Having a steady stream of passive income sounds like a dream, because it effectively means you get to earn money for doing nothing. Unfortunately, many people who claim to be able to generate passive income aren’t exactly being as passive about it as they let on. For instance, many webmasters and bloggers claim to earn passive income through their sites but fail to mention that they spend tens of hours each week writing blog posts and analysing site traffic.
Stock or forex day traders might make it sound as if they’re making money out of nothing, until you realise they spend hours in front of the computer each day with their hearts in their mouths. If you have a day job and are unwilling to commit too much time and effort into making passive income, here are some ideas that require minimal effort.
1. Rent Out a Room
If you’ve got enough money to buy multiple properties, you could probably just become a landlord by trade and stop working altogether, living off your rental income. On the other hand, even if you’re not exactly Mr Moneybags, you might still have the opportunity to rent out a room or two in your existing home. A friend of mine even volunteered to sleep in the living room so he could rent out his bedroom for the spare cash.
If you’ve got some money to invest you might want to consider purchasing commercial property (which is often cheaper than residential), either on your own if you can afford it or together with friends or relatives. While it does take a bit of effort to view potential properties and deal with tenants, with the help of an agent your effort can be kept minimal.
2. Buy Dividend Stocks
Making money off the stock market isn’t something that yields fruit immediately, and prudent investors often find themselves holding on to stocks for years. If you do happen to enter the stock market at a time when the price is right, purchasing dividend stocks can be a good way to obtain a bit of passive income until you finally sell them off.
You will typically receive your dividends on a quarterly or annual basis, and this money can just be credited directly into your bank account. At the same time, monitor the stock prices in case you want to sell your shares at a profit.
3. Credit Card Rewards
This probably isn’t one of things that comes to your mind when you think of “passive income”, but used the right way, and we mean the right way, credit cards can actually provide you with a source of kickbacks and benefits.
Cash back and rewards that banks give you for using their credit cards can be a legitimate source of passive income, especially considering credit cards give you as much as 5% or more on your spending. The beauty of credit card rewards is that you don’t even have to be spending on your own stuff to qualify for the rewards. Pick up the tab at a restaurant meal for a big group and then have everyone else pay you in cash, and you get cash back on the entire sum.
The same goes for ordering stuff online together with a large group of people. And when it comes to big ticket items like wedding banquet reservations or air tickets, you can get significant amount of money back.
Of course, if you decide to go overboard and blow your credit limit on yourself, then this section doesn’t apply to you.
Here are some of the most generous credit cards on the market:
- HSBC Revolution Card – 5X rewards points for online purchases and local dining and entertainment – apply here.
- American Express True Cashback Card – 3% cashback on spending in first 6 months (up to $5,000), 1.5% cashback on unlimited spending thereafter – apply here.
- Citi PremierMiles Visa Card – Get up to 42,000 miles when you apply and spend – apply here.
4. Bank Interest
The banking interest rate in Singapore is notoriously low, especially if you stick with the default POSB / UOB savings account that yields a negligible amount of interest each year. However, if you do your research, you will find that there are a number of high interest bank accounts that give you interest rates of up to 2%+. With a 2% interest rate, you would be getting $2,000 a year for every $100,000 deposit.
Check out this article elsewhere on MoneySmart for an overview of some of the better high interest savings accounts in Singapore. Of course, which one you ultimately pick depends a great deal on your income and your banking habits. Still, once you go to the trouble of opening the account, the only thing you have to do is sit back and collect your interest payments.
Do you have any passive income streams? Tell us about them in the comments!