It never hurts to have a little more money, right? Many of us look at all our bills, expenses, debt, and lifestyle goals and realize that the two are not always in alignment. You might have goals of traveling a lot when you retire, but the amount of money in your retirement account is not going to be enough. Maybe your grocery bill is growing with each new child in the family and your primary source of income is not keeping up.
Searching for an entirely new career might be out of the question. Maybe you thought a raise was coming but it never did. Either way, you need to figure out how to make more money to achieve the lifestyle you dream about, but this source of extra income cannot take up a ton of your time.
The solution? Passive income. The right strategies can bring in extra money with little ongoing effort, or at least just some work on the front end of things. Here are a few passive income methods to consider.
Mutual Funds
If you are looking for a relatively safe and simple form of extra income, then mutual funds are the way to go. When you invest in a mutual fund, you contribute to a pool of money from other investors. The fund managers will then choose what investments to get involved in. Some firms will allow you to play a role in choosing the investments while others will charge small fees to do it themselves. The reason mutual funds are an attractive option is diversity. Portfolios tend to include a mix of both high-risk/high-reward and low-risk/low-reward investments. This protects investors from losing their money. Instead, you receive regular dividends whenever profits are earned. It does not get much more passive than that.
REITs
Real Estate Investment Trusts, or REITs, are very similar to mutual funds except they specialize in the real estate industry. Instead of buying shares or stock options in various industries, they focus on properties. That means you invest a certain amount of money into the trust and then that firm chooses which properties to invest in. Similar to the mutual fund model, you will receive dividends when the investments pay off. Some people prefer this option because properties tend to appreciate, so the likelihood of your investment paying off is a little higher. Additionally, REITs tend to have greater returns than most mutual fund portfolios.
Rental Income
The rental market is very strong in the United States. Millennials in particular, who would normally be driving the house-buying trend at this age, are more likely to consider renting as an option for a living space. The main reasons are hesitating to make long-term commitments and avoiding volatile housing prices. This provides an opportunity for certain investors. You could turn part of your home into a studio apartment and start collecting rent. This will take some work to set up and a little ongoing effort, but the rewards can be massive. Another option is to invest in a separate rental property and pay a property management firm to handle the day-to-day. Both options require work upfront and some persistent attention, but they can yield impressive profits.
VA Disability Benefits
This category only applies to specific individuals, primarily veterans. Serving in the Armed Forces grants you access to many perks through the Department of Veterans Affairs. If you acquired an injury or illness during your time of service, or if you had an affliction that was worsened by your time in the military, then you could receive disability benefits in the form of tax-free payments. There are many conditions you must meet to qualify, and your claim could be denied if the disability isn’t connected to the service. But, if you meet the requirements, this extra income could help you cover medical bills and other expenses that you otherwise would not have to worry about if not for the disability.
Certificates of Deposit
You have probably heard of high-yield savings accounts, which generate more interest than traditional savings accounts. A Certificate of Deposit, or CD, can be even more lucrative and is completely passive. Essentially, you agree to put your money into a short-term account. If you do not withdraw any of the money during the contracted period, you will receive a guaranteed interest rate return at the end of the contract. Term lengths could be as short as three months or as long as five years. Either way, if you have money sitting in your savings account that generates barely any interest, you might as well have it sit somewhere that has better returns.
Consider the Long-Term Benefits of Passive Income
Even if you choose one of these strategies and only invest a little of your money, the long-term benefits can be substantial. The general rule for investing is the longer you do it, the more you can make. Whether you rent out part of your home, invest in an REIT, or qualify for VA disability benefits, this extra income can help you meet your financial goals for the future.
