In this present-day Nigeria, having a job does not guarantee a stable lifestyle, not to talk of financial independence. It can be quite challenging to survive in this economy without a well-paying job or multiple streams of income.
What do you think about a way to get more money without the burden of two jobs or juggling a 9-5 with a business? Sounds good, right?
Keep reading and you will find out the meaning of passive income, and some passive income ideas that you can tap into.
What is Passive Income?
Passive income is a form of income that comes without or with minimal labor. It is an income that is earned whether you actively participate or not. The main benefit of passive income is that it creates financial independence or financial freedom and it can also help to attain early retirement.
The concept of passive income should be understood before venturing into it. You necessarily don’t have to be actively involved in the business before you can profit from it.
Examples of passive income are:
- Investment in stock or real estate
- Affiliate marketing
- Owning rental services
- Drop shipping
- Being a sleeping partner.
Passive Income Ideas for 2024
There are several ways someone could earn income passively. They are discussed in the categories below;
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Traditional passive stream of income
a. Rental Properties
Owning a house, a shop or a short-let apartment is one of the best ways to get cash passively. It might look like a long shot but it is worth it. A property in the right environment would generate a good income and be the road to financial freedom.
b. A high-yield savings account
This type of account, unlike your regular savings account, has a higher percentage rate i.e. the more your money stays untouched in the account, the more interest you receive. Look for a bank with a high-interest rate and start your journey.
The downside of this idea is the amount of money that has to be put in before finally realizing profit. It is a long-term plan and often gets tiring.
c. Rent out your spare room
If you don’t have the money to start a rental apartment, you can still partake in this by renting out the extra room in your house or home. Or do you have a house but do not mostly stay there because of your shifts at work? You could always rent it out to earn some extra cash.
Read also: 7 Financial Plans to Make Towards Productivity in 2024.
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Online methods
a. Affiliate marketing
Affiliate marketing is one of the easiest ways to earn income. You promote a company’s product to its targeted audience and you get a percentage from any goods sold. The more you sell the more your profit.
All you need to do is have a vast amount of audience on your social media to promote the goods.
b. Starting a YouTube channel
Starting a YouTube channel is the way to go for youths of this generation when it comes to generating income. Things like vlogging your daily life, and Get Ready With Me videos are content that can get a lot of engagement depending on how interesting they are.
The channel might not grow at first but with consistency, creativity, and determination, in no time you will start earning.
c. Sales of design on online platforms
Certain apps provide platforms for people to sell logo designs, templates, and other related materials. Some of the apps are 99designs, Themefrost, Creative Market, and so on. There are various tutorials on YouTube to get you started with the act of designing.
d. Starting a blog
A blog might be challenging to start due to the effort and time needed to make it grow but everything pays off when a community is built by the blog.
These are ways you could earn passively from a blog: selling products, running ads through Google AdSense, selling affiliate products, creating sponsored posts, and many others.
Creating a blog has been made simple with the use of a Content Management System such as WordPress. Without knowledge of coding, you can publish blog posts, video content, upload files, etc. Other examples of these CMS platforms are Wix, Blogger, Ghost etc.
Read also: Beginner’s Guide to Digital Products: Crafting, Selling and Succeeding Online
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Income through investments
a. Investing in a business
To invest in a business, you don’t have to be actively involved before you can yield profit. It’s like lending someone money to start a business and receiving an amount of money every month from the person running it. Apps like Mainvest, Vaulted, and Percent, help people invest their money and get a certain cashback by the end of the month.
b. Renting out your car
You can offer your car up for rent to people who might need money. Services like Turo, Hyer Car, and others make this easier. Those who don’t want their cars in the hands of complete strangers can give a trusted person to run a cab service and return a certain percentage per week or month, depending on the agreement.
c. Invest in REITs
The Real Estate Investment Trust is an investment scheme where you can get into real estate without having to go the traditional way i.e. having estates or land or properties. With little money, you can get into the real estate business proper.
