Most of the options I’ve seen bandied about tend to be scams, bad advice or poor investments earners.
If there was a passive income competition and the person who earns the most passive income in a year with up to a $50k investment is the winner, what would you do and why? To win you must also prove to the competition runners that it’s not a scam.
High yield savings account. A CD.
Mal said:
High yield savings account. A CD.
[deleted]
Mal said:
High yield savings account. A CD.
[deleted]
Most people won’t consider real inflation rates.
If it’s a competition you want to win, crypto is the obvious answer. But it depends on how much volatility is acceptable to you.
IMO split it into
Investment for not passive income (10% something to reduce your spending, isolation, improve your health, pay debts, or for work, law mowing, etc.; it can also be tools to rent out afterwards)
low risk (40% immo investing as bonds), medium risk (40% ETF stocks, peer to peer lending), high risk (9% crypto daily trading), very high risk (1% lottery style).
To win that competition, you would make a bad investment and hope to have good luck. Casino and all on red would give you a good chance of booking that competition right then and there.
There is more to a good investment than how much it earns; the other side of it is how large a risk you are taking making that investment. Small earnings can be a very good investment if it’s almost certain to pay out and extremely unlikely to lose all your money.
I mean…there’s no “absolute number 1 passive income option”.
Each person has their own network, set of skills, background, interests, and aptitudes. If I’m the world’s best Excel user, my “passive income” path would likely be to create some sort of digital products package that unsophisticated users would pay for to improve their productivity.
That said, there are assorted strategies that the “average” person could probably pursue in combination that could result in decent “passive income”. By passive income, I’m going to define that as you “invest” the money in something upfront which will pay ongoing dividends going forward with little to no ongoing effort. By that logic, passive savings (anything that reduces your costs on a go-forward basis) qualifies as a subcategory of passive income in my book…and this approach also has the benefit of not creating taxable income. If I earn $100 in interest from a HYSA, that income is taxed at my marginal tax rate, so the NET to me is probably $70. If I find a way to save $100, the net to ME is $100. So in that way, passive savings is generally better than passive income. The downside of passive savings is that there’s a cap on how much you can save. Passive income options can generally scale and outgrow your passive savings strategies.
Some basic insulation in homes that are “leaky” and in areas that experience a lot of fluctuations in temperature. Weatherstripping/caulk on doors, windows, sealing cracks in walls, around outlets. Maybe an insulated foam cover to cover an attic access point. YouTube tutorials and $250 can go a long way towards reducing electric/gas bills. Payback on this is typically less than 1 year…meaning a 100% return on your “investment”.
On that same front, a smart/programmable thermostat can pay for itself. The Nest, which is a higher priced product in that category, has about a 1.5 year payback period. That’s like a 60% return.
If you/your family eat a lot of meat, buying an energy star compliant top loading freezer will allow you to take advantage of specials on meat at your grocery store. Those happen often enough. For example, my family likes Wright Bacon. It’s typically $11 per package. This week it was $6.99 so I bought 3 (which expire in January). A lot of food freezes well and can extend the use by date significantly…so a freezer can help cut your perishable food expense down as a family by 25-40%. Just don’t put it in the freezer and forget about it.
Form an LLC and start a business. It’s generally pretty inexpensive (a few hundred dollars), and if you start any sort of side hustle, you can run some of your household expenses through the business as a business expense while also getting a home office deduction on your taxes. The return on this can easily be over 500% per year.
If you still use standard light bulbs, those are electricity hogs. CFL and LED lightbulbs use a fraction of the electricity. It’s probably not worth replacing bulbs that aren’t on very frequently (like light closets or basements), but if there are lights that are on constantly in your home, replacing them can save you money. The average home with incandescent bulbs uses about 2,000 kWh of electricity per year. At the national average of $0.10 per kWh, these homeowners spend $215 a year on lighting. By switching to LEDs, you can save around $4,000 over 20 years (the typical lifespan of an LED).
You can look at other areas of your life where you have a high daily spend. If you get a Starbucks every day, you’d save a lot of money by getting a Keurig or Nescafe setup…or, if you’re adventurous and want to learn…buying your own coffee beans and learning how to make your own decent coffee. Spending $100 on the equipment to grind/brew your own coffee can save you $150/month or more if it replaces a daily Starbucks.
I’m just giving examples here of small “investments” of time and/or money that have high cash returns. Maybe they don’t all apply to you, but there are probably 100 of these types of micro-investments that can really change your monthly cashflow profile. Some require cash up front, and some just require a change in habits. (Working to optimize credit card cash back as an example.)
For me, my scalable passive income stream is asset-backed lending. That can earn a return in the 15-17% range…so on $50k that’d be about $7500 a year. That’s a decent return on investment, but it pales in comparison to a lot of the types of things I mention above.
Anyone else have any good cost-saving strategies that they want to share?
Down payment on a house.
6 months savings in high yield.
DCA into SPY, QQQ, and BTC.
Not financial advice, but it’s gonna be an insane four years for crypto. Wouldn’t be a bad idea to get involved. I’d take 20% of that and buy three cryptocurrencies/stocks you believe in. For example, I’m really big on coin stock, and I really like Bitcoin Cash. I could be totally wrong; though, it’s your money.
@JamesMark
Try an insane 2025, if everything follows the script. Then it’s back into the cellar. Trump isn’t one of the people manipulating the market.
Ash said:
@JamesMark
Try an insane 2025, if everything follows the script. Then it’s back into the cellar. Trump isn’t one of the people manipulating the market.
The amount of crypto support in this election is insane. Check out this page. Who will defend crypto in America? | Stand With Crypto
Robinhood Gold HYSA.
Hands down.
What prizes are you offering? Because you say something about the competition runners (I assume winners) have to prove it was not a scam.
No offense, but your question is a variation of the same question that pops up every day.
Just try searching. There aren’t really that many passive income ideas that are legit and do not require some work (which makes them not passive).