February 3, 2020

Passive Income Ideas to Make Money

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How can you generate passive income? You don't always need money to start. Here are good strategies for beginners and even students.

© CreditDonkey

Two friends bought a used pinball machine for $25. One repaired the machine while the other cut a deal with a local barbershop. They set it up in the store and collected money from waiting customers.

Soon, they had a pinball empire across town. The young man ended up selling his business for $1,000.

You might recognize one of the friends: Warren Buffet.

Sometimes it's the simplest ideas that blow up. But the hardest part of passive income is starting.

If this story inspired you, take a look at these passive income ideas that actually work.

Why Passive Income is Important

  • Give yourself a safety net should your day job end abruptly
  • Earn extra cash to save for retirement
  • You may save time earning passive versus active income
  • You can earn multiple passive income streams at one time
  • Most passive income streams can be done from anywhere
  • Develop an interest that may flourish into your own small business or company

Best Ways to Generate Passive Income

© CreditDonkey


Robo-advisors are platforms that let you automate your investments. You fund your account and choose an investment strategy—the robo-advisor does the rest. With answers to your questions about risk and return, the software program creates an asset allocation that helps you meet or exceed your goals.


  • Invest without the need to micro-manage your financial accounts
  • Lower fees than most true stockbrokers
  • Small minimum investment, depending on the platform
  • Access to tried-and-true investment strategies

Robo-advisors often invest with tax efficiency in mind.


  • No personalized service—you work with a computer program
  • Limited options to customize your portfolio

High-Yield Savings Accounts

Earning interest on money you already have is arguably the most effortless way to generate passive income. With an online savings account, you can earn more interest than from your local bank.

Sure, an APY between 1% and 2% may not net you thousands of dollars. But if you continually deposit more money into your savings account, your interest will compound over time with zero risk.


  • Hundreds of online bank options
  • Minimal risk with an FDIC-insured bank
  • Earn a higher interest rate than with traditional banks
  • Few, if any, fees for online savings accounts
  • Easy to open and maintain


  • Even "high-yield" APYs may be rather low
  • You have to conduct your banking business online
  • External transfers may take a few days
  • Small minimum investment

Peer-to-Peer Lending

With peer-to-peer (P2P) platforms, you can lend money to borrowers who don't qualify for traditional bank loans. They may offer direct-to-consumer loans or loans already originated and now being sold.

With P2P platforms like LendingClub and Prosper, you can typically start investing with small amounts of money and choose loans based on your preferences.


  • Earn an average of 4%–10% in interest
  • Diversify your risk by investing in multiple loans in micro amounts
  • The P2P platform vets borrowers and provides you with the information you need to make a decision

P2P platforms often set credit score limits for prospective borrowers. LendingClub requires borrowers to have a 600+ credit score, whereas Prosper requires a 640+ credit score.


  • Borrower defaults can leave you with a loss
  • No collateral on loans
  • Illiquid—most platforms don't have a secondary market for you to sell your investment

Does Passive Income Get Taxed?
Yes, passive income does get taxed, though the amount varies depending on the type of income and profit earned. Your tax adviser can help you understand the implications that passive income has on your taxes.

Dividend-Paying Stocks

Dividend stocks are actually company profits that are shared with stockholders. Companies often pay dividends as cash, but sometimes they pay them as shares of stock.

You can decide what to do with the dividends, either withdrawing the funds or reinvesting the dividends to compound the earnings.


  • Earn profit from dividends without having to wait for the stock to increase in price
  • Dividend stocks may hold their value even when the stock market drops
  • Typically older (established) companies offer dividend-paying stocks


  • No guarantee a company will offer dividends—it's up to the board of directors
  • Dividend-paying stocks may not increase in price like other stocks when the market does well
  • Potentially high tax rates for investing

Difference between residual income and passive income
Residual income is how much money you have left over after your bills and expenses are paid. This is not to be confused with passive income, which is a way of making extra money that requires little to no time or effort.

