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I recently finished watching the movie, Wall Street: Money Never Sleeps. It made me so thankful that I never worked on Wall Street. It also made me think about different ways that I could make my money work for me while sleeping, in a legal, non-greedy way.
Whether you’re trying to knock out some debt, invest a little bit more for the future, or even acquire a little extra spending money, figuring out ways to make your money work for you is key.
If you look at the rich and famous, many of them make money every single minute of the day, even when they are lounging around at a beach.
So how do they do it?
Through passive income streams.
While these passive income streams don’t come without a little bit of risk and some effort, the pay off can be enormous over time.
Here are thirteen paths to passive income that may be worth pursuing.
1. Dividend Stocks
Let’s start out with the passive income stream my Dad currently obsesses over, dividend-paying stocks. Now that he’s retired, he tries to figure out ways to continue growing his money. He’s not alone. Many retirees gravitate towards making some income from dividends. Heck, even Warren Buffet is a huge fan of dividend-paying stocks.
One of the ways that Warren Buffett is doing that is through purchasing stock in companies that pay dividends to its shareholders.
There are certain industries that typically pay higher dividends than other industries, such as consumer staples, public utilities, and oil companies. So, make sure that you do your due diligence before selecting which companies to invest in.
Remember, you shouldn’t solely look at the companies with the highest dividend yield. Instead, you should seek out the ones that will sustain dividends for years to come. Those with the highest dividend yield today are more prone to cut their dividends in the future, which in turn further depresses the stock price.
In fact, many dividend investors focus in on the Dividend Aristocrats, which have a history of increasing their dividend payout year after year.
While buying dividend-paying stocks can be risky, with the right due diligence, you can come out a winner.
Related: The Magic of Dividends
Another great way to earn consistent passive income is through the purchase of bonds. Most bondholders receive interest payments every six month, just for loaning the underlying company/government money. At the end of the maturity period (agreed loan period), you will receive your money back in full.
There are many options available when it comes to choosing bonds, whether it’s government (federal or local) bonds, which are called municipal bonds, or foreign bonds, or even corporate bonds. Each one has a maturity date in the future, minimum investment balances, and interest rates that they pay out.
Right now, the 10-year treasury rate in the U.S. is paying 3%. In contrast, the Venezuelan interest rate is over 10%. The difference in rates tells you the risk premium that investors require to lend a country money.
Can you guess why investors are more nervous about Venezuela paying them back?
So, before you decide to purchase a bond, make sure you look at the full financial picture and not just the rate of return.
3. Peer-to-Peer Lending
In recent years, marketplace peer-to-peer lending has exploded. If you’re not familiar, this is where individuals lend other individuals money, instead of the bank. Marketplace platforms like Prosper, Lending Club, Upstart and Funding Circle have led the charge to make crowdfunded loans more widely available to borrowers, which opens up new income streams for investors.
These companies have touted that their returns are anywhere between 6-10% each year. Although, it will be very interesting to see how these investments do during the next bear market.
As with lending money to anybody, peer-to-peer lending can be volatile. Borrowers can default on their debts at anytime, losing your hard-earned income at any moment. One way to help protect yourself is by creating a checklist that you follow when you lend out your money to others. This may include requiring a certain credit score of your borrowers, that the borrowers make a certain amount of money each month, as well as diversifying across segments of the country in case one state gets hit with unemployment.
4. Rental Properties
Rental properties can be an amazing way to receive passive income. However, there is usually a large upfront investment, and oftentimes, a lot of sweat equity that needs to go into it before you start receiving passive income. On top of that, if something goes wrong with the property, you are normally held responsible to address the issue.
However, if you are handy or have a great property manager, these issues can be alleviated.
As a rule of thumb, when looking to buy an investment property, besides looking for desirable locations to buy, seasoned professionals normally recommend the 1% rule. This rule states that you should look for a property that can rent for 1% of the total value of the purchase price of the house. That means that if you spent $200,000 on the house, you should charge $2,000 for rent. This is to ensure that you can cover all of your costs like insurance, property taxes, maintenance and even mortgage costs.
