Thursday, July 28, 2011

Passive Income Ideas

We are familiar with the routine.  Get up.  Go to work.  Come home.  In a week or so, get paid for the work we did.  Start over again.  Go to work. Come home.  Get paid for the work we did.  Some have come to accept it as a fact of life.  Well, to other more savvy and financially independent (or those aspiring to be) have probably heard of the idea of "passive income".  The concept is defined something like this:

"Passive income is an income received on a regular basis, with little effort required to maintain it"

That being said, most passive income streams do require an additional effort or monetary commitment to get set up.

Here are a few common ones:

  1. Rental Property - does require some upkeep or a reduction in income to subsidize the management of the property.
  2. Bond Investments - investing in bonds can be expensive (the usually cost around $1000 each + trading fees, and like most investment vehicles, can lose up to 100% of their value (although this is unlikely in most cases)
  3. Dividend Income - income from equities that pay a cash dividend;  these are usually financially strong and established companies such as Southern Company ($SO) and Verizon ($VZ).  There are also trading fees associated with purchasing stocks.
  4. Pension- Social Security (until it runs out) or other funded pension program you are vested into, more than likely from working somewhere that offered this as a benefit.
Additionally, there are other alternative ways you can earn "passive income":

  • Blogging - advertising and other referral sales income (if you weren't already blogging in some form, this really isn't that passive, but can be fun)
  • Vending Machines - owning vending machines can be a little work to stock and maintenance them, but is an interesting alternative way to generate a "side hustle" income
  • Royalties - recurring cash flow from the licencing of a patent, sale of booksmusic, etc.  A useful invention or phone application 
Frugal Dad has also had some pretty interesting ideas on the topic.  

I would love to hear other creative ideas for passive income....

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