Reduce Your Consumer Debt

Saving money can be just as profitable as earning it. By paying high rates of interest on debt, you are giving away some of your income. Paying off the debt means more money in your pocket (or bank account).

Consider paying bills to improve your financial outlook. For example, if you have 15% interest on your credit card debt and pay that debt off, it's like earning a 15% return.

You can either pay your debt off in full, if you are able, or refinance debts, such as student loans or personal loans that have high interest rates. Any money you can save on interest is passive income.


  • Improve your credit score while you generate passive income
  • Refinance or transfer your credit card debt to a low interest credit card and save money
  • Help your financial future by paying off your debts now


  • If you don't have the money to pay off the debts in full, it can take a long time to see a return
  • You have to be consistent about your payments in order to get out of high interest debt
  • Getting out of debt takes money (and effort)

Credit Card Rewards

If you already use credit cards for everyday expenses, a rewards credit card can earn a little passive income. While it won't make you rich from this passive income stream, getting a couple dollars back for each $100 you spend or earning airline miles to save you money on travel can help.

Look for credit cards that reward you for the things you normally do, like buying groceries or eating at certain restaurants. Or you can research the card that offers the highest flat percentage back for any purchase.


  • No extra effort—earn money just for doing what you normally do
  • No added costs
  • A chance to earn bonuses if you track the rewards well enough


  • May encourage overspending
  • If you don't pay your balance in full, you'll get charged interest, which takes away from your income
  • Not all rewards cards translate into cash

Invest in Real Estate Crowdfunding

Real estate investment has traditionally involved a ton of capital to get started. But not anymore.

Crowdfunding platforms like Fundrise now pool investors' money to fund investment properties.

Because you join hundreds of others, you earn fractional shares of the real estate based on how much you invest. The return on your real estate investment comes from the property's appreciation and/or income from rental property.


  • Start investing with only a small amount of capital
  • Real estate allows portfolio diversification
  • You don't have to deal with tenants, repairs, and other headaches associated with owning rental property


  • Real estate isn't liquid, which puts your investment at risk
  • Long wait for returns depending on the property's condition and status

Can You Make Passive Income With No Money?
There are plenty of passive income ideas that don't require an upfront investment of cash. You may have to sacrifice your time or even rent out items you own (real estate, equipment, garage space, etc.). But you can earn an income without laying out any money upfront. Just remember that not all passive income ideas are guaranteed to work, which means you may be putting forth effort without reward.

CD Ladders

Investing in a CD means that you tie your money up for a specified period. Typically, the longer you let your money sit, the higher the APR you earn.

If you don't want to tie up all of your money in the longest-term CD, you can set up a ladder. Put a portion of your money in shorter-term CDs while investing some of the money in longer-term ones.


  • Increase your liquidity by investing in multiple CD terms
  • Control over how much money you invest in each CD
  • The more money you put in longer-term CDs, the more interest you earn
  • Reinvest the money earned from the shorter-term CDs into longer terms if rates rise


  • If rates rise and your CD hasn't matured, you can't liquidate to take advantage of the higher rates
  • Learning curve to figure out how to successfully set up a CD ladder

    CIT Bank

    CIT Bank Term CDs

    • Up to 1.35% APY
    • $1,000 minimum opening deposit
    • No monthly maintenance fee
    • FDIC insured
    • Daily compounding interest
    TermCD Rates
    6 Month0.72% APY
    1 Year1.30% APY
    13 Month1.30% APY
    18 Month1.30% APY
    2 Year1.30% APY
    3 Year1.30% APY
    4 Year1.35% APY
    5 Year1.30% APY

Bond Ladders

Bond ladders work similar to CD ladders. You purchase bonds of different amounts and maturities. As the bonds mature, you collect the interest and reinvest the funds in another bond (if you have the liquidity).

