Earning a decent level of passive income is a great financial goal to set for yourself. I’m going to break down all you need to know about making money this way and how you can make it an achievable goal.
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What is passive income?
Passive income involves making an income with little direct effort or energy in maintaining the flow. Ideally, it’s a way of making money while you sleep!
Our lives shouldn’t just be about making money. Earning this way means it happens in the background of your life so you can prioritise more important things.
In an ideal passive situation, there’s no direct relationship between the amount of time you work and the amount of money you make. It’s not a get rich quick approach, but it is a realistic way to earn on autopilot.
How can I earn passive income?
There are loads of different ways to start earning some passive income. Depending on your situation and skill set, routes to consider include:
- Renting out your property or even just a room in your house
- Sharing your skills by creating online courses or content for platforms such as YouTube
- Selling your own creations, such as stock photos
- Writing and self-publishing a book straight to Amazon
- Creating a blog or website to monetise through advertising or affiliate links
- Investing in stocks and shares that pay dividends
Whichever route you choose, it will probably take some initial work to get things rolling. Although there are plenty of tried and tested ways to create passive income streams, thinking outside the box could also work in your favour.
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What is an easy way to earn passive income?
This is where things get exciting. There are plenty of things that you can do to help build up some passive income. You don’t have to be an entrepreneur or even be on a high salary to get started.
Investing is a great place to start because you can kick things off with a relatively small amount. So could find yourself earning a small passive income almost immediately.
(Of course, however, the value of your investments can go down as well as up and you may not get back all the money you put in. All investments carry a varying degree of risk and it’s important you understand the nature of these risks.)
However, it’s probably not going to be enough to live on. So you’ll need to consider what you want your passive income to cover.
How do I earn passively with investments?
Here are two great ways to begin earning some passive income with investments:
1. Stocks and shares ISA
This is a great account for investors because growth and proceeds from aren’t subject to further tax. You can put up to £20,000 into a stocks and shares ISA each tax year.
Proceeds from investments in a stocks and shares ISA are not classed as part of your yearly income. So if you invest wisely, you can gradually build up a bigger stream of passive income that’s shielded from tax. (Please note that tax treatment depends on the specific circumstances of the individual and may be subject to change in the future.)
If you want a more stable source of income from your investments, you could look at something like dividend investing. This means picking companies that pay dividends to their shareholders. Investing this way can be less volatile when you’re no longer looking for growth and want a more steady stream of passive income.
2. Investing solutions
Although the option above is good for selecting your own investments, it can be time-consuming.
An investing solutions platform can be a way to help you create passive income. Instead of spending lots of time researching or maintaining your portfolio, you can let the experts help.
This way, you can put in less effort and time managing your investments and passive income. Investing in this way used to be really expensive, but that’s changing. For example, InvestEngine has lowered its minimum investment amount from £2,000 to £100 and they’re currently offering a £50 welcome bonus. So you can get set up with an immediate boost on your way to earning some passive income.
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