Passive income is an important pillar of financial freedom What’s better than working for your money? Making money without continuous effort! Passive income refers to money you receive without having to actively perform a job to get it. The idea is to do something once, or make an initial investment and continue to receive money for it long after the effort is done. One of the most familiar types of passive income are royalties from a photo, buy-to-let properties and financial investments.
However, there’s plenty more where that came from. Generating passive income in the UK is a key part of achieving financial freedom, so let’s dive into the basics.
What is passive income?
At its simplest, passive income is a revenue stream that continues to payout after the work is done. Usually, you will need some effort or money to ‘grease the wheel’ at the beginning, but the idea is that it continues to pay out over the long term without needing you to work all the time.
While you may well have a talent you can capitalise on, many other passive income streams will also need a little up-front investment. And there’s always some risk attached, as there is with anything rewarding. All the same, they can be a game-changer in your financial strategy and wealth growth when done right.
Active employment has a ceiling. There’s only so much you can do day-to-day to generate income, no matter what your talents. At most, you can carry a regular 9 to 5 and a side hustle. This is the key benefit of passive income- it’s working even when you’re sleeping or busy at work. Some people even manage to leverage enough passive income that they don’t have to work actively again! While that may seem like a pipe dream, for now, there’s plenty you can do to actively begin to open passive income streams and grow them over time.
Passive Income Ideas
1) Best Passive Income Stream You Can Create: Long-term Investing
Traditional savings accounts pay you interest to leave your savings in the bank. While this was once a valid way to generate some income on your money, inflation and the slow erosion of your buying power over time means what little interest banks offer you get eaten up.
You can leverage larger sums for better interest through fixed-term savings accounts. These savings vehicles will lock your money away for a set period of time, however, rates increase with the length of time you commit to. You cannot get this money back until the end of the period.
Looking to the stock and bond markets, however, is the real way to get an inflation-busting rate of return on your investment and eventually build wealth. For those who want a truly passive- but not necessarily optimised- investment strategy, there are robo-investor accounts. Here you can set aside the money to invest, and allow algorithms to pick stock and index choices based on your investment profile. This is truly passive investing.
For those who would like to more proactively grow their money over time, there are online brokerage accounts. Here you can select your own ETF, index tracker, mutual fund, and stock picks, allocate your funds as you desire, and rebalance your portfolio for growth as you choose. Over time, you can add more funds to the account. While this is a more active investment approach, it can also be more satisfying and open up more growth potential. Through wise investment in financial products that appreciate with time, you can grow your capital at inflation-beating return rates and work towards long-term financial freedom.
You can also choose to seek out established dividend-paying company shares and ETFs. While they may have smaller growth potential than growth-focused non-dividend paying companies, they will pay out a set portion of the company’s profit at regular intervals. Based on how many shares you hold, the capital will appreciate over time too.
You need to do your due diligence when investing in the stock market based on your risk appetite.
Of course, investing is not the only passive income you can generate, although it’s the simplest and most time-tested. Let’s take a look at the other passive income streams to consider.
If you have a talent you can leverage that will generate royalties or long-term repeat sales, you can create a passive income stream from it. Can you create a helpful e-book?
Writing and publishing a book is definitely an ambitious project, but it can pay off in spades when it comes to generating passive income. You can explore many different publishing platforms. You can then use your book to promote yourself as an expert in your field and earn passive income from your e-book sales.
3) Stock Photos
Do you have a passion for photography? With websites like Shutterstock and iStockPhoto, you can make money off of your photos. You can license your images to be used by a wide array of different companies, or individuals.
Obviously, the only catch is that you need to take the photos yourself. Even if you don’t own a professional camera, you can start with the smartphone in your pocket that could come in handy. Many smartphones come equipped with a high-quality built-in camera that can capture professional-looking pictures when combined with the right lighting technique.
4) Stock Videos
If you have a talent for making impressive videos, you may be able to turn that skill into some extra cash. There are many websites out there that will pay you for useful or interesting videos. Websites like Adobe Stock and Istock will pay you for creating stock videos that can be licensed out for other websites or advertisements.
5) Create an Online Course
There are so many people who have knowledge, skills, or expertise that other people would love to learn from. Researches show that online courses are one of the biggest trends in education in recent years and expected to continue to get more users.