The idea is to have a series of bonds with staggered maturity dates so that you always have liquid funds and earnings. Ideally, you keep reinvesting the funds to generate more earnings.


  • Low-risk investment
  • Control over how you invest, giving you certainty regarding when you'll have your funds back
  • Reinvest funds from matured bonds to "extend the ladder"


  • If rates rise, you're stuck with the lower interest rate promised when you bought the bond
  • Slight risk of default, which means a loss of your capital
  • Not a great idea for short-term financial needs

Get Paid to Take Surveys

Numerous sites offer surveys in exchange for cash. These platforms will pay for you to share your opinions on products and services you already use. Don't expect to make thousands of dollars. But combined with other passive income ideas, this method may improve your cash flow.


  • Earn cash while you do other things, like watch TV, wait at the doctor's office, or sit in the school pickup line
  • There are some opportunities to take surveys in-person too, which pay more
  • Help improve products and services by offering feedback


  • Takes a while for the rewards to add up to anything substantial
  • Sometimes hard to qualify for surveys because they want people in certain demographics
  • Need to act quickly as surveys often fill up fast

Invest in Kickfurther.com

You can help a business grow by investing in their inventory on Kickfurther.com. Essentially, you offer a short-term inventory loan. Once the product sells, you earn a portion of the profit that is equivalent to the percentage you invested.


  • Invest in companies that are already up and running rather than taking a chance on new businesses
  • A great way to diversify your investments, taking some money out of the stock market
  • Open your own Kickfurther store to generate more cash flow


  • Not a lot of support—you have to do your own due diligence
  • Risk of the product never selling
  • No guarantee that you'll earn anything

Refinance Your Mortgage

If you took out a mortgage when rates were higher (or when you had worse credit), refinancing can save you money. With lower interest rates, you'll be able to put that money right into your pocket.

Generally, if you can lower your interest rate by at least 1%, it's worth refinancing. You'll have to find a new mortgage that will pay off your existing mortgage.


  • Control over how much you save, since you can shop around to find the best deal
  • Once you refinance, the passive income continues each month without you doing anything
  • Pay your loan off faster with lower interest


  • Harder to qualify for a mortgage with a low interest rate
  • Closing costs can take away from your earnings
  • A lot of work involved in finding a good loan and mortgage lender

Wrap Your Car in Advertisements

If you don't mind driving a car that looks like a mobile billboard, you can get paid to wrap it in company advertising. Using a site like Wrapify, you can get matched with available campaigns from various businesses.

You get your car wrapped and drive it around to get paid. Each campaign pays a different amount, which varies based on how far you drive and the size of the advertisement.


  • No-cost way to improve your financial outlook
  • Keep your normal routine—you get paid for the miles you drive
  • Choose how much you wrap your car (panel, partial, or full)
  • Earn premium rates if you drive during "high traffic times"


  • Must be at least 21 years old
  • Car must be 2008 model or newer
  • Company campaigns may be sparse at times

Use Cashback Sites When Shopping

Do you shop online often? You can get paid for your efforts by linking your shopping habits to one of the many cash-back websites available. A few of the most common sites include Swagbucks and Rakuten (formerly Ebates).

When you sign up for an account, they give you offers or links. Shop for products through those links at online stores like Amazon, Best Buy, Kohl's, and Macy's to earn a portion of your purchase back.


  • Earn money for shopping you are already doing
  • Free to sign up and use
  • Possible bonuses if you spend a specific amount within the introductory period
  • Potential different ways to earn money, including completing surveys or watching videos


  • Need to accumulate a certain amount of earnings to cash out
  • Often exclusions even within the stores offered on the sites
  • May encourage you to shop for things you otherwise wouldn't buy

Sell Digital Files

You can create digital products, such as printable wall art, coloring book pages, crochet patterns, budget spreadsheets, invitations, or thank-you notes. Then an unlimited number of people can download it, making you money with each download. Etsy is the most popular website, but there are numerous online marketplaces you could check out too.


