5 ways to generate passive income.

If you are proactive person looking in ways to achieve financial freedom, you may be dreaming about enjoy life as you wish, spending more time with your loves ones, on your hobbies, traveling the world or probably you are just tire of working as employee for someone else. I can tell you are in the right path to achieve your dreams,

To achieve your goals, you will need to consider increasing your cash flow through passive income. There is plenty of ways you can generate passive income but have in mind that passive income in not a formula to get rich fast. There is some exception to the rule and there are some who made millions in couple years. Hopefully you will be one of the selected few. But for most people passive income will be a slow but steady growth over time.

What is Passive Income.

Passive income is the cash flow you can generate in a way that requires little to no daily effort to maintain. There are different ways to generate passive income, some require capital and other requires time to get start running.

Why Build passive income.

There are plenty of reasons to create passive income. Increasing your cash flow will allow you to enjoy life and do things that you like as I mention early. Same as why you would like a raise on your salary or find a better pay job. There is a lot of benefits of creating different source of passive income. Here the top reasons why to build many sources of passive income:

Protects you from bad times: having different source of cash flow would help you if you lose your job. As more different sources of income you have more you would be protected from bad times.
Increase your wealth building plan: as long you are able to generate more cash flow you would be able to pay debt faster, create more source of passive income and start new projects.
Personal growth: When your passive cash flow is big enough, you could take the decision of quit your job and spend more time learning thinks you like and start new projects that align more with your goals and preferences.
Early retirement: Generating enough passive income cash flow creates opportunities to retire early.
Enjoy life: When you achieve financial freedom and no longer need to exchange your time for a salary you would have the opportunity to spend your time in things you enjoy.

Passive income ideas:

Dividend stocks:

Requirements: Money: Moderate/ High.

Time: low.

Shareholders in companies with dividend yielding stocks receive a payment at regular intervals from the company. Companies pay cash dividends on a quarterly basis out of their profits. All you need to do is own the company stock. Dividends are paid per share of stock, so the more shares you own the higher your payout.

This type of investment is one of the easiest ways to start generating passive income, since the only requirement is the initial capital necessary to buy the stock. Capital required to own a divided-yielding stock share may vary from a couple dollars to thousands of dollars and its yield can vary between 1% up to 9%.

Top 10 S&P dividends stocks by yield.

Macerich (NYSE: MAC) — 9.0%
CenturyLink (NYSE: CTL) — 8.6%
Iron Mountain (NYSE: IRM) — 7.9%
Macy’s (NYSE: M) — 7.0%
Altria (NYSE: MO) — 6.7%
Occidental Petroleum (NYSE: OXY) — 6.3%
Nielsen (NYSE: NLSN) — 6.3%
AT&T (NYSE: T) — 6.2%
AbbVie (NYSE: ABBV) — 6.1%
Invesco (NYSE: IVZ) — 6.1%

Is important to understand that higher yield no necessary means more returns. When investing in stocks is important to do your own due diligence in order to take better decision. Is important to spend time researching about a stock before buy.

“ETF are and an ideal choice for novices they are easy to understand, highly liquid, inexpensive and have far better potential retunes because of far lower cost than mutual funds” Graves says .

Blog / YouTube channel:

Requirements: Money: None / Low.

Time: Moderate.

Starting a blog or a YouTube channel is a great way to generate passive income while sharing a topic you like. What would be better than start a blog on a topic you love and generate cash flow from it. Or start a YouTube channel on where you could share your knowledge or experience and profit from it. If your content engages with users and generate enough traffic the possibilities of generates large amounts of passive income are huge!

There are a lot of ways to generate passive income from a blog or a YouTube Channel.

Advertisement: One of the common and easiest way to start making money on your blog is by placing ads. There are two popular types of ads: CPC cost per click and CPM cost per 1000 impressions. CPC are usually placed un the header, side bar or inside the content of the post and each time a reader clicks on the ad you get paid. The amount you get paid varied on the demand of the key words. On the other hand, CPM are ads that pay you a fixed amount of money based on how many users view your ad.
Affiliate links: placing affiliate links on your content is another great tool to get money from your blog.
Product or service: Offer a product such books, shirts, mugs or services like professional calculators or software is other method you can use to profit from your blog.
Course:
Others: The options to generate cash flow from your blog or channel are unlimited. You can rent a section of your blog, write post that promote a brand, product or service, you can add a bank of images for sell, as many other as your creativity goes.

Real State:

Requirements: Money: Moderate / High.

Time: Low / Moderate.

Other way to build passive income is by purchasing real state and renting it out to tenants.

Rental property can be a great source of passive income, but it requires large capital, time and effort into managing the property. Buying a property as a business not only can generate cash flow also you can benefit from tax cuts.

When you rent a home, you get the benefit cash flow between the difference from the rent price and the total expenses + the equity that the home is getting every month + the depreciation value of the loan that can be used for tax benefits. Let me explain how.

Imagine you buy a $100,000 home that generates $8,000 a year and your total year expenses including taxes, interest, insurance is $3,000$. Subtracting the yearly expenses from the total income would provide you with $5,000 dollars of profits. Now assume your tax bracket is 30%, this means that you will need to pay $1,500 on taxes and your profit leftover would be $3,500.

Now let’s run the same example but adding depreciation. In the united states code, real state depreciates over 27.5 years. So, you would need to divide the value of the property by 27.5 years. In this example the depreciation per year is $3,636. Now we need to take that off from your yearly profit. So, take the $5,000 and subtract the deprecation of $3,636. Your profit leftover before taxes is $1,364, assuming the same bracket of 30% you will pay $409.2 on taxes. Saving more than a $1,000 dollar on taxes.

Crypto staking:

Similar to dividends stocks the only requirements to start generating passive income by staking cryptocurrencies is to hold the token. Most proof of stake cryptocurrencies projects offer the possibility to stake tokens. Staking is a transaction validation method that reward tokens holders with the native token or gas that can be trade for bitcoin or fiat currencies.

Risk is something to consider when taking this path to generate passive income. Cryptocurrencies are a highly volatile asset with a huge potential but with a lot of risks. Is important to do a considerable amount of research before investing on this amazing technology.

Rent items.

Do you own something that someone else would like to use? Now with the help of technology renting items is easier than ever. You can rent a room from Airbnb, or your car at Turo in just a few minutes. The only requirement is to have something that someone else need for a short period of time and you can start making money from it.

Conclusion

No matter which of these 5 ways to generate passive income source you chose, the most important is start a soon as possible. As more income source you can develop closer you will be to your financial freedom. Imagine the day you own a couple of rental properties paid off that generate cash flow every moth with just a little effort.