In today's fast-paced world, the concept of passive income has gained significant traction, offering individuals the opportunity to generate revenue streams that require minimal ongoing effort once set up. Whether you're looking to supplement your current income or aspire to achieve financial independence, exploring various passive income avenues can pave the way to financial stability and freedom. Here are nine lucrative passive income ideas to consider integrating into your financial strategy:
- Investing in Stocks and Shares:
Investing in a service is, in a way, giving a form of value. And so, when we give our money to a company in the form of buying their stocks, it makes sense that we would get some kind of return for that investment. And we're starting with this because investing in stocks is the easiest way to make any kind of passive income. If you have any sorts of savings, and they're sitting in a savings account, earning 0.01% interest, they're not really doing very much for you. Whereas, if you had those savings and put them in stocks, you could potentially be earning passive income from the money that's otherwise just sitting there.
Now, I've got a whole video called the ultimate guide to investing in stocks and shares for beginners, which is gonna be linked over there somewhere. So that is a solid, half an hour long introduction to stocks and exactly how they work. But the thing that I recommend for most beginners as a non-financial advisor, and this is not financial advice, purely for entertainment purposes only, or so people say, or, at least, the thing that I do is that basically all my money that's in stocks and shares is invested in index funds.
Now, an index fund is something like the S&P 500. And when you invest, let's say, $1,000 in the S&P 500, that basically means that your $1,000 is distributed amongst the top 500 biggest companies in the US. So, you know, weighted by how big they are. So like 2% of it would be in Apple, 2% in Facebook, 2% in Google, 2% in Microsoft. And then you probably wouldn't have heard of the 500th company on the list, but basically, all the big US companies you've heard of, you end up investing in all of them a little bit at a time. So if you wanna get started with that, all you need to do is sign up to a stock broker. If you're in the US, you can use Webull, I think I've got link in the description. If you're in the UK, you can use Freetrade or Vanguard. Basically, whatever country you're in, just Google the phrase "best stock broker platform," your country name, and you'll find something that works for you. And then it's very easy to be able to invest in an index fund. So within our famous Side Hustle Assessment Matrix, we're gonna give the difficulty of starting a one-star rating, one outta five. It's very, very easy to get started with stocks.
How hard is it to make $100 a month by investing in stocks and shares? Well, this kind of depends, because it depends on the performance of the stock market overall. So in the last 12 months from 2020 to 2021, the S&P 500 is actually increased by about 50%. That is a lot, it's like gone up by a solid 50% despite COVID and everything going on. So if in April, 2020, you had invested $2,400 in the S&P 500. The fact that it's gone up by 50% means you would've made $100 a month, but obviously, this is not the way to look at it, because things can go up and down, and the stock market has different levels of performance, depending on what time period you're looking at. But if we average out the last 30 to 50 years, the S&P 500 has had a roughly 10 point something percent return, which means, every year, on average, over the long term, it goes up by around 10%. This is not inflation adjusted for any economist among us. And so, if we do some back of the envelope calculations, if we wanna earn $100 a month passively through stocks and shares, we would need around about $12,000 invested in the S&P 500 to make that 10% $1,200 a year, which is $100 a month. But as I talk about in that video about stocks, over time, we have compounding. And so, if you put in $7,500 in the S&P 500, and you left it there for five years, then five years later, you would be making roughly $100 a month, if we go by this very average figure of 10% a year. Or if you invested $5,000 in the S&P 500, then 10 years later, you'd be making $100 a month in purely passive income, again, assuming the 10% average.
So overall, how hard is it really to make $100 a month in passive income from stocks and shares? Well, it kind of just depends on how hard is it for you to make $5,000, $7,500, or $12,000 in savings and put them into a stock market index fund, and crucially, this is money that you shouldn't need to touch in the next 5 to 10 years, at least. So basically, how easy is it for you to make that sort of money obviously varies massively depending on which country you're in and what your circumstances are and what your job is. But if you're in the UK or the US, where the median, kind of average salaries are around about $50,000, something like that, then, again, depending on your circumstances, it's not that hot to get $10,000 in savings. Obviously, if you're supporting a family of 15 people on $50,000, it's different. If you're a single person, again, it's different, but I'm gonna give this roughly a 3/5 star rating for difficulty of getting $100 a month. Obviously, if you live in a country like India, where the average salary is $3,600 a year, it's very, very difficult to make $10,000 in savings overall.
Finally, the third category in our Side Hustle Assessment Matrix is how hard is it to maintain this income once you've set it up in the first place. And we're gonna give this a 1/5, because once you've got the money in, you just like set it and forget it. And it's not that hard to maintain. There are other sources of passive income that require higher degrees of maintenance over time, but stocks and shares is a very, very easy way to make passive income, and to use my personal example, these days, my stocks and shares portfolio, which I've been investing in since 2015, is now worth around about $350,000. And the vast majority of that is in the S&P 500 index fund. Now, I can't be bothered to work out the actual inflation adjusted returns for that. But again, if we assume a very, very rough average of 10% a year, then that average is out to around $682 per week in purely passive income.
