straightforward, generating $100 per month in passive income from it is a different story. In reality, podcasters don't earn true passive income, as their revenue primarily relies on brand deals rather than a podcast-specific advertising program like YouTube AdSense.
To make money through your podcast, you generally need sponsorships or brand deals. On average, a 30-second ad in a podcast yields around $18, while a 60-second ad earns approximately $25 per thousand views or listens. Now, let's say you want to make $100 per month. Assuming you have sponsorships lined up based on your download numbers, you would need approximately 1,000 downloads per episode for a weekly podcast.
This translates to 4,000 downloads per month with four episodes released. If you include a 60-second ad at a rate of $25 per thousand views, you could potentially reach your $100 monthly goal. However, achieving a thousand downloads per month is considerably more challenging for podcasts compared to garnering a thousand views on YouTube.
YouTube has a vast built-in distribution network and a significantly larger user base than podcasts. Nevertheless, statistics show that the top 20% of podcasts worldwide achieve over 1,000 downloads per episode on average. Considering the overall ratings, starting a podcast receives a one-star rating, indicating its ease of initiation.
Making $100 per month through a podcast receives a three-star rating, signifying the moderate level of difficulty, albeit less challenging than monetizing on YouTube with its minimum threshold requirement. Finally, in terms of maintenance, podcasting does not offer true passive income since you need to consistently create new episodes to maintain brand deals.
However, once you have found a successful formula and become accustomed to the podcasting process, it becomes easier to continue producing content, much like any other endeavor. Therefore, the maintenance aspect of podcasting receives a two-star rating.
4. Becoming an affiliate marketer
Okay, let's explore idea number four for generating passive income: becoming an affiliate marketer. In affiliate marketing, you sell products created by others and earn a percentage from each sale. Surprisingly, 48% of affiliate marketers worldwide earn $20,000 per year, which translates to $1,660 per month. That's actually quite good, indicating that people are finding success in this field. Now, let's discuss how easy it is to get started with affiliate marketing.
I would rate it two out of five stars. All you need to do is sign up for an affiliate program like Amazon Associates, which happens to be one of the largest programs globally. Once you've signed up and obtained your unique affiliate links, you can share them on your website, Twitter, social media, or any other platform. If someone makes a purchase through your link, or even buys any product on Amazon through your link, you'll earn a small percentage of the sales.
Starting with affiliate marketing is relatively simple, but what about making $100 a month? Truth be told, that can be quite challenging. Let's say you're promoting a $50 product and earning a 5% commission, which would be great. However, Amazon offers a lower percentage, around two or three percent.
Assuming a reasonable average conversion rate of 1% (the number of visitors who actually make a purchase), you would need around 8,000 monthly website visits to earn $100. Obtaining 8,000 visits per month, specifically to your product page, is quite difficult. Succeeding in affiliate marketing often requires significant upfront effort, either in building an audience or establishing domain authority in your chosen niche to attract organic traffic.
Apart from Amazon, there are numerous other affiliate programs available. So, how hard is it to make $100 a month? I would give it a 3.5-star rating, mainly because it necessitates having an audience. To build an audience, you need to create valuable content and consistently share it for free online, preferably once a week, for at least a year.
By following these steps, I guarantee you'll develop an audience and earn some passive income. However, it's quite challenging to stay committed to this strategy for at least a year. Hence, the 3.5-star rating.
The good news is that once you've established your audience and started earning money through affiliates, maintaining your income becomes relatively easy, especially if your content is evergreen content that remains relevant over an extended period, unaffected by current affairs or the latest news. This can provide a reasonable source of passive income.
5. Selling digital products
Okay, let's discuss the fifth and final method for generating passive income, which involves selling digital products. These products are created once, such as ebooks, downloadable apps, or similar items. Once you've created them, you can sell them multiple times without incurring any additional costs. Now, you might be wondering how difficult it is to start creating digital products.
Well, the truth is, anyone can write an ebook or create a product. So, I would rate this method as two out of five stars. However, it's important to note that the value you provide through your product must justify the price you charge. This can be challenging, especially if you lack experience in this field. Now, let's address the question of earning $100 a month. While it's relatively easy to create an ebook, convincing people to buy it, or purchase your app or website themes, is a whole different story.
The market for such products is highly competitive, so you need to be genuinely exceptional to attract customers. The key lies in identifying a problem that your potential customers have, offering a solution, and charging for it. If you can accomplish these three things, making $100 a month is definitely achievable.
However, it's important to emphasize that you must have something valuable that addresses a pain point people are willing to pay for. Therefore, I would give this method three out of five stars. Lastly, let's consider the maintenance aspect. I would rate it two out of five stars. While some level of maintenance is usually required for your product, it's generally easier compared to the initial creation process.
