Creating several streams of income can help you weather a financial storm. What if your day job wasn’t your chief source of income? If you could generate income while you sleep or when you’re on a beach sipping a margarita?
While many rely on their day job for most income, there are other passive income options to make money. Almost anyone can generate residual income if they know where to look and how to set up their income streams.
What is Residual Income?
Residual income is passive income that continues to make money for you after you’ve done the work. Unlike passive income, it should require minimum input from you to keep it going and generate cash while you go about your life.
Active income is income you make by being paid for providing a service. This can include your salary from a day job, tips, bonuses, commissions or any active business income. If you’re a freelancer, it’s money you get by serving your clients.
When you make residual income, you don’t have to be present to get paid. You don’t get compensated for the services you provide but earn money based on work you have done in the past. It should require little to no active involvement on your part.
Generating both residual and active income can help you supercharge your savings and speed up your pace toward building wealth and becoming financially independent.
How Do You Build Residual Income?
Some ideas require little to no work on your part while others will be more involved. After the initial setup phase, you should be able to generate residual income with little input on your part.
10 Easy Residual Income Ideas
If you’re looking for the best way to make residual income, below is a list of 10 ideas to consider. You can start off with one residual income idea to keep things simple so you can learn how the process works.
1. Try a high-yield savings account
If you have money sitting around in your regular bank account, consider moving it to a high-yield savings account. While this is not a glamorous investment, it’s a safe and easy way to generate residual income with a little work on your part.
One advantage of going with high-yield savings account over a CD is that you get competitive interest rates without locking in your capital. However, rates can fluctuate so always do your research for the best rates available at the moment.
Make sure you look for high-yield savings accounts that offer the FDIC insurance protection of $250,000 so that your money is safe in case something happens.
2. Create a CD ladder
CDs (Certificates of Deposit) offer another safe way to earn residual income on money sitting around in your savings account or under your mattress. There is nothing as low risk and passive than using a CD to stash your cash.
A CD works similarly to a high-yield savings account but with a catch – you can’t touch the money until the time frame on the account expires. If you try to access them earlier, you will pay a penalty.
CDs can have varying lengths of maturity from a few months to a few years. If you want to get a steady stream of residual income, you can build a ladder with CDs that mature every few months (or even every month).
Once the CD term expires, you can collect the interest and reinvest the money into another CD to continue your CD ladder. How much you make depends on the current interest rates for CDs and how much money you have to lock up in this income stream.
3. Invest in real estate investment trusts
Real Estate Investment Trusts (REIT) pool money from many investors to own and manage income-producing properties. As the company makes money from their properties, it distributes profits to investors.
Some REITs require you to be an accredited investor to get started and come with high investment minimums, so you need to do your research. The U.S. Securities and Exchange Commission (SEC) defines an accredited investor as someone with an earned income of more than $200,000 or a net worth of more than $1 million excluding the value of a primary residence.
RealtyMogul offers non-accredited investors the option to invest in multi-family properties, debt, and debt-like securities. You can get started with as little as $1,000 to build your residual income stream.
4. Invest in dividend stocks
Dividend stocks are paid out by publicly traded companies that share part of their earnings with investors. Companies pay out dividends when they report their earnings, usually quarterly although sometimes it can be bi-annually or annually.
Unlike stock appreciation, you need not sell your shares to receive dividends. This is one reason investors like this form of residual income. Companies that pay out dividends are established and choose to share part of their profits with investors rather than reinvest them for growth.
Dividends can be a great source of residual income but keep in mind they are not guaranteed. Companies have been known to cut back on dividend payouts or eliminate them altogether.
5. Buy a rental property
Buying a rental property is not the right fit for everyone, but it can be an excellent source of residual income. You will have to put in upfront work in doing the research, evaluating different options, and finding the right cash flowing property.
Once you buy the rental, you can hand over finding renters and managing the property to a company for a fee. This will allow you to earn residual income while going on with your life.
Keep in mind you will give up part of your profits to the property management company, which will reduce your earnings. In addition, you may have to spend some time working with the company if there are large expenses or tenant turnover.
6. Try peer-to-peer lending
If you would rather help individuals or a business, consider investing your cash via peer-to-peer lending. You can select the person or business you want to lend to based on the amount of risk you’re willing to take. When the borrower makes payments, you receive the principal plus interest.
One popular option is Lending Club. Potential borrowers create a profile and fill out the necessary information such as credit history and income. Lending Club assesses its risk profile and gives them an interest rate that matches.
On the other end, lenders can create an account and buy the debt. As a lender, you will get paid monthly when the borrower makes payments.
7. Sell your photos online
If you have an eye for photography, this could be a lucrative way to make residual income. Websites like iStockPhoto and Shutterstock allow you to upload and sell your photos to individuals or businesses looking for stock images.
Once you take the photo, you can continue to earn royalties from it month after month as long as it’s popular. To optimize your earnings, upload images regularly, and grow your online portfolio.
8. Write an eBook
If you have the idea for a book, why not self-publish? Platforms such as Kindle Market are a great place for many self-published authors to get started and grow their following, which can lead to deals with publishing houses.
You will have to put in the work upfront from writing the book to getting it edited, formatted, and uploaded to the platform. In addition, you will have to market it and get it in front of readers interested in what you have to say.
The great thing about eBooks is that you will continue to receive residual income every time a book sells. If you’re looking for a tried-and-true guide on how to self-publish an eBook, check out Kindlepreneur.com.
9. Start a blog
While blogging can be a great way to make money, it’s not easy to build a lucrative blog. It’s very cheap to get started but requires learning the ins and outs of making money online, which takes more than great content.
Learn about: 10 Best Books to Make Money from Blogging
Start by coming up with a subject for your blog, registering a domain name, and selecting a hosting plan. Bluehost is a suitable option for beginning bloggers since you can get started for as little as $2.95/month.
10. Build affiliate income
Affiliate income is the money you earn for promoting a company. When a reader or a follower clicks on a link you provide and purchases a product or service through it, you will earn a percentage of the revenue.
You need not have a blog to earn affiliate income, although it can make it easier. Many social media influencers also make their money via affiliate marketing and receive kickbacks from sharing products or companies with their audience.
The larger your following, the more opportunity you will have to earn an affiliate commission. It’s a great way to make residual income since you can put out the content once and continue to get paid every time someone buys using your referral link.
The Bottom Line
Building residual income streams is a great way to diversify your earnings. While some ideas can take some time and upfront work to set up, once they are in place, you can continue making money with little to no effort.
What is your favorite way to earn residual income? Share your thoughts in the comments.
Residual income is the income you continue to make after the initial set up is done. The idea is to do the work once and continue to reap the benefits for months or years to come. Unlike active income, most of the time you don’t have to be present to get paid. This article will go over ideas for building a residual income and getting paid month after month.
Learn more about 50 Ways to make extra free money – Almost Free!