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Business Ideas
a. Drop shipping business
This is a type of retail business whereby a person collects orders from potential buyers and transfer all information to the manufacture to do the processing and delivery by themselves.
This business has very low risk as you only pay your suppliers once payment have been made. You do not need to buy goods before being able to sell.
b. Sales of handmade goods
There are so many goods that can be made and sold either online or can be supplied. Examples are soap, zobo, chin chin, pastries, and a lot among others. All you have is to get the right customers. Platforms like Amazon, Ebay, and Jumia allow you to showcase your handmade goods.
Other Common Passive Income Ideas
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Cash backs
This is a percentage that goes to the customer or buyer after purchasing a particular item. This is a lucrative way to earn money while shopping. Apps like Ibbota, Honey, Opay, Palmpay and others give a percentage on any item bought which can be used any day and any time.
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Teach online courses
There are platforms that allow you to create courses, and as people buy or take your course, the more you earn an amount of money. What you need is the knowledge you want to pass across and the time to put the course together. Example of platforms in which you can showcase your courses are Allison, udemy, Future Learn ETC.
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Lend money to your peers
This type of passive income needs strict management and a strict personality. Lending money to your friends and having them pay little profits on top is good but there are some peers who would take advantage and not pay back.
Benefits of Passive Income
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Financial freedom
This is when you have enough money that can take care of your expenses and still have residuals that can be saved or invested. Passive income helps you achieve this because it can be combined with your initial income.
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Generational wealth
Some of these passive income methods can be passed down to the next generation like rental properties, stocks, websites, and businesses and if managed well can be there for more generations to come.
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Easy achievement of goals
With more streams of income, achieving certain goals becomes easier. Pursuing personal and professional goals become more visible as you have more time and resources.
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Early retirement
The combination of both active and passive income helps you gain financial freedom and early retirement as it gets to a stage where you no longer get worried about money because it comes in steadily.
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Increase in cash flow
The more one diversifies in their stream of income, the more the increase in the flow of income. More cash increase will surely help with different areas of your life.
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Diversification of income
Passive income can help you diversify into different business. This helps lessen the risk of loss in certain businesses that have high risk.
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Difference Between Passive and Active Income
Now that you know what passive income is, there is another type of income we also have to shed light on. Active income is fixed income that comes with the rendering of some type of service.
Wages, salary, tips, bonuses, commission are examples of active income.
Active income can be gotten by running a business, working for a company or providing any type of services. Unlike passive streams of income where you get income with relatively minimal effort.
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Risk factor
Active income is more stable and can be predicted. You know how much you earn in a month, you know how much percentage is gotten on a product sold or how much wages you receive per week, but when it comes to passive means it’s quite different.
Passive streams can be quite unpredictable, for example, the stocks of a company might be making profit this minute and by the next day they are in a big loss.
Due to the unstable nature of the income, the risk factor is very high and one can lose their capital in a day.
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Lifestyle
Income affects our lifestyles differently. Where active income requires you to put a lot of work and effort, passive income requires you to give time and dedication. Passive streams of income are may be done online and may not require your presence. This will affect how you plan your time and live your life.
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How they are taxed
The taxes put on passive income are differentiated by the way they are earned. Some are taxed like normal active income while some are taxed by how they are earned.
Risk Factors and Challenges of Passive Income
- Building some streams income requires huge capital. Passive streams like rental properties, the stock market, and investment needs huge amount of capital in other to realize good profit in a short time frame.
- Along the line, some will require maintenance or renovation. Most businesses might require rebranding and making changes to little things that will matter.
- You will need to invest time, effort and be consistent in what you do. Passive income might not require a lot of physical labor but the key is consistency.
- Some income streams are unpredictable and can flop at any moment. For example stocks and cryptocurrency have an unstable market place and the tables might change the next day. It is important to study the kind of market you are entering to avoid huge losses.
Conclusion
Passive income has been proven to be a reliable way to gain additional income alongside your regular 9-5. It is essential to read about any income stream before venturing into the business, learn what it entails and know how to schedule it. There are various ideas to start on, pick the one you can manage and venture into it.
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