Passive Income for Beginners (2024)

FAQs

How can I make $1000 a month in passive income? ›

Dividend stocks

Opportunity: Since the income from the stocks isn't related to any activity other than the initial financial investment, owning dividend-yielding stocks can be one of the most passive forms of making money. The money will simply be deposited in your brokerage account.

Rent Out Assets

If you like the idea of earning passive income, one idea to make $5,000 per month is to rent out things for money. This is probably the best option if you're very busy with your job and don't have time to start a new side hustle.

Some popular passive income strategies include investing in dividend-paying stocks, creating an online course, or writing an eBook. These methods require an initial investment of time and effort but can generate a daily return of $100 or more if executed correctly.

Create a digital product

Whether it's a course, an e-book, or a piece of software, digital products have an unmatched potential for passive income. With platforms like Udemy, KDP, and the App Store, you can create something once and sell it repeatedly, with little to no ongoing effort on your part.

Typically, passive income is subject to a taxpayer's usual marginal tax rate, which is based on their tax bracket. But taxpayers whose modified adjusted gross income is above a certain threshold may also be subject to the Net Investment Income Tax (NIIT).

Most ways to generate passive income require an upfront investment of either money, time or both; the income part comes later (in some cases, much later). But once you've made that initial investment, passive income can pay off for years to come.

One simple strategy is to invest in two types of assets: closed-end funds (CEFs) and real estate investment trusts (REITs). A CEF is a type of mutual fund that can be bought and sold like a stock on an exchange. Some CEFs specialize in high-yield bonds. Others own preferred stocks and dividend stocks.

How much money do you need to live off passive income? ›

It's easiest to live off of passive income if you live in a low cost-of-living area. To live off of financial investment and cash-equivalent income, you'll need a larger amount of money. To earn $30,000 per year, you'll need $600,000 invested at 5% per year.

A digital rental allows eBook access for a publisher-determined length of time. Access to content ends once the rental period expires. The product page displays rental duration and license details in the eBook Features section and at checkout.

A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.

You can produce $500 a month in passive income through savings accounts, certificates of deposit, stocks, bonds, funds and other investment vehicles. Each offers varying rates of return, degrees of safety, convenience, and liquidity.

Some experts recommend withdrawing 4% each year from your retirement accounts. To generate $500 a month, you might need to build your investments to $150,000. Taking out 4% each year would amount to $6,000, which comes to $500 a month.