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21 Passive Income Ideas For A Freedom Lifestyle
Passive income ideas play an important role in life design.
If you've read Rich Dad Poor Dad, you'll no doubt have come across the idea that your passive income should cover your expenses.
In fact, this is one legitimate way of achieving Financial Independence.
You'll also no doubt have seen many people out there talking about “earn passive income and go sit on a beach”.
This is of course entirely possible because you can make £5 of passive income per month and still have access to a beach.
My point here is that folks aren't telling the whole truth about passive income.
You see, I've been on this journey myself and explored a variety of passive income ideas.
I've been wanting to write this post and keep it totally real with you.
I'm aware that many people are struggling out there and looking for legitimate ways to make money.
As such, I won't waste your time with fantasies. What you're about to read is as real as it gets.
Having written to you previously about how to get started with Passive Income let's now dive into some legit passive income ideas.
Table of Contents
What is Passive Income?
Passive income is money you make without having to swap time for money.
The big misconception about passive income is the extent to which work has to be put in to make passive income.
Notice I haven't used the word earn re passive income.
That's because “earn” is legally defined and refers to swapping time for money. For example, if you have a day job, you earn a salary.
People typically use ‘earn’ and ‘make’ interchangeably, but this is wrong.
Making money is related to applying your time to create something that then goes on to make you money in the future. E.g. Creating music, writing a book, starting a business, etc.
Passive income arises from this latter definition and requires initial time input.
This is the bit that's often misunderstood. There is work to be done. In fact, in some cases, there is some future ongoing work to be done.
So in my opinion, passive income exists on a gradient from ‘initial work only’ to ‘some ongoing work’ to maintain assets.
This, therefore, means that the type of passive income ideas you choose to explore matters.
They will have varying:
- Risks attached
- Returns expected
- Efforts required
- Money needed to start
- Liquidity levels i.e. ease of conversion to cash.
Millionaires typically have 7 different sources of income and these usually don't come from earning income.
Although of course there are many millionaires who have done it through their jobs by having equity or becoming very senior over time.
They remain a minority compared to most people.
As such, I highly recommend exploring passive income ideas because:
- You get to diversify your income
- If done well, it gets you closer to Financial Independence
- You get to enjoy a freedom lifestyle over time
- You'll learn by experimenting. Nothing beats experience.
- You gain a huge amount of confidence from knowing it's possible to make money from more than one income source.
We'll score each passive income idea by the following as a guide:
Risk – between 0 (High risk) and 10 (Low risk)
Return – between 0 (Low returns) and 10 (High returns)
Effort – between 0 (Lots of effort) and 10 (Small effort)
Money – between 0 (Lots of capital required) and 10 (Small capital required)
Liquidity – between 0 (Low liquidity) and 10 (Highly liquid)
NEW: Note that in addition to reading these detailed passive income ideas below, we have made a video on it too on Our YouTube Channel:
Passive Income Ideas
Below are 21 passive income ideas you can explore:
1. Property Investing
This is by far the most common way of trying to make passive income.
It’s the way we started out by investing in property in order to make rental income.
Although we remain, property investors, I have to make it clear that it's not for everyone.
The reason for this is because:
- You need a lot of capital to get started typically.
- There are significant transaction costs such as stamp duty etc that eat away at returns.
- There is much ongoing work unless you outsource management (at a cost) to someone else.
- Expect future costs re repairs, voids, insurance etc.
On the upside, property investing has the potential for significant capital gain over time.
For us, it has played a big role in our net worth, however, it's also highly illiquid.
2. Start A Blog
I've been running this blog for just over a year now, and I'm finally starting to see its many potentials.
Although we didn't set it up to make money, it does generate an income.
Examples of this include affiliate income, income from programmatic ads, coaching, sponsored posts, etc.
Only some of these are passive and ongoing e.g. some affiliate income sources are recurring each month.
In addition, the ad revenue accrues daily depending on the level of traffic to the site.
And this grows each day with the level of traffic.
We've chosen ethical ad categories that are complementary to the site. So no gambling etc.
(although saying that, once in a while, annoyingly, a gambling ad creeps through. Please click “Report This Ad” if you see it!)
Anyway, what's particularly interesting about the ad revenue is that it comes in every single day whether it's raining or snowing.
And it's more lucrative than I thought. Double-digit income per day for a site that's barely a year old.
Blogging requires work! But it has a huge return on investment due to the possibilities of the internet.
It also requires little to no capital and is low risk.
Plus there is a huge scope for what you can do with it.
I've known people who started blogs to build a name ahead of publishing a book!
Or even those who have started blogs and gone on to become paid speakers. The choice is yours.
If you want to start a blog, read my detailed step by step tutorial here.
