Money Management

Looking for simple ways to earn passive income? Check out a few proven methods that could start bringing in money quickly. [[{“value”:”

Passive income is a popular buzzword, because the idea sounds amazing. Instead of only getting paid when you work, you invest your money or time in something that earns income while you sleep.

Unfortunately, lots of passive income ideas aren’t all they’re cracked up to be. Contrary to what influencers say on social media, dropshipping is not some risk-free way to get rich, and owning rental properties is anything but passive.

If you’re looking for easy ways to earn a reasonable amount of passive income, here are the best options.

1. Invest in stocks the pay a high dividend

Investing in stocks is a widely recommended financial habit, because it’s one of the most effective ways to build wealth over time. While the U.S. stock market has its ups and downs, its long-term return has been about 10% per year. And if passive income is what you’re after, you could get that by focusing on stocks with a high dividend yield.

A dividend is when a company distributes a share of its profits to shareholders. The amount of the dividend depends on the company. Some don’t pay dividends at all, some pay 1% to 3%, but high-yielding dividend stocks could pay 4% to 5% or more.

Imagine you pick out a few companies you like with an average dividend yield of 5%. If you invest $100,000, you’d receive about $5,000 per year in dividends. That’s a basic example, and dividend amounts can change. But for those with money to invest, dividend stocks are a simple passive income stream.

2. Save money in a high-yield savings account

Another way to get a good return on your money is a high-yield savings account. Many of the best savings accounts have rates above 4%, and a few even earn over 5%.

Just like investing, saving is an important financial habit. You’ll need money for emergencies. The standard recommendation is having three to six months of living expenses in your emergency fund. It’s also wise to save for large future expenses, such as vacations, a new car, or a down payment on a home.

If you don’t have as much saved as you like, make saving money a goal for the final months of 2024. Even if you’re happy with your balance, don’t forget to put it in a high-yield savings account to earn a competitive amount of interest.

Let’s say you have $5,000 in savings right now. You focus on building that, and by 2025, you increase that to $10,000. In a high-yield account with an APY of 4.50%, you’d earn $450 per year in interest.

3. Rent out your car or a spare room

If you have extra space in your home or a car you don’t use all the time, you could turn either into a source of income. Airbnb lets you rent out a room or a guest unit on your property. For car rentals, Turo is a popular choice, and it reports that hosts could earn an average of $634 per month.

These options certainly aren’t for everyone, and they aren’t 100% hands off. If you rent out a room in your home, you need to clean it after each rental and prepare it for each new guest. If you rent out your car, it could require more frequent maintenance from the additional wear and tear.

With either option, you’ll need to assist renters when necessary. You’ll probably also need to get additional homeowners or auto insurance. But if you don’t mind that, you could potentially earn an extra $500 to $1,000 per month or more.

Dividend stocks and high-yield savings accounts are both reliable ways to earn passive income. You’ll only be earning a small percentage of the money you put in, but as you invest and save more, your earnings will get bigger. Home and car rentals are also options that could work well, if you don’t mind managing them.

Decide which ones you like, and you can start setting up passive income streams for 2025 and beyond.

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Sometimes it’s worth giving up a cheap lease. Read on to learn how one writer took on a costly mortgage but is coming out ahead in other ways. [[{“value”:”

For many years, buying a home was both the cornerstone of the American Dream and pretty much guaranteed to improve your financial circumstances. Unfortunately, this is no longer the case — many Americans have been priced out of the housing market thanks to wages not keeping pace with home prices. You need to think long and hard (and do a lot of math) before signing on the dotted line with a mortgage lender.

I had a pretty terrible experience the first time I bought a home 14 years ago, thanks to being emotionally and financially unprepared, so it took a lot of soul-searching to decide to buy again. After I made my decision, I spent two years paying off debt and saving money (and boosting my credit score in the process), and in spring 2024, I became a homeowner again.

Here are three ways my second chance at homeownership has already improved my finances.

1. More storage space means it’s easier to buy in bulk

We’re big fans of Costco here at The Ascent, and thanks to buying a house with a basement and decent closets, I have finally joined the Costco bandwagon. Admittedly, my local warehouse is about an hour away, so I won’t be able to visit every week (and likely not every month, either).

But if I shop online and make a big shopping trip a few times a year to stock up on nonperishable food and paper goods, I can save myself money compared to buying these items in smaller quantities at the grocery store. I could even use my Costco membership to save on a new refrigerator for my basement so I can extend my bulk shopping habits to perishable food items, too.

2. A better home office means greater productivity

I’m a full-time freelancer, and since my work is based on a computer, I can do my job from anywhere. In practice, that means that 99% of the time I work from home.

I spent several hundred dollars on paint, furnishings, and electrical upgrades to make one of the bedrooms in my apartment into a home office right before I started freelancing. Doing the same in a house was a priority for me, especially now that I’ve almost doubled my housing costs — I’ve got to keep up with those mortgage payments!

Thankfully, the house I bought has a perfect little nook right off the living room, and so far, it’s been a great place to work. I’m just a few feet away from the modem and router, giving me a strong wifi connection for minimal work disruptions. I’m close to the kitchen and the first floor bathroom. And I have quiet neighbors, so the cats and I can even enjoy the breeze from open windows on days with nice weather.

3. A garage means having a place to keep an old, paid-off car

One of the smartest financial decisions I’ve ever made was buying a reliable and inexpensive new car in 2009, paying it off, and continuing to drive it to this day. I enjoy cheap car insurance coverage, and not having a car payment for the last decade has freed up more cash in my budget.

But nothing lasts forever, and over the last handful of years, I’ve had to put money into repairs needed because of my car’s advanced age. I live in a place with severe winter weather, and the last few winters, I was parking my car on the street in front of my apartment, where it was susceptible to snow, ice, and road salt. That means rust — which will eat a car alive.

Buying a home with a garage was a priority for me. My elderly car will no longer have to sit on the street in the winter — it’ll be safe and covered. I’m hoping this will mean I can get even more years out of it — with the average new car payment sitting at $734 per month as of Q1 2024, that’s not an expense I’m eager to take on anytime soon.

Will buying a home improve your finances?

Becoming a homeowner is not an automatic slam dunk for your budget and your life — especially with our new reality of mortgage rates over 6%. Rates are slowly declining, and they’ll probably fall further now that the Federal Reserve has begun lowering the federal funds rate. But you certainly can’t expect a 3% mortgage rate like you might have gotten in 2020 or 2021.

That said, if you can afford the upfront and ongoing costs, buying a house could do wonders for you, too. If you end up with more space at home for bulk purchases, a nicer environment to work from home, and a covered space to keep a vehicle you’re hoping to preserve, the extra cost of a mortgage and all other related homeownership expenses could be worth it.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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