You will find a bunch of great examples of passive income ideas. Please check the best option for you and start creating passive income. I will try to explain every aspect of each example at blog pages. Check out my blog often. I am happy that you want to start creating passive income. This is important for you and your family to live a wonderful life without financial problems.
1. Earnings from Stock Investing via Dividends.
I prefer this method for building passive income. Receiving dividends from stocks is more profitable than saving money in your bank account. Seeing your stocks going up in value can make you happy (and you earn a good money doing nothing). If the company pays dividend, you will earn money for just holding stocks in your portfolio.
What is a dividend?
Wikipedia translates dividend as: “a payment made by a corporation to its shareholders, usually as a distribution of profits.When a corporation earns a profit or surplus, it can either re-invest it in the business (called retained earnings), or it can distribute it to shareholders. A corporation may retain a portion of its earnings and pay the remainder as a dividend. Distribution to shareholders can be in cash (usually a deposit into a bank account) or, if the corporation has a dividend reinvestment plan, the amount can be paid by the issue of further shares or share repurchase.”
To summarize: Dividend gives you money in the certain amount of time (every quarter / once or twice a year). Payment time depends on company and stock market you are investing in). You only need to have this stocks in your stocks portfolio… and that’s it. Hold and earn.
- Dividend Is more profitable than saving money in bank.
- You can sell stock every time the price goes up.
- You can buy stock every time the price goes down. It is ok for you.
- You can check all the condition of the company every time by checking company’s reports.
- You can buy stocks for dividend constantly, and increase your income till retirement (financial dividend retirement plan).
Stocks are a good way of earning income. You can buy and sell them whenever you want (capital gains), plus you can earn money from dividend (the dividend payment). From my experience I can tell, that investing in stocks are not so risky, but you need to make the right decisions at the right time. If you want to invest in stock market please check out common financial strategies. I also encourage you to read as much as you can about stock market (especially books). Don’t rely on “specialist”. recommendations. Those pieces of advice are usually worthless.
If you can manage to collect enough shares of these high quality stocks, then you could set yourself up to receive thousands of dollars in an annual income for doing nothing but being a shareholder (now that’s a passive income!) Dividend stocks can be bought either inside your tax advantaged retirement accounts (where you probably won’t be able to touch them until age 59-1/2) or with your taxable broker account (where you have access to them anytime and could potentially retire anytime you are ready).
You can use financial strategies to check the methods of creating passive income using dividends.
2. Bank interests.
This is a safe method to increase passive income. You receive low interests provided by bank. Basically the money you earn will be close to inflation. Always remember to save some amount of money. The idea is to save as much you can. The best way is to save 30% of your income. You can put this money into your savings account and don’t take it out until you are ready to invest. Don’t put too much money on your bank account – Interests are low. It’s better to buy some assets. Money needs to work.
You need to make emergency savings for at least 2-3 monthly (the dark hours). Some specialists recommend even 6 months emergency savings. If you lose your job you will need to survive somehow. This is one of the reasons why you should use Balance Sheet..Only if you use Balance Sheet you are able to determine your monthly expenses. If – for example – you spend 2000 $ a month (food, car, bills etc.) you need to have 4000 – 6000 $ on your bank account.
- Bank interests can provide you some money.
- Interests are close to inflation.
- You need money in your bank for the safety.
- You can use this money when it is a good moment to buy assets.
- This is a safe method to hold your money away from you.
3. Saving for Retirement with Retirement Plan.
The idea is to save as much as you can during your working years, and – after a retirement – live off your money and interests. Retirement plan is very important, because we will all retire someday. Using retirement savings can be a good passive income in the future. You need to check your country’s retire plan companies and use the best one. Take your time. This is an important decision. Check all companies and find the best for you. My advice is not to rely 100% on “specialist’s” opinion. Guys from retirement companies are just sellers. They want to sell you their most profitable option. You need to rely on yourself.
- Very important passive income idea. You need to use it.
- You will receive some good money after retirement. This income should be enough for normal life.
- This will always be your back-up plan.
- Unfortunately you have to wait until Age 59-65 to take your money.
3. Real Estate Investment Trust (REIT).
The idea is the same as in dividend stocks, but instead of using stocks you use real estates. You are not a direct owner of property you invest in, but you receive dividend. REIT was very popular during the housing boom. Right now it is risky to use this method. Since the prices of houses are low, It’s better to buy and rent a property. You will collect more money and you will have more control over your real estate. Keep in mind REIT, because someday it will be profitable once again when the prices of real estate go up.
- REIT is less risky than owning a real estate.
- You can receive good money from REIT and when the price of estate goes up – you can sell your shares and make more money.
- REIT will be worth considering when the real estate market establishes.
- Beware ofthe moment when the prices of real estate go down – you can lose a lot of money.
- At the time of sub-prime crisis people lost big money using REIT. That’s why it is important to do right things at the right time.
4. Bond Ladders or Bond Interest.
Bonds are safe and stable. The idea is to buy bond, for a longer time (year, two or more), and collect money interests. You know at the beginning what is the interests you will earn. You become a loaner. If you purchase lots of bons coupons, you can create really nice passive income stream. Some people use bonds as a retirement plan. They buy bonds and after each year they receive interests and buy again (maybe higher interest rate bond) until retire. This is a good method but it takes a lot of time.
- Very important passive income idea. You need to use it.
- You will receive some good money . Not much, but will be ok to survive.
- You can find better ways to increase income, but bond ladders are at low risk.
- You need to wait long time to collect your money.
5. Certificates of Deposit (CD’s) and CD’s Ladders.
CD’s are similar to bonds. The difference is to loan money not for the government, but for companies and businesses.. This is a litle more risky way, but you can earn more money You could use the same strategy like in Bond Ladder. You can even find online banks that offer the best interest rates for CD’s. Please be aware that alone investing is more profitable (and not so hard as it looks like at the beginning).
- Similar method to bonds – more profitable but more risky.
- You can buy CD’s easily and sell them easily.
- Before buying CD’s, you need to check the condition of the company and all the details about transaction.
- You need to be aware that the company can go bankruptcy, so invest wisely.
An annuity is a type of an insurance product. You pay the company a certain amount of money, and after a while they pay you monthly money for the rest of your life. The most common example is your home deal with the bank. You agree with bank, that you give him your estate when you die. Bank pays you monthly money for the rest of your life.
I don’t like this method. You are always in a bad position. The bank agreement are mostlyunfavorableto you. If you are at the retiring age and you don’t have children, you can think about this type of insurance. Although I don’t recommend it.
- Good idea for Passive ncome when you don’t have children.
- You need to invest first in order to receive money.
- In most cases you are paying some amount of money each month.
- This can be your back-up plan when you retire.
That’s my quick overview for Investments Ideas. Please check out the rest of the website for other important topics.