Like everyone else, renters often dream of achieving financial security and reducing their financial burdens. Establishing passive income streams is one effective way to make this dream a reality.
Passive income enables individuals to earn money without the continuous exchange of time and effort, freeing up their resources for other pursuits.
Passive income can be particularly beneficial for renters, as it can help them accumulate funds for a home deposit, pay off debts, or enhance their overall financial stability while renting. In this guide, Blossom provides valuable insights into creating passive income tailored to renters’ needs, offering ideas and strategies to boost income and build wealth without the need for constant attention.
Before we dive into the details, it’s essential to note that this guide offers general information and does not consider personal circumstances or financial situations. Before making any financial decisions, you should read the relevant Product Disclosure Statement and Target Market Determination for the specific financial product and consider if the product is right for you and whether you should seek advice from a financial advisor.
Why consider passive income when you’re renting
Passive income is crucial in building residual income, the money left after covering living expenses. For instance, if you earn $5,000 monthly from various sources and your living expenses amount to $4,000, your residual income stands at $1,000 per month.
Higher residual income offers greater potential for investment and wealth growth. In an era of rising living costs and inflation, saving money becomes increasingly challenging. Passive income, generated with minimal effort or ongoing time investment, can substantially augment your income, aiding in saving, investing, and wealth creation.
With passive income, you can generate extra cash flow alongside your job or business income. Whether you explore avenues like affiliate marketing, course sales, product promotion, or even renting out a room or belongings, numerous opportunities exist to supplement your monthly income.
Over time, passive income may even replace some or all of your active income, providing enhanced financial independence and flexibility in deciding whether to continue working, retire, or explore financial freedom. This strategy can be especially beneficial if you’re concerned about saving enough for your financial or retirement goals while renting.
Understanding passive income
While the term “passive” might suggest no effort is required to generate income, this is not entirely accurate. Passive income streams typically involve one of the following two elements:
1. An initial financial investment.
2. An initial time investment.
What makes income passive is that once established, it demands minimal maintenance to provide consistent cash flow. In essence, passive income involves performing an action once and then receiving continuous income from it in the future.
What doesn’t qualify?
Income from employment does not qualify as passive income because it necessitates investing time, energy, skills, and attention to earn wages. Similarly, taking on a second job is not a passive income stream since you still need to actively work to get paid. Non-income-producing assets, like non-dividend-paying stocks or certain cryptocurrencies, may be appealing investments but typically do not generate passive income.
You might also like:
> Why it pays to have an emergency fund (and how you can do it)
> Finding financial freedom: Setting realistic money rules that work
> 7 ways to use automation and bill smoothing to become a budget pro
Easier ways to begin generating passive income
Creating passive income doesn’t have to be complex. Sometimes, it’s as straightforward as selecting the right place to invest your money for better returns. In times of rising interest rates and high inflation, a high-interest savings account can be a reliable source of passive income for your cash funds.
Surprisingly, one practical approach to kickstart passive income generation is to pay off debt, including credit cards, personal loans, and home loans. The sooner you free yourself from regular loan repayments, the faster you can redirect that income toward other income-producing assets. This not only improves your credit score but also accelerates the flow of cash, which can be used to build wealth.
Numerous investment strategies are available for renters seeking passive income streams, such as term deposits, government bonds, shares, exchange-traded funds, or property investments. These assets can generate passive income through interest, yields, dividends, distributions, or rental income.
Another effective method is to invest in shares or exchange-traded funds, property funds, real estate investment trusts, managed funds, or mutual funds. This typically involves engaging professional fund managers or property managers to oversee your investments or opting for index funds.
Evaluating the risks associated with each investment option is crucial. Conduct thorough research, ask questions, and seek professional financial advice before making investment decisions. Active investing, such as trading shares and stocks via a trading portfolio, does not generate passive income because it requires continuous active participation and attention.
In essence, passive income involves investing in opportunities to earn extra income with minimal ongoing effort.
How to get started
To embark on your passive income journey, begin by taking inventory of your available resources and potential leverage points. Ask yourself the following questions:
- How much surplus time do I have?
- What surplus resources do I possess?
- What personal and financial assets can I utilise?
- Do I have any unused spaces or possessions?
- What intellectual property do I own, or can I create resources from?
- What are my talents?
- What skills and knowledge can I share?
- What community or network can I leverage?
- Do I have any business ideas?
Once you have identified these elements, consult our list of passive income-generating ideas to find inspiration or take actionable steps toward building your passive income stream.
Passive income ideas for renters
Invest in money market accounts, high-yield savings accounts, or fixed-income investments.
- Explore Peer-to-Peer lending platforms or provide loans to startups and small businesses.
Create a product or service:
- Develop digital products for online sale, such as e-books, blogs with advertising space, podcasts, online courses, webinars, or subscription models
- Consider creating a product or service on platforms like Etsy or Amazon.
- Explore affiliate marketing by promoting other programs and services.
- Utilise print-on-demand stores to create products.
Sell things to generate income online:
- Establish an online business or store.
- Sell digital products, designs, photos, or videos you create.
- Offer stock images or products that can be drop-shipped.
- Monetise your expertise or become an influencer.
- Participate in sponsored posts on social media.
- Earn by sharing your opinions in online surveys.
Rent out your possessions:
- Rent out unused spaces or possessions, including spare rooms, garages, cars, parking spaces, caravans, boats, jet skis, motorbikes, and backyards for events, tools, or even investment properties.
Tax considerations in Australia
Always seek financial advice or professional tax advice before making financial decisions.
Final thoughts and suggestions
Creating passive income need not be daunting. We hope this guide has given you valuable insights and inspiration to start your journey toward building a passive income stream.
And remember, you can even generate passive income from your earned passive income!
About the Blossom App
The Blossom App is currently targeting 5.70% p.a. returns. 1 in 3 people saving with Blossom are saving towards their home deposit. Explore our app to learn more about our product.
The Blossom Fund is issued by Gleneagle Asset Management Limited. Please consider the PDS and TMD before applying. All information provided here is for general advice only, and all investments carry risks.