I'd also highly recommend you sign up for my free 7 day email course for creating an impactful blog.
NEW: Watch this video on our YouTube Channel to understand why you should start a blog and how:
3. Rent Out A Spare Room
This is by far one of the easiest ways of generating passive income.
Many people (especially older parents whose children have moved out) have spare rooms.
However, many people miss the trick and don't step out to find a decent tenant to use the space.
This is often down to living in the comfort zone.
With a growing sharing economy, opening your mind to renting a spare room is worth exploring.
Here is an illustration of how powerful this is –
Imagine you rent out a room for £700 a month or £8,400 a year.
This is equivalent to having £210,000 invested in through the stock market and generating a 4% return per annum.
4. Invest In Index Funds or ETFs
You can generate passive income from investing in index funds and ETFs.
These are passive investing strategies that come at a low cost.
As such, you're more likely to see a return on your money through capital gains and dividends from underlying companies.
Although you need a lot of money to make the passive income worthwhile, you should start now with however much you have.
Related post: Index Fund Investing And The Simple Path To Wealth
NEW: Watch this video on our YouTube Channel to learn how to start investing in the stock market as a beginner:
NEW: Check out this other video on ETFs vs Index Funds i.e. pros and cons and how to get started:
5. Create Courses
Courses are a great way to teach what you're already good at.
The asset at work here is you and you're simply exporting your knowledge and experience into a digital asset to work for you.
You can also create more than one course if you have various things you have knowledge about.
Even if you don't have the knowledge, you can acquire or hire it.
Platforms such as Thinkific or Teachable are great for making this a reality.
You can join for free and upgrade for more advanced features.
I've used both Thinkific and Teachable and highly recommend them.
Check out our Online School at Financial Joy Academy to see how we generate passive income from courses.
6. High-Interest Deposits
This is the traditional way of making a return via a bank.
You make a return for investing your money for a fixed period of time e.g. 1 – 5 years.
It's clear exactly how much you'll make but it usually means you have no access to your money.
Banks have to invest your money, make a return and pay you what they promised.
7. Peer To Peer Lending (P2P)
P2P continues to grow in popularity as it offers a less risky alternative to picking stocks.
It's a way of lending money for a return via the internet for projects such as property investing etc.
It's fairly liquid as an investment and the income is more predictable.
It does, of course, carry some risks.
Ratesetter is a well-established provider for making P2P investments.
Feel free to also check out The House Crowd.
Follow the links below to also learn more about P2P, RateSetter and The House Crowd.
- How To Invest Through Peer To Peer Lending
- RateSetter Review: A New Way To Invest
- The House Crowd Review
8. Dividend Income Investing
Dividends are a way for companies to return money to shareholders. The other way is through a share buyback.
People typically buy dividend-paying stocks in order to take advantage of regular income.
The bigger reason is due to the fact that dividends can be reinvested and therefore compounding over time.
This is a particularly powerful way to create wealth, but it requires time to work.
Companies that pay a good dividend are typically well established low-risk companies with a large market cap.
In the ideal world, you want the dividends paid by the company to be consistent and growing.
The growth part is usually an indication that the company is financially healthy and with consistent cash flow.
Although income from dividends is easily accessible, they have the most power when reinvested and compounded over time.
9. Venture Capital Investments
Venture capital is an alternative investment i.e. it’s not the typical investment in stocks, bonds, ETFs.
It’s an asset class for investors who are a bit savvier and looking for supernormal returns.
Retail investors like you and me can get involved by investing in tax-efficient structures such as Venture Capital Trusts.
VCTs offer a 30% tax rebate for investing, and your money is usually locked away for 5 years.
If you invest in a good quality VCT, then you expect to receive regular dividends as passive income, and some capital gain.
VCT investors are typically classed as the ‘mass affluent’ i.e. people who can write cheques for ~£30k+.
However, you can invest as little as £5k into a VCT and get the upfront 30% tax rebate.
Given your money is unavailable for 5 years, VCTs are illiquid and carry risk as they typically invest in unquoted companies.
We recently made a video on our YouTube Channel for 9 of these 21 Passive Income Ideas:
10. Bond investing
This is possibly the most boring form of investment, but a very important one if you’re managing your retirement portfolio.
You invest in bonds by either lending money to companies (corporate bonds) or to governments. The latter is more reliable.
With bond investing, you have the predictability of income (coupons) and returns aren’t stellar as it’s low risk!
11. Create A Membership Site
If you have a passion for helping others, then a membership site is one to explore.
You use the information you know (or have access to) and create valuable content (e.g. videos) around it.
E.g. It could be anything from advising a niche group such as small business owners to a community of mum bloggers.
This can be hosted on a platform (e.g. Thinkific) and people access it by paying a membership fee per month.