Related: How Real Estate Changed My Life
5. Invest in Crowdfunded Real Estate
If you don’t want to get your hands dirty by purchasing a property on your own, but still want to invest in real estate, you can use a crowdfunding platform to invest in real estate as a great alternative.
Companies like Fundrise and Realty Shares are two of the largest real estate crowdfunding companies out there today. While investing in real estate can be scary, both of these companies do an excellent job of showing you options and allowing you to select the properties that align with your investment goals.
6. Earn Royalties
I have a friend who loves to check the website, Royalty Exchange. This is a marketplace, where you can buy royalties that musicians are selling so that you can earn royalties in the future.
There have been some amazing songs, sold at incredible prices. Although, with the direction of the music industry, make sure you do your due diligence before you buy.
7. Get Cash Back While You Shop
If you have to buy things, why not get paid to shop? There are two great ways to get paid while you do so.
The first way is to use a cash back credit card to make your purchases. As many of you know, I love to use my credit card. I do use it responsibly though. I pay it off each month, and I love how I can link it to my Personal Capital account. Best of all, the card provides me cash back the instant I buy something. On top of that, my credit card offers fraud protection as well as extended warranties on my purchases.
Related: Benefits of Using a Credit Card
The second way that my wife and I receive cash back is through Ebates. Ebates has affiliation with over 2,000 stores. When someone clicks on the Ebates link to a retail store, Ebates receives a commission. In turn, Ebates then provides you with half of their commission. Therefore, you make money and they make money as well. It’s a win-win situation.
8. Renting Unused Space
The gig economy is in full swing. If you have extra space in your home, or travel frequently for business (or leisure), you can join the thousands around the world who rent out their homes through Airbnb.
While this is not entirely passive income, the returns can be quite impressive. I have heard from people who make thousands each month from renting out a spare room in their homes.
9. Rent Your Car for Ad Space
Can you imagine getting paid, just for driving to work? Certain companies are willing to pay hundreds of dollars each month for the opportunity to place advertisements on your car and car windows. Not too shabby, huh?
10. Open a High-Yield Bank Account
If you have an emergency fund, you’ll need to park it somewhere. That’s why I am a big fan of high-yield bank accounts. The typical brick-and-mortar bank account yields just 0.05%. In contrast, an online bank account through Ally yields 1.5%, or roughly 30x what a normal bank account yields today.
Along with much higher yields than local banks, you can feel secure knowing that they still are FDIC insured. While you won’t make as much money as some of the other investment options on the list, it’s a safe way to consistently make income and not lose money.
11. Create a Product
If you’re the creative type, look for opportunities to sell things that you’ve created. I recently created a financial course to help people with their finances. While the initial outlay took a lot of time, the course has been more than paying for itself since then. You can make some serious passive income over time by doing this.
12. Rent Your Junk, I Mean Stuff
To be honest, my garage is littered with items that I barely use. It’s a random collection of 14 years worth of stuff. If you can relate, consider renting out your items. Instead of continuing to let these items sit or waiting for your neighbor to borrow them and “forget” to bring them back, why not rent them out on Craigslist?
People are constantly on the lookout for certain items. It may be a moon bounce for a kid’s birthday party, wedding decorations, extra chairs or even chainsaws.
Renting out these items is a great way to make money. However, make sure that you have a rental agreement in place beforehand. Both parties should sign it, and you should require payment beforehand as well. In addition, I’d encourage you to get a photo ID and proof of address to protect the property that you’re renting.
13. House Sitting
A friend of mine recently started a house sitting service. She also loves animals, and more and more people have asked if she would watch their animals while they are away as well. She has been staying at their homes to avoid disrupting their pet’s routines. My friend literally makes money as she sleeps.