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How to Generate Passive Income

Dena Standley | February 06, 2024

Dena Standley
Legal Expert, Paralegal
Dena Standley, BA

Dena Standley is a seasoned paralegal with more than 20 years of experience in legal research and writing, having received a certification as a Legal Assistant/Paralegal from Southern Technical College.

Edited by Hannah Locklear

Hannah Locklear
Editor at SoloSuit
Hannah Locklear, BA

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

Summary: Here are a few ideas to help you generate passive income: earn dividends from investments, open a high-interest savings account, invest in rental properties, fund a private business, and create online content.

You may already have a reliable job that earns you good money, but you still feel you can do more with your finances. With the rise of inflation, you may be looking for ways to stretch your income further or be tired of working unmanageable hours. Whatever your reason, finding a source of income that doesn't require your presence full-time is beneficial.

Passive income comes from stocks, investing in other people's businesses, or side hustles that require little to no effort to maintain—unlike active or earned income that forces you to work regularly.

Passive income may require you to put in more effort, time, or money to start, but it can earn you money for years after setting it up. That sounds appealing to most people. Today, we will discuss ways you can generate passive income and be on your way to meeting your financial goals.

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Earn dividends from investments.

Dividends are a form of passive income because you get paid by the company you invested in for trusting them with your money and helping them grow and make a profit. The dividends you earn depend on the number of shares you bought and the amount the company pays for that quarter or year.

Here is an example to illustrate how earning dividends from investments works.

Example: Jody bought 100 shares worth $2,000 from ABC Company on 8th January. The asking price was $20 per share. At the end of the first quarter, ABC company paid a quarterly dividend of $1 per share. Jody received $100 for her $2,000 investment in April, and she continues to receive dividends regularly depending on the company’s performance.

Open a high-interest savings account.

Unlike traditional savings accounts, high-interest savings accounts enable you to earn above-average interest rates on your deposit. A regular account, on average, will make you 0.01% APY (Annual Percentage Yield) and a monthly yield of 0.47%, while a high-interest savings account will earn you an average of 4–5% APY. Notably, the value given varies over time. Hence, it's crucial to shop around and regularly compare the APY rates. The following table gives you APY rates for some banks.

Typical APY Rates

High-Interest Savings Account Annual Percentage Yield
Betterment 5.50 %
BMO Alto 5.10 %
SoFi 4.60 %
USBank 4.50 %
Synchrony 4.75 %

Got an outstanding debt preventing you from getting into a passive income project? SoloSettle helps you to settle your debt for less than you owe. Watch the following video to learn how to settle your debt so you can focus on generating passive income:

Invest in rental properties.

Rental properties can earn you good money long-term, especially if it’s located in a strategic area where you'll always have tenants. However, real estate requires you to pour a significant amount of money when purchasing. It also comes with additional responsibilities like maintenance, paying taxes, and mortgage payments. Other short-term ideas would be to have a part of your home as Airbnb and advertise online on BNB platforms. You can also rent out a room to someone locally.

Funding a private business

Starting your own business may not be on your to-do list, but it doesn't have to prevent you from investing in upcoming small businesses. You can start by looking for a promising start-up from your close family or friends. If there is none, look into platforms like Mainvest that help you find local businesses to invest in. However, investing in small companies can come with significant risks. Do your research to confirm that the business model is sound and likely to grow. As a precautionary measure, use the money you can afford to lose.

Creating online content

If you are willing to invest some time and effort initially, creating online content can work for you. Once you develop content and have a reasonable online audience, you will likely make long-term passive income. The following table outlines a few ideas to consider.

  • Blogging: Grow an audience for your blog and profit from it through advertisements, affiliates, and products.
  • Sell digital products: Create and sell informational products such as ebooks, online courses, and graphics.
  • Affiliate marketing: Promote other companies' products via your website or social media and earn a commission.
  • Stock photography: Take photos and sell them as royalty-free on sites such as Shutterstock or iStock.
  • YouTube videos: Earn ad money from the YouTube videos you make with helpful content that attracts viewers.

It is important to manage your debt situation to ensure the maximum benefit from your passive income. When you have a delinquent debt account, creditors investigate to find out if you have other sources of income. When they find one, they take all measures to ensure they get their hands on it. SoloSuit can help you settle your debt using SoloSettle, which can protect any passive income you generate.

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