  • No printing and shipping costs
  • Low overhead if you already have the equipment
  • People can more easily purchase digital products than physical art


  • Files have less value than unique, printed items
  • Concerns about copyright infringements and illegal sharing of your products
  • May need to lower prices of your products to compete

Rent Your Car on Turo

Consider Turo the Airbnb of car sharing. If you have a vehicle you don't use often, you can make money by renting it out to those in need. You list your car, include pictures and available dates, and then set the price. Best of all, there is no penalty if you turn down a specific request to rent.


  • Turo provides liability insurance up to $1 million
  • Add more protection if you choose (this does take away from your profit)
  • Keep older cars (12 years old is the max) and make money on them rather than trading them in


  • Works best with a spare care that you can list a majority of the time
  • Must meet the renter at a location to provide the car
  • Risk of damage to your vehicle

Rent a Room (or your Entire Home) on Airbnb

If you have an extra room or you don't live in your home year-round, consider listing it on Airbnb. The listing service connects you with guests looking for a place to stay on the dates you listed.

If a guest rents your property, you pay a 3% host fee and the guests pay up to a 13% service fee.


  • A profitable way to fill an otherwise empty property
  • No need to commit to a long-term lease
  • Guests pay before their stay, so you don't have to worry about payment


  • Your house/room could sit vacant for long periods
  • Risk of damage to your property (or added insurance costs)
  • Strangers staying in your home

Rent Empty Garage Space, Attic, or Storage Space

Have an extra room in your garage, attic, or storage space? Consider renting it as storage space to make passive income. Using the platform Neighbor, you can list your empty space and earn income when someone rents it. Think of it as the Airbnb of storage.


  • No fees to list—Neighbor only charges if someone rents your space
  • Set your own price and terms to earn rental income
  • Rent space that would otherwise collect junk or sit empty

Neighbor offers host insurance that may cover your property should damage occur from the renter.


  • Sharing your personal space with a potential stranger
  • You assume responsibility of keeping your tenant's possessions safe
  • May increase insurance costs


If you're good at marketing but don't want to stock inventory, consider dropshipping. You create an eCommerce store and market products. The dropshipper keeps inventory of the products and ships them out when ordered. You provide the shipment details (and payment) only when a customer orders a product.


  • Low overhead costs
  • Offer a wide variety of products without the need to stock inventory
  • Minimal startup costs


  • Low profit margins
  • Lots of competition due to the low barrier to entry
  • Risk of slow fulfillment and shipment times since you are at the mercy of the supplier

Sell Stock Photography Photos

If you love to take pictures, why not share them with the world? Using a site like iStock Photo, you can share your photos and earn royalties every time someone buys it.

You don't have to worry about having shows or carrying an inventory. Instead, you sell the intellectual copyright and right to use the photos on their own pages.


  • Earn money multiple times on the same picture
  • Make money through a fun hobby
  • Decide how much time you want to spend


  • Large portfolio needed to make significant income
  • It may take a while for your pictures to rank high in the site's search
  • Large upfront investment if you don't already own good photography equipment

Create a Blog

If you have knowledge or passion for a particular topic, write about it to earn passive income. Chances are that there are other people out there interested in the same topic. Share your knowledge, opinion, or both—just make sure your words have value.

Monetize the blog by adding affiliate links for products or services that you trust or by selling ads right on your blog. When a reader clicks on your link and buys something, you earn a commission.


  • Fairly easy to start a blog and keep it running
  • Run a blog in your spare time while working a regular job
  • Little monetary investment to start
  • Make money through affiliate marketing, sponsor ads, and selling your own products or services.


  • Takes a long time to build a following
  • Lot of effort required to perfect search engine optimization and get your blog noticed

Affiliate Marketing

If people are always coming to you for recommendations, why not get paid for it? That's what affiliate marketing does. You recommend products/services by including links to products/services on your blog, social media sites, and other online space. Every time someone clicks on your link and makes a purchase, you earn a small commission.