They don’t have to be expensive either. Sites charging anything from £5 – £30 a month are some the most successful.
It offers sticky recurring income, which is paid to you in advance. But you must offer excellent value i.e. results or a transformation.
As with all things, building such a platform and community requires work and time, but is entirely possible.
12. Start A YouTube Channel
Youtube offers the opportunity to create content, distribute it and monetise it via ads.
It’s the second largest search engine in the world and will continue to grow as we consume more video content.
YouTube channels are a great way to make passive income, however, you need to produce valuable and engaging content.
The more people view your content, the more you get paid.
Check out the YouTube Partner programme for more info on how to monetise content.
We've also launched our YouTube Channel as a passive income source. Feel free to check out our recent video on how to achieve YouTube Monetization:
13. Create An App
Apps remain more popular than ever before and often inexpensive to create if you hire abroad.
The best apps are usually very simple as an idea and you make money through a revenue share with the distributors e.g. iTunes, Google Play.
Not all apps make money although most of them do.
If you’re interested in creating one, my advice is – Don’t think as a tech person does.
Focus on the idea, user experience, and engagement. Hire the tech resource and focus on creating the best in the category.
My favourite app, for example, is Notability, with a focus on productivity.
14. Affiliate Marketing
If you don’t have the resources to create your own product, you can market products created by others as an ‘affiliate’.
One of the easiest ways of doing this is to joins the Amazon Associates program.
Related post: How To Make Money From The Amazon Associate Program
Other ways of doing it are to join affiliate networks such as AWIN, CJ, ShareASale and market products within their network.
Finding the products to market is one thing, learning how to effectively market them is another.
Starting a blog offers a good environment to market affiliates for a commission.
Another way of doing this is through a podcast or via social media such as Pinterest, Facebook, etc.
Note that affiliates come in different shapes and sizes.
Some offer you a one-off commission such as $80, whereas some offer $1 for a conversion.
The ones that pay a lot do so because their data shows that the lifetime value of the referred sale is high on average.
As such, they’d rather pay out say $80 to you and make $400 from the person you refer over a period of time.
So the ROI for them is high and justifies the ‘cost of acquiring a customer’ i.e. the $80.
Some affiliate commissions are also recurring for as long as the person your referred remains a paying customer.
This blog, for example, has a few of those and gets paid each month by people we referred directly or indirectly.
15. Make And Sell Videos
Making and selling videos is big business.
Companies such as Newsflare pay you for your video (the quirkier the better) and license them to major news organisations and brands around the world.
They then agree to a revenue share (usually 50%) with you each time your video is used.
So whenever you see something rather unusual happening in public, it could be rewarding to capture the event on your phone.
16. Rent Out Your Driveway
This is one of the passive income ideas that uses wasting space as we saw with spare rooms above.
Especially if you live 10 – 15 minutes from a train station.
Lots of people who travel in from further afield like to park their cars and then walk to the station. You can easily rent your parking space for £5 – £10 per day, which is equivalent to between £100 and £200 a month of income.
JustPark has very good user feedback and is well established. They broadly charge a 3% commission.
17. Real Estate Investment Trusts (REIT)
A REIT is a property investment company.
It offers an alternative way to invest in property without actually owning the property and associated risks.
The best part is that it can be traded on the stock market and so offers much better liquidity.
One of the largest and most diversified REITs in the UK is ‘British Land’.
The returns you get from investing in a REIT comes through dividends and through capital gains (increase in Net Asset Value).
18. Create an eBook
eBooks create a very good opportunity to help people solve specific problems.
As they are digital downloads, you can create these easily and copyright the content.
They are also priced fairly cheaply and easily accessible by mobile.
However, to make money from this, you must first find a problem to solve and a market of buyers.
That market could come from an audience you help regularly or a community you have access to.
You do the work once and can sell your ebooks for as many times as you want in the future.
Once you’ve cracked this, repeat and create more ebooks.
Remember to focus on helping people. The money bit follows.
A good example of an eBook type product is our custom product called the BUDGET FOR LIFE
19. Start An eCommerce Store
Creating your own online store is easier than ever before.
Shopify has done everything they can to make setting up and running an eCommerce website as easy as possible.
They handle all the security, hosting, and credit card processing to give store owners more time to focus on promoting their website.
20. Run A Podcast
Podcasts work very similarly to blogs in that the monetisation is similar.
Affiliate marketing and creating your own digital products or membership site are just some of them.
Anchor.fm has created a phenomenal app that lets you launch your own podcast and publish onto iTunes straight from your phone.
It requires time and effort and a willingness to help your audience.
John Lee Dumas runs one of the most successful podcasts in the world and he makes millions!
He started ~5 years ago with zero fans and has grown a loyal following through consistency and hard work.
