Everyone wishes they could earn money without doing anything, but what if I told you it’s actually possible? You can earn passive income by investing in stocks or opening a high-interest savings account and watching your money grow while you go about your daily life.
However, you do have to work a little bit before you can really have your money doing the work for you. You will need to research the best options for savings accounts, stock options and more if you want these options to create a passive source of income that can really make a difference for your finances.
High-Interest Savings Accounts
A high-interest savings account, also known as a high-yield savings account, is a savings account that accumulates interest on your savings at a higher rate than a traditional savings account. High-interest savings accounts are usually backed by the government and make 20 to 25 times the amount of return normal savings accounts make.
The amount of interest gained from high-interest savings accounts will depend on the account you have, the money you deposit and the rate at which the bank matches your interest. Most banks offer .50 APY in returns, ADY being the annual percentage yield of the account, for high-interest accounts, but the best high-yield savings accounts will offer over 1 percent or more in APY.
Not many accessible high-interest accounts offer the full 1 percent APY and if they do, they are usually difficult to apply for or have high deposit amounts and monthly fees. One of the best high-yield accounts is offered by Nationwide Bank. It offers a .70 percent APY for a minimum deposit of only $100. Other smaller banks may be more willing to offer a higher rate for a high-yield account, but always make sure to only go with a linder that is covered by the Federal Deposit Insurance Corps in case anything were to happen to your funds.
Rental Property Investments
Another way to let your money work for you is to buy real estate. It may seem counter productive, but to make money in real estate, you first have to spend money. Building wealth through real estate requires you to buy the right property and the right time and make sure it is located somewhere people are likely to rent a home in.
Figuring all this out can be complicated, especially if you are a novice in rental property investment, so it is always recommended to consult a real estate agent for advice. Real estate professionals can help you figure out where the best places to buy investment property are and when you should invest in purchasing those properties. If all goes well, you can own and manage a property that will make you thousands of dollars in the long run and will be more than worth your initial investment.
However, be sure to keep in mind that you will need to manage the property yourself unless you hire someone else to do it, which will be another cost you will need to cover. Additionally, your tenants may not all be the best and you may need to invest in renovations or repairs in between tenants if something is damaged. So be sure to consider all of these factors before investing in real estate.
Retirement Savings Accounts
Opening up a retirement savings account like a 401(K) can help you save for retirement and earn passive income. In a 401(K) account, and in other retirement savings account options, your employer will match the contributions you put towards your savings account up to a certain percentage. This means that if you set aside $5,000 of your yearly salary into your retirement savings account and your employer will match you up to 4 percent, you will receive an extra $200 a year.
This may not seem like much in the beginning, but if you keep accumulating those $200 each year, you can have $10,000 or more in extra cash in your retirement fund. Now, that’s a lot of extra cash you can set aside for your retirement planning that you would not have had if you hadn’t opened a retirement savings account.
Investing in Stocks
Investing in the stock market is another way your money can grow without you having to do much but click a few buttons. However, investing can be quite tricky and sometimes you have to know when to pull out of an investment just as much as you have to know when to invest in the first place.
Ideally, you will be able to find long-term investment stocks that you can leave your money in and let them increase organically over time. Long-term investment stocks can be companies that have been stable for a long time and will probably continue to be in the future. This can include companies like FedEx, Roku and Wayfair that have had moderate success in their respective industries and we do not see any of them going anywhere any time soon.
To take advantage of the benefits of long-term investment stocks, you will need to buy and hold these stocks until the time comes to finally sell them and cash out your long-awaited profit. In order to time this buying and selling properly, we recommend contacting an investment expert to help guide you. Interesting can be a minefield of uncertainties, so be sure to seek the right help and advice before putting your money down.
This last one is less about investing money you already have and more about paying back the money that you owe. Instead of earning passive income, eliminating debt will help you save your income in order to invest it in something worthwhile. However, you can’t exactly put your money towards a project effectively if you are weighed down by an expensive mortgage or credit card debt.
The first thing you need to do to get out of debt or at least alleviate your debt is to consult an expert and come up with a debt management plan. This may not be necessary if you only have mild debt issues, but if you are in deep debt, you should consult an expert.
Once you have a debt management plan in place, you will usually start by eliminating any credit card debt you may have. To eliminate credit card debt, you will need to consolidate all of your debt, which will make monthly payments more manageable, and you will start to pay more than the monthly minimum payment in order to pay your debt down faster.
Another way you can pay down your debt and free up some of your money to use in more productive ways is by refinancing your mortgage. To refinance mortgage payments you may also want to contact an expert before contacting your lender to renegotiate the terms of your mortgage agreement.