Passive income is a source of money that is received with very little effort. Earning a passive income requires an upfront investment and a lot of work in the beginning. After a little bit of time and hard work, the passive income streams start to maintain themselves and bring you money without much effort. But, when it comes to earning a passive income, not many people know where to start, which is why we have created this article. However, some of the strategies we cover involve risk. If you are not comfortable with this, then we recommend going down a more labor-intensive route. Others can be some of the best ways of investing money. The most important thing to think about when it comes to passive income is that you are fully comfortable with whatever avenue you choose.
Why is Passive Income Appealing?
Passive income is appealing because it frees up your time so you can focus on the things that matter the most in life. If workers want to earn the same salary and enjoy the same lifestyle year after year, then they have to continue working the same day and hours. Once you reach retirement age or find yourself unable to work anymore, income will stop unless you have a passive income in place as a source of revenue. Generating a passive income is one of the most common goals for investors and is typically the only reason they choose to invest.
Whether you are looking for financial security for your retirement, provide for your family, send your grandchildren to university or supplement your pension fund, passive income can be a great way of doing so. Now, let’s take a look at the different ways you can generate a passive income.
Switch Your Current Account
Loyalty to a certain bank is, no doubt a thing of the past. That’s why so many now offer cash incentives for switching current accounts. Not all banks offer cash incentives but those that do guarantee that new customers’ transactions will be transferred over to their new account in as little as a week.
Rent Out a Spare Room or Parking Space
Buying a property and then renting it out is an excellent way of earning passive income. But, it is extremely expensive and requires a significant amount of work. However, if you have a spare room in your home or an empty parking space on your drive; you can rent them out. If you plan on doing this, you will need to notify HMRC for tax purposes.
Use a Rewards Credit Card
If you plan on spending money on a credit card, then you might as well use one that is going to give you cash bonuses. There are a few credit cards on the market that offer cashback or rewards schemes where you could get discounts in some shops and even earn air miles for your next holiday. However, like all credit cards, it’s always important to approach them with caution as they are a debt product after all. If you are concerned that you won’t be able to make the repayments every month and in full then the interest is going to outpace any cashback or rewards you make.
Have a Go at Robo-investing
Robo-investing is one of the riskier ways of generating a passive income. Unlike conventional savings accounts where your money sits there earning interest, here is gets invested for even more financial rewards. However, remember that you can also experience loss. Robo advisors can select investments on your behalf. Once your funds are invested, the software automatically makes amendments to the investment to align your portfolio. Some Robo-advisors can even make trades automatically, which can reduce your tax bill. This process is known as tax-loss harvesting.
Earn Interest on Your Savings
These days the best rates on savings are normally reserved for fixed-rate accounts. These are savings accounts that lock your money for a period of time. The longer the money is locked away for, the higher the interest rate will be. You should only use this type of accounts if you are completely comfortable with knowing that you can’t access your money. If you find that you need the money before the set period ends, then it is very likely that you will need to pay an early withdrawal fee.
About The Author:
Lloyd Parkinson is a Content Marketing Executive at Revive.Digital. Lloyd has experience writing content for the purpose of marketing on behalf of B2B and B2C organizations ranging from legal services, insurance brokers, financial services, all the way to the music and entertainment industry. He conducts research and writes about an extensive number of topics. Lloyd aims to educate his readers through his creative writing by providing them with informative and valuable content. He seeks to simplify complex topics for general readers as well as writing technical content for the well informed.