- Starting a YouTube Channel:
Starting a YouTube channel can be a lucrative venture for generating passive income, but it requires dedication and effort to succeed. Let's break it down using our Side Hustle Assessment Matrix.
Ease of Starting:
Starting a YouTube channel is straightforward, earning a rating of four out of five stars. You simply create an account, upload videos (even using your phone), and you're off. However, creating quality content that attracts viewers is the real challenge.
Earning Potential:
Achieving monetization on YouTube, requiring 1,000 subscribers and 4,000 hours of watch time, is a significant hurdle. It typically takes time and consistency to reach this milestone. Making substantial money—say $100 a month—requires around 50,000 views per month, equating to about 12,500 views per video if you upload weekly. It's a steep climb, earning this aspect a rating of four out of five stars.
Effort to Maintain:
Initially, gaining those first 1,000 subscribers is the toughest part, but once achieved, growth becomes more manageable as you refine your content and strategy. Therefore, maintenance effort is rated two out of five stars.
In my experience, it took 70 videos before generating any significant income from YouTube AdSense. Nowadays, the channel earns around $12,000 a month, primarily from older videos, demonstrating the potential for passive income. While not entirely passive due to regular uploads, it still offers a substantial return on investment.
In conclusion, while starting a YouTube channel is relatively easy, making substantial passive income from it is challenging but rewarding in the long run. With dedication and perseverance, it can become a significant revenue stream.
- Starting a Podcast:
Starting a podcast seems to have its challenges and advantages. While it's relatively easy to get started, growing and monetizing it can be tougher. Unlike YouTube, podcasts lack built-in algorithms for growth. Instead, many podcasts leverage YouTube channels to expand their audience, which may seem odd.
To start a podcast, you can use platforms like Anchor.fm or invest in tools like Riverside.fm for remote interviews. However, making money from a podcast usually involves brand deals rather than ad revenue like YouTube. Typically, you'd need around 1,000 downloads per episode to make $100 a month from sponsorships, assuming certain rates for ad placements.
Getting those 1,000 downloads per episode isn't easy, as it requires consistent growth. Only the top 20% of podcasts achieve this level of traction. Still, with dedication and strategic promotion, it's possible to build an audience over time. For example, someone like Sheen, who started from scratch, can see significant growth with consistent effort and complementary platforms like YouTube.
In terms of difficulty, starting a podcast is rated one out of five stars, while making $100 a month from it is rated three out of five due to the effort required. Maintenance, while not entirely passive, becomes easier once you find your groove. For instance, maintaining a podcast like "Not Overthinking" may require ongoing effort, but the returns can be substantial, as evidenced by the $625 per week income it generates.
- Selling a Digital Product:
Starting with affiliate marketing is relatively straightforward, earning a two out of five stars on the difficulty scale. You can easily sign up for affiliate programs such as Amazon Associates, one of the largest in the world. Once you have your unique affiliate links, you can promote products on your website, social media, or other platforms. When people purchase products through your links, you earn a percentage of the sales.
However, making $100 a month can be challenging. Let's break it down: if you're promoting a $50 product with a 5% commission rate and a 1% conversion rate, you would need 8,000 visits to your site to achieve that goal. Generating this amount of traffic requires significant effort, either by building an audience or establishing domain authority.
Beyond Amazon, there are other affiliate programs available. For instance, Skillshare offers a program where you earn $7 for every person who signs up for a free trial through your link. To reach $100 a month, you'd need approximately 15 sign-ups monthly.
The difficulty in achieving this depends on your existing audience and content. If you already have a following or create content on platforms like Skillshare, driving sign-ups becomes more feasible.
In summary, while starting with affiliate marketing is relatively easy, making substantial income requires effort and persistence. Building an audience through consistent content creation is crucial. Once established, affiliate income can become a reliable source of passive income.
- Selling a Course:
An online course is akin to a digital product, typically presented in video format. This video, in particular, is extensive enough to almost qualify as a complete online course. Considering starting one myself, the initial difficulty rates at a modest two out of five stars. While creating an online course isn't overly complex, proficiency in video production is essential. Fortunately, filming on smartphones, like iPhones or Androids, suffices. However, to earn $100 a month from a course, quality is key. People only pay if the content truly delivers value.
Alternatively, platforms like Skillshare offer an avenue to share courses without direct charges. Skillshare, a sponsor of this video, hosts numerous classes, including my latest on productivity. Using the link provided in the video description grants a 30% discount on the annual Skillshare Premium Membership for the first thousand users. Personally, I've found Skillshare to be an excellent resource for learning and teaching.
