Imagine receiving an additional income stream every month that you put very little effort into achieving.
Sounds amazing right? Well, this is essentially what it means to earn a passive income and it’s a powerful way to supplement savings for your retirement goals.
But, if you do decide to seek out a passive income, you should be prepared to make some kind of an initial investment whether its from a monetary or time perspective.
“Most of the different methods of creating passive income are going to involve some sort of effort being injected initially. You cannot pick up royalties from a book or a song without first writing it. Similarly, you can’t expect to receive income in the form of rent for a property unless you first own the property, and that takes money that has to first be earned and put aside,” says Conray Labuschagne, founder of Work Your Wealth.
Here are four ways to help you build your wealth:
- Affiliate marketing
If you have a blog or website with a large following or readership, you can use your website to leverage some extra cash. Affiliate marketing involves partnering with a company or an entrepreneur to promote a product or service on your site.
It’s a way to collect an agreed-upon percentage of commission for every purchase a person makes from the link on your website.
It’s a win-win option for both parties.
- Peer-to-peer lending
If your finances allow, you could explore becoming a P2P investor to people seeking loans for various reasons through a peer-to-peer lending site where you can earn monthly interest on your investment.
P2P lending however, does carry the risk of having to deal with defaulters as it is an unsecured loan, but to reduce this risk you can consider diversifying your lending portfolio by lending smaller amounts to larger numbers of people as opposed to a few large investments and doing a thorough analysis of the person’s credit rating and history.
- Property investment
Buying property to rent can be a lucrative way of earning a passive income, but it’s a decision that you should take a considered view on.
Be on the lookout for entry-level properties that are located close to schools, transport and shops – these tend to be easier to rent out and are in high demand.
Property experts also say that capital growth predominantly lies in smaller rather than bigger properties when the objective is buying-to-rent
- Get out of debt
Financial planner Neal Frankle says settling your outstanding debt will mean that you’ll have a little extra money left over that you could use to invest in another passive income idea.
“The nice thing about getting out of debt is that you can do so by making more money, spending less or a combination of the two. I love this idea and if you are currently in debt I suggest you make getting out of debt your number one priority,” he says.