Passive Income: Making Money in your Sleep
What if you could be making money in your sleep? What if you could retire early as a millionaire? What if we told you two words that could make both of those a possibility? Good news, we can.
In essence, passive income is a source of income that is separate from your active income (such as a full-time job) and allows you to make money without actively engaging in anything. For example, investing in stocks would be considered passive income. If you choose your stocks wisely, your money will grow over time independently. If you have a significant amount of money to invest, you could try buying a property and renting it out. This is low effort and your properties will quickly pay for themselves. Starting a side hustle or publishing a book are also valid forms of passive income, but they might require a higher level of commitment. Many people have a goal of growing their side hustle to the point where they can quit their 9-5 job, but it is ok to keep your job even as your passive income begins to grow. Although it is thought of as a tool for main adults, it isn’t a bad idea to consider starting a side hustle in high school or in college.
Levels of involvement will vary depending on the source of your passive income, but here are two main categories:
Rental income:
Rental income can be sourced in several different ways, but is generally dismissed as something only very wealthy people can afford. However, this is a complete misconception.
Firstly, if you live in a multi-bedroom apartment or house and live alone, there is no harm in vetting a roommate and having them pay you rent. This isn’t an option for most teens but can be considered for later on. You can use the money you get from them to pay your mortgage, or you can just pocket it. If you do happen to be someone with significant amounts of wealth, buying and renting out a second house is a profitable source of rental income. While it can take years to regenerate the original cost of the house in rental income, a second house can be a massive asset. Through actively renting it out when you aren’t living in it, you can generate a lot of money. However, if none of the previous options are feasible for you, you can still benefit from rental income.
Another option would be buying a vending machine and placing it in a high-traffic area. However, buying the machine would cost a considerable sum, and might not be optimal for teens. You would need to refill the machine when it runs out and collect the money, so it isn’t super low effort. Over time, the profits will add up, and you can start making a lot of money. The only catch is the legal issues with setting up a vending machine on someone else’s property without permission or a contract. If your family owns a business or they know someone who does, there is no harm in asking about the possibility of setting up the vending machine outside of their store.
Investment income:
Investment income is another great way to form another source of income, and unlike with rental income, starting small is still valuable. Even if the initial investment is small, the portfolio can still grow significantly. Investment income allows anyone to invest into these types of passive incomes as long as the person is either an adult or a minor with a custodial account. A custodial account is just an investment portfolio shared with a minor who gains full ownership of the account when they become an adult. This type of income also generally takes little to no effort after the initial investment. But there are many different types of investment income, which allows you to decide how much effort strategy goes into the investment and how much income comes out.
Bonds:
One of the most popular investment-based incomes is bonds. These are basically loans you can make to a borrower, such as the government or a company. Like many investment incomes, a possible risk to bonds is that there may be a decrease in the value of the bond, so you must wisely decide when and where you invest.
Stocks:
The other main type of investment income is Stocks. This is a strategic investment in a share of a company that is bought by investors if they think the value of the share will go up and sell the share when they determine that they have gotten enough profit from it. Like bonds, it is important when and where you buy and sell shares in the stock market.
As you make money from investing, you can also choose to reinvest your profits into additional investments, allowing you to make more income.