  • Profit by recommending the products/services you believe in the most
  • Save your followers money by offering special deals only through your affiliate link
  • The most passive income you can earn—once you place the link, you don't have to do anything


  • Requires a website or social media page with a large amount of traffic to earn income
  • Non-reputable affiliates that you support can ruin your reputation
  • Need to find affiliates to get paid

Sell on Merch by Amazon

You can create a design and upload it to Merch by Amazon. Merch takes care of the rest, including production, shipping, and communicating with the customer. You earn a royalty each time someone orders your print.


  • No worries about overhead or inventory
  • Prime customers can use benefits like fast shipping on your products
  • Take advantage of Amazon's global reach


  • Amazon takes a portion of your profits in exchange for their service
  • Significant competition on Merch (and Amazon)
  • Invitation-only, due to the platform's popularity

Buy and Sell Domain Names

You buy domain names (website addresses) at a low cost and then sell them for a profit. There are numerous domain marketplaces that bring buyers and sellers together.

You'll have the best chance of making a decent profit if you buy popular or generic domain names. Believe it or not, many people are after the generic names and will pay hundreds or even thousands for the name.


  • Little upfront investment required
  • Thousands of "good" domain names available for sale every day
  • Easy way to earn once you get the hang of it


  • Can't buy trademarked domain names
  • Steep learning curve in buying and selling domain names

Create a Course

If you have a special skill, expertise, or professional certification, you can create an online course. Sites like Udemy and Teachable offer easy-to-use platforms that allow you to create a course, market it, and sell it to consumers around the world. It's a great way to share what you know to an audience of people willing to pay to learn.


  • Access to a built-in audience
  • SEO efforts, as well as design and format, are done for you
  • You don't have to worry about technical setup


  • Platform fees will take away from your profits
  • Fierce competition (depending on your topic)
  • Little room for customization

Create a Podcast

If you have a way with the spoken word rather than writing, you may want to create a podcast. Like a blog, you'll need a specific niche or topic, but rather than writing, you speak it. You can monetize your podcast by including affiliate advertisements, sponsors, or selling your own products.


  • No experience needed—just share your knowledge or expertise
  • Very popular type of media
  • Low startup costs


  • Difficult to market podcasts, making it harder to get listeners (i.e., earn money)
  • You'll need to know how to edit your audio, which can take time

Create an Alexa Skill

Just as smartphones have apps, Alexa-enabled devices have "skills." These programs or demands bring up content for users that they can use.

You can monetize your Alexa skills that are either one-time purchases, consumables (users buy, use, and buy again), or subscriptions. A few categories people have created Alexa skills in include games, weather, health/workout, education, and music.


  • View your skill's progress via the Amazon Developer Portal
  • Amazon offers free courses that teach you how to make and monetize an Alexa skill


  • Marketing fall on you—otherwise, your skill could get lost among the numerous others that Alexa has available
  • Payment based on customer engagement, such as the minutes of use or frequency of purchase

Create YouTube Videos

While making YouTube videos does require some work on your part, it's a one-and-done type thing. Once you make the video, it can earn passive income through ads on your videos as your viewership grows. While you won't get rich quick, it can serve as passive income if you know how to grow your audience.


  • Easy to include ads on content you produce
  • A fun way to earn money

60% of people prefer online video platforms versus TV, giving you a large audience to choose from if you are already a video marketer.


  • You'll need a big audience to compete for ad revenue
  • Takes millions of views to make real money
  • Need to frequently create fresh content to keep your audience engaged

Buy Vending Machines

Vending machines are a great way to start a side business without a lot of overhead. Once you purchase the vending machine, which you can get for $150 to $400, your only other cost is replenishing inventory. Of course, you must figure in the time it takes to travel to and fill the machines, but that's your only "active" work in this investment.


