Throughout my 20s, I battled debt and attempted to build savings on entry-level pay. I looked forward to my 30s when I’d have things all figured out. Turns out, “figuring it out” has a lot more to do with practice than age. (Surprise!) My husband and I are working to reach our goals faster so we can finally feel like we’re on the right track. We’re hoping passive income will be the key to getting there.
What is passive income – and why I’m focusing on it
Passive income is income you earn without much effort. Here’s why I’m focusing on passive income in my 30s:
1. My time is limited
When I was in my 20s, I sought to achieve my financial goals faster through side hustles. That’s no longer possible now that I’m older and advancing in my career; the amount of time I have to earn extra income is limited. My husband and I work a lot and already struggle to fit in other things we need to do, like cooking and working out. And we don’t even have kids yet!
2. It can help me achieve my goals
Just like in my 20s, my financial goals are driven by my feeling behind. In my 20s I was battling expensive credit card debt, now I’m battling a nearly non-existent retirement account. Not that I ever want to retire but things happen.
I’m also dealing with the fact that I only have two years left to save if my husband and I want to have kids before I turn 35. We don’t have a decade to get our savings in order; we need to make it happen now.
3. Passive income gives me some control
Money doesn’t buy happiness, but it can buy freedom of choice. If my husband and I manage to set up reliable passive income streams now, we can feel at least a little bit in control when life throws us curveballs.
A few smart passive income ideas
Now, the fun part! Below are a few ideas for creating passive income streams.
Real estate presents a variety of income-earning potential, from active to passive. An active real estate option would be to flip houses. A passive real estate option would be to rent out your real estate.
This option is my favorite for two reasons. First, if you know someone you can trust to manage the property, you can pay them to help and earn truly passive income. Second, since my husband and I live in New York (a city of expensive rentals), it provides a sort of insurance against rising rental prices. We could always move into the property if we needed to.
If you live in an expensive city (or a city with high taxes), this option might be out of reach. However, there is still the option to rent out a vacation home in a budget- and tax-friendly locale.
Peer-to-peer lending is a way to invest by lending to those trying to pay off debt. You can use sites like Lending Club and Prosper to do so.
The beauty of this option is that you can invest at your own comfort level: both in the amount you invest and in choosing who you lend to. There is some risk in this (just as there is with all of these passive income ideas). If you want to try this out, start small and diversify your lending to mitigate against it.
Create a monetized website
This is one my husband tried to convince me to do, but it didn’t seem passive enough for me. The idea is to create a website you can make money off of, whether it be content-focused with ads or product-focused (such as a tech tool, an ebook, or courses). Passive income expert Pat Flynn has a ton of information to help with this.
This option starts off active but can become passive if you’re successful and can outsource most of the work. In the beginning, you’ll have to invest time into setting up a website and driving traffic to it.
A lot of people invest in the stock market to grow their retirement, but you could also invest in the stock market to earn passive income if you invest in dividend stocks. These are stocks that regularly pay out a portion of a company’s profit to its investors.
There are a few things to consider before you invest. Dylan Ross, CFP®, AFC®, Director of Communications and Financial Planning at Garrett Planning Network, offers this advice:
Dividend stocks sound really appealing because of the income, but the income comes at the cost of share growth. Corporate profits can be distributed to shareholders as dividends or retained by the company, increasing its value. Many companies do a little of both, splitting the profits between dividend payments and growing the company. Investors generally want a diversified mix of companies that provide income and ones that offer growth. This is called, ‘total return’.
By investing in a broadly-diversified portfolio, like a total market index fund, investors can sell stocks or mutual funds to create income, benefiting from both dividends and growth. Doing this should provide the same amount of income but with lower risk and lower costs.
A smart passive income strategy
So how do you choose the best passive income ideas for you? Go with your gut.
As you look into ways to earn extra income, you’ll find a million ideas that sound great but don’t sync up with your lifestyle. Don’t try to fit yourself into a box of what you think you “should” do. Focus on what you think you can sustainably manage; a smart passive income strategy is to simply choose carefully.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.23% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 6.23%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|