By creating a useful online course, you’ll be able to teach other people and make money at the same time. You can use open online course platforms like Udemy or Teachable to get your course online or put it on your own website if you want more control over how it looks and how you’re promoting it.
6) Real Estate Investment
Real estate is one of the oldest forms of passive income. Rental income remains a cornerstone of the passive income market. Buy-to-let properties are purchased to let out in order to produce a rental return. It can also grow in value, producing a capital gain when you sell.
Another option is to invest in a real estate investment trust (REIT).
A REIT is a publicly traded company that invests primarily in real estate. Often, REITs will buy and manage big commercial properties like shopping centers, office buildings, or apartment complexes. REITs can be bought and sold on the open market like stocks.
7) No-code Apps
The process of hiring a programmer or learning how to code and build an app is time-consuming and expensive for most solo entrepreneurs. No-code app builders are the easiest way to build a mobile app. If you have a great idea for an app, you can utilize no-code app builders as a way to make money passively.
They require no coding experience and allow you to create an app with just a few clicks. These tools make use of visual builders that allow you to drag and drop elements to create your app.
Building mobile apps is one of the great passive income sources for students as it requires very little up-front investment. No-code app builder platforms such as Bubble, Appypie, and Airtable all have low-cost plans.
Blogging is the act of regularly creating new articles for your own website where you share your knowledge and experiences with a specific audience. It’s the perfect opportunity for you to write just about anything, from your passions to your area of expertise. If you have something valuable to share, other people will want to read it.
You can monetize your blog by displaying advertisements or sharing affiliate links. Blogging is a great way to create a passive income because the money is earned passively as you provide your target audience with valuable information.
Who doesn’t love a good podcast? They’re perfect for car rides, working out, or even just doing the dishes. And as more and more people are tuning in, there’s never been a better time to start your own podcast. Not only is podcasting a great way to connect with others and build an audience, but it can also be a great source of passive income.
With an effort up front, you can set up your podcast so that it requires minimal ongoing maintenance while still generating income. For example, you could sell advertising or sponsorships, or include affiliate links in your show notes. You could even charge for access to premium content or create a subscription-based podcast.
10) Youtube Channel
One popular method of generating passive income is to start a YouTube channel. While it does take some initial work to get your channel up and running, once it is established, it can provide you with a steady stream of income with minimal effort on your part.
In order to be successful, you need to choose a niche that you are passionate about and that has a large enough audience to support your channel. You also need to produce high-quality content that will keep viewers coming back for more.
Dropshipping is a type of online business model in which an individual or company sells products that are acquired from a third-party manufacturer directly to consumers.
Dropshipping is convenient because the seller company doesn’t need to hold stock of the goods it sells. The products are packaged and shipped by the manufacturer or wholesaler.
12) Digital Designs
Selling digital designs can be a great way create passive income. You can start off by selling digital products such as logos, graphic design elements, branding resources, templates and illustrations on platforms such as Envato, Creative Market and Motion Elements.
If you’re looking to build up a portfolio then this is a great way to do so as you can showcase your work online. It is one of the convenient ways to make money with your digital design skills.
13) Buy and Sell Domain Names
There are many ways to earn money off of websites, and selling domain names is just one of them. Selling a domain name can be a profitable business if you invest in the right words. The first thing you need to do is find the right domain names that have the potential to become much more valuable in the future.
A good domain name has a nice, catchy name that people will remember. You can also follow the recent trends and buy domain names that include popular words. Common practice is to buy domains for £10 to £50, then sell them when their prices increase considerably.
Everyone who is trying to achieve the goal of financial freedom knows that the answer is to work smarter, not harder. There will always be a ceiling on how much income you can generate through active, engaged work. A passive income stream is a great way to supplement your earnings. Whether you’re looking to eventually replace your full-time income, or just want to have some extra money to spend each month, creating a passive income stream is a smart move. Whatever approach you choose, be sure to put in the work upfront so that you can enjoy the fruits of your labor for years to come.
Are you keen to get started on your passive income journey? Diversifying the income streams and building a strong online investment portfolio are great steps toward ongoing financial freedom. So why not take your first steps today?