  • Low cost of entry, even if you buy an existing vending machine franchise
  • Control over the type of products you stock as well as the time and money you invest


  • Need to find time to stock the machine
  • Trial and error as you find the best locations to place vending machines
  • High possibility of vandalism and theft

Create an App

If you have the next best idea to fill a need, you can create an app for any platform. Beyond the programming and mechanics of the app, you'll need to market it. There are many ways to do this, but starting with a basic app and offering a premium version, including ads, and selling a subscription are a few ways to monetize.


  • Gain audience by offering a free version (teaser) to bring in paying customers
  • Continually add features or ad-free versions to bring in more money
  • Leave an app in the app store indefinitely


  • Time of building the app (or paying a programmer to do it)
  • Need to find a market for your app
  • Will require frequent updates

Run Display Ads

If you have a website, you can add stagnant advertisements that run along the side or top of it. You sell the space to advertisers rather than waiting to earn a commission when someone clicks on the link and makes a purchase. While it won't make you rich, it's a nice way to add passive income to your website, which probably isn't nearly as passive.


  • Control who or what advertises on your website
  • Loyal advertisers create a steady stream of passive income
  • You can change out the advertisers if you feel as if your page is getting stale


  • Need to have a decent amount of web traffic to attract advertisers
  • If you use a service like Google AdSense, you have little control over which advertisements show up on your page

Sell Non-Display Ads

If you aren't into sharing your web space with other advertisers, consider non-display ads. While you'll have to be careful to disclose the presence of these ads in your privacy policy, it's a great way to market to your audience without being "in their face." Advertisers use the audience from your website and retarget them by advertising on their social media pages.


  • Control which advertisers use non-display advertising on your site
  • Set prices for placing non-display ads on your site


  • Run risk of losing viewership if they don't agree with your advertising techniques
  • Need to be careful about disclosing the advertisements to avoid legal issues

Be a Social Media Influencer

Are you a social media guru with a large following? Then you can be a social media influencer by promoting products or services for other companies. Businesses pay influencers to talk about their products online, be it on social media, videos, or blogs.


  • Make money from products and services that you don't have to own or run
  • Learn about cool new products and services
  • Help a brand build credibility based on your own influence in social media circles
  • Very little upfront investment required


  • Can take a long time to earn the audience necessary to be a social media influencer
  • Opportunities may ebb and flow, making it hard to make a consistent income

Create a Lead Generation Website

If you have the knowledge to create a website and bring in leads, you can sell the leads to businesses. It all comes down to the marketing efforts you can put forth. You don't have to sell your own products or services. Instead, you gather the leads and get paid by other businesses or individuals for the information.


  • Gather leads for just about any industry
  • No need to sell anything
  • Getting people to offer their contact information is a lot easier than making a sale


  • Requires a thorough understanding of internet marketing to be successful
  • Can take a while to build up your reputation in the industry

Write an eBook

If you have a way with words, you can write and publish your own book using Amazon's self-publishing tool. By self-publishing, you are in charge of writing (obviously), editing, formatting, and creating a cover.

Amazon's self-publish tool is self-explanatory and easy to use. You earn royalties every time someone buys your book.


  • Earn up to 70% royalties on your books
  • If you choose Amazon Kindle Direct Publishing, you can also market your book with other eBook retailers
  • Choose to publish a printed version of your eBook for a small investment


  • Significant commitment, including editing, designing, and formatting of the book
  • You must handle all of the book's marketing
  • Less support than if you used a traditional publisher

Bottom Line

Earning a passive income is possible with enough time and effort. While there's no guarantee as to how much you may earn (or if you'll earn at all) if you diversify your efforts, by giving yourself multiple streams of passive income, you increase your chances of a positive outcome.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

More from CreditDonkey:

Passive Income

Residual Income

10 Smart Ways to Invest $1,000

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