Skillshare operates similarly to Netflix, where users access content without individual purchases. Moreover, the platform's accessibility makes it easier than setting up a personal website. Generating $100 a month on Skillshare typically requires around 1,700 minutes of watch time, equivalent to 28 hours. Achieving this milestone hinges on the quality of the course and, possibly, an existing audience.
Another approach involves directly selling a course for $100, necessitating just one sale monthly. With the burgeoning demand for online education, offering valuable skills can yield passive income. Once established, maintaining course revenue typically demands minimal updates and steady traffic generation. In my experience, Skillshare hosts the bulk of my passive income-generating courses, collectively yielding $60,000 to $65,000 monthly. These earnings contribute significantly to my business's total passive income of $27,000 per week.
- Building a Membership Community:
Passive income can be generated by implementing a paid membership or community model. However, this approach is generally not advisable unless you already have an established audience. Building a loyal audience over time by consistently delivering valuable content fosters trust and familiarity. Consequently, when you introduce a membership option, some of your audience members may be inclined to sign up.
Another method involves crafting a value proposition so compelling that individuals are willing to pay for access to a community-like service. For instance, consider the case of Hannah Witton, a YouTuber with around 600,000 subscribers. Despite this large following, she has approximately 626 patrons on Patreon, translating to a monthly passive income ranging from £2,000 to £5,000 (or $3,000 to $7,000). While these numbers reflect a small fraction of her overall audience, they underscore the potential for significant earnings with a dedicated following.
Similarly, Anne-Laure, the founder of Ness Labs, initiated a paid membership community priced at $5 per month in the summer of 2019. Despite starting with zero audience, she gradually built up her platform by consistently publishing blog posts. By March 2020, when she launched the membership, she already had paying members. As of recent, her annual recurring revenue has surpassed $100,000, illustrating the substantial growth achievable within a relatively short period.
Creating a membership program is straightforward, typically involving setting up an account on platforms like Patreon. However, sustaining it requires providing value equivalent to the subscription fee, which can be challenging. Once you establish a formula for generating income, maintaining it becomes more manageable. Membership communities operate on the principle that as long as you continue delivering value, subscribers are likely to remain engaged.
For example, our Part-Time YouTuber Academy offers a membership community called "The Part-Time YouTuber Inner Circle," generating approximately $2,800 weekly. Although managing this community involves significant effort, the financial returns justify the investment.
- Automating a Business:
Transforming a traditional business model into one that generates reasonably passive income involves delegating, outsourcing, automating, and employing smart strategies, as advocated by Tim Ferris in "The 4-Hour Workweek." Take, for instance, my friend Oliur, who runs a successful Shopify store with vegan leather desk accessories. Initially, setting up the store required significant effort, but now he has a team managing the operations, allowing him to spend less time running the business. Similarly, another friend runs a social media marketing agency, setting up ads for clients and automating processes with tools like Zapier. While there's initial work involved, the ongoing maintenance is minimal, making it a source of passive income.
Starting such ventures can be challenging, earning a rating of four out of five stars for difficulty. Providing genuine value is essential, earning the same rating for revenue generation. However, once established, maintenance becomes more manageable, earning a three out of five stars for ease.
- Building an App or Website:
These days, many software businesses operate on a subscription model known as Software as a Service (SaaS). If you explore sites like indiehackers.com, you'll find numerous examples of entrepreneurs building such businesses, sharing revenue numbers, startup tips, and success stories. I recently had the opportunity to be interviewed on the Indie Hackers podcast, discussing the concept of launching an online course like the "Part-Time YouTuber Academy."
Drawing from personal experience, during my university days, I collaborated with my brother to create BMAT Ninja and UKCAT Ninja, websites offering question banks for medical school applicants preparing for admissions tests. We developed these platforms from scratch, leveraging our coding skills acquired from a young age. While it was rewarding financially, with BMAT Ninja generating around $25,000 last year after five years of operation, it required significant effort to establish.
Starting a software business rates a five out of five for difficulty due to the coding and compelling value proposition required. Once launched, attracting paying customers presents its own challenges, earning a four-star difficulty rating. However, maintenance becomes somewhat easier over time, earning a three-star rating. While creating an app can be tough, the journey is rewarding, offering opportunities for growth and innovation.
Incorporating multiple passive income streams into your financial strategy can diversify your revenue sources and provide greater stability and resilience against economic uncertainties. However, it's essential to approach passive income endeavors with diligence, patience, and a long-term mindset, as success often requires consistent effort and adaptability. By leveraging your skills, creativity, and entrepreneurial spirit, you can build a sustainable path to financial freedom and achieve your wealth-building goals.
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février 07, 2024
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