21. Monetise Through Advertising
This is one of the passive income ideas that I never thought I'd be writing about when I started this blog.
You can make money from advertising by creating a platform you can place ads on.
Starting your own website is one way of doing this as you have control of the platform i.e. it's self-hosted.
You can have ads from Google Adsense or from other parties such as AdThrive or MediaVine.
The latter two have barriers to entry in terms of how much traffic your site has to generate.
However, once you cross that barrier you don’t have to keep it up.
The Humble Penny, for example, uses MediaVine because they offer the choice over what type of ads to deliver. Plus they are a brilliant company.
Passive income from traffic to your site is generated either through the number of page views or the number of sessions.
You then get paid a fee i.e. Revenue Per 1,000 impressions aka Revenue Per Mille (RPM).
Here is a summary of all the scores sorted by the total score; and an indication of my current personal interests:
Passive income is real but it requires work upfront to make it work for you.
It also takes time and in some cases, it could take 5 – 10 years to build significant passive income.
The variety of options shows that some will be more suitable for you than others might be.
Some options can be explored with low capital whilst others require a lot of money. The good news is, the options exist and there is something there for everyone.
The key is to get started, do some research and see what works for you.
Start small and focus on increasing the proportion of passive to active income you make over time.
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- Step By Step Tutorial: How To Start A Blog
What's your experience of passive income ideas so far? What has worked and what hasn't? What are you curious about?
Do please share this post if you found it useful, and remember, in all things be thankful and Seek Joy.
Wow! Some really great ideas here, thank you!
On your section entitled “Invest In Index Funds or ETFs”. I find it helps to mitigate risk if you balance it with other assets like here https://obviousinvestor.com/my-investments/growth-portfolio/
Just a thought.
Thanks for your blog and the info. Really enjoying the read so far.
Keep up the good work!
Ken Okoroafor says
That’s useful. Thanks for stopping by and for sharing! I’ll be checking your blog out.
No worries Ken, happy to help!
Still reading your blog now. Lots of really great info.
Ken Okoroafor says
I love this list! The most common mistake I see people make with passive income is chasing things that SOUND LIKE they’re passive income, but they actually take a little work from time to time. You have to earn the right to sit on that beach. 😉
Ken Okoroafor says
Thanks you! I know exactly what you mean.
On many levels, making any form of income is a win. If one then starts to set goals around 5%, 10%, 20% passive, things start to get more interesting.
Really enjoyed this, thanks for the transparency!
Ken Okoroafor says
You’re welcome, Tola! Glad you enjoyed it 🙂
Ezaz Shaikh says
It’s a very informative article. This is something that everyone must read and especially the one who seriously wants to create passive income. I have also written some extra points on passive income ideas. You can check mine. Anyways, Good Job! Keep sharing such good content. I will come back to read your other contents. Thanks.
Ken Okoroafor says
Thanks for that! Knowledge of these things is usually the first step forward.
Shubhangi Dhall says
Thank you so much for this information. I think online trading is a great source of earning passive income. The trick is to find the right platform for you, I would recommend using binomo.com. It has a user-friendly interface and it is fairly easy to use. It also has demo account, tutorial videos and a great customer support team.
Bella C-D says
Ken, I love the rigorous approach you’ve taken with regards to ranking these ideas, however I disagreed with some of the ‘Effort’ scores you gave. This suggests that running a podcast or starting a blog would be less effort than PASSIVE index funds?! Great ideas nevertheless that everyone should have a think about…
The Humble Penny says
Thank you 🙂
I think you’ve read that in reverse. On Effort, investing in Index funds and ETFs requires little effort, hence a higher score. Running a blog or podcast requires much more effort, hence a lower score. Understand?
Looking to learn and take that first step towards making a passive income however I seem to keep talking myself out of ideas, I’m not good at this or I don’t think that’s for me… I’m not that creative I’m an IT guy and I play a bit of piano (though I’m not that great and never record!)
Where does someone like me even begin? I’d be happy with a few pence a day anything to take those first few steps and getting into the mindset for making a passive income.
Ken, looking at your video of passive investments it shows an example of £10k over 10 years, is that just with the interest being reinvested and not including monthly contributions? so it was just the initial 10k investment plus interest reinvested for 10 years?
I’m intrigued having never invested before I want to start making money work for me!
Dani Schultz says
Thank you so much for putting together this wonderful list. I love the idea of investing in index funds and creating an eBook.
The Humble Penny says
I appreciate you stopping by! Is an ebook something you created in the past or expect to create in the near future?
These business ideas are awesome, hawever, running an e-commerce store is not quite passive and require lot of work and keeping a track of orders and many other tasks which can fail if there is no solid budget and marketing plan.