Becoming Sleepily Rich. Or: make your money sleeping. For those who love to make money as well as sleep. So a combination of these two sounds like paradise! Probably for you too, because on the one hand we want to have a relaxed life and enjoy every day and no traffic jams and long meetings and stress (right?), on the other hand, earning money and being nice in the slack is also quite nice. But, so it can be both. And we share how to make it happen. Initially, you will have to do something for it, namely invest money or time. Anyway, sit back, relax, read, and learn how you can become sleepy rich. In other words, generating a passive income, how do you do it?
Want to really get started generating more income? Check out our e-course Boost your Income and learn all about negotiating, passive income and side hustles.
Why generate passive income?
Passive income is income for which you do initial work and then earn money without (much) further effort. Sometimes for the short term, sometimes for life.
Simply saying that passive income is income for which you don’t have to do anything at all is a bit of a stretch. Something about sowing and reaping.
Two ways
There are two ways to generate passive income:
- making money work for you
- creating something that produces a right
So you either need start-up capital (money) or you need to create something (time). The former also often takes time, of course. Or a terribly good fate. We’re going to cover both options in this article, i.e. making money work for you and thus generating passive income, and how to create something that earns you income.
Generating passive income through investing
Making real money without doing anything for it is done by investing your money. By investing, you reallocate your earned money to a place where it will then do its work for you. Your money is going to make a return. That means that without having to do anything for it, your money becomes more money. Amazing! But how exactly does that work?
Passive income from your investments can occur in 3 ways:
- Dividend: if you invest, it will earn you long-term money in the form of price appreciation and dividend payments. You can benefit from the price increase if you sell your shares, but you can benefit from dividend payments – if you have a good amount of money in shares – every month, quarter or year. Suppose – leaving inflation and taxes aside – at some point you have a million in stocks, and they pay 4% dividends, you earn €40,000 annually, a fine basic income. Read more about dividend investing here.
- Interest: interest you get on outstanding loans. Loans can be “purchased” in various ways: bonds or crowdfunding, for example. You will receive interest on a monthly or annual basis. Savings interest does not fall under passive income for me because it is currently so low that inflation and wealth taxes are higher. For example, if you have lent €25,000 through crowdfunding and you receive 5% interest on this annually, you will also receive €1250 interest on this per year in addition to repayment of your loan. Read more about crowdfunding here.
- Rent: if you invest in real estate, which can be done in several ways, you will receive rental income. This goes on every month, you don’t have to do much for it. Read more about real estate investing here.
Calculator
To generate a fine passive income by investing your money, you will need to have a good amount of invested assets. Imagine investing in a dividend fund that pays 3% dividends per year. You want to have €6000 in passive income per year, then you will have to have €200,000 invested.
Starting to invest
You have to start somewhere! So how do you start to eventually have a nice investment portfolio and enjoy passive income?
- Step 1: Get an understanding of your income and expenses. Open your banking app, write down what you spent in the past three months and what came in. Scared to death. And agree with yourself that you will improve your life. At elfin, we help you get serious about this and create a solid financial statement and multi-year plan. Check out our membership and find out more.
- Step 2: Now that you are going to improve your life, you are going to add 2 more fixed charges each month: an automatic transfer to your savings account and to your investment account. What amount is up to you, but also know: that freedom may make you happier in the long run than that dinner or new dress. Start by setting aside 10% of your net income. Read this article on how to save smart.
- Step 3: open an investment account. There are many parties where you can open an account, do good research and see if this party has a license to do business in the Netherlands. Finding it hard to choose? Read this article where we help you choose a bank or broker where you can invest your money.
- Step 4: transfer that first €50 to your investment account and buy an ETF, for example. Read here what ETFs are and how to buy ETFs.
- Step 5: Be patient. This effect is going to be exponential, both in terms of behavior and effect. Because you are paying off your mortgage, your monthly expenses shrink, you can invest more, the more you invest, the more you benefit from dividends, the more income you have, the more you can invest again. Flywheel to the max, creating a true money machine through that whole investing and being smart with your money game!
Passive income through side hustles
Many people today work part-time for an employer and also have what is known as a sidehustle. This way you provide multiple sources of income which is quite a strategically smart choice financially. You are less dependent on your employer and have extra income behind you should something go wrong. Nice to know, right? So a side hustle is a “side activity,” a job on the side. Something that is not your primary source of income, but is a nice extra.
YouTube & Instagram: YouTube allows you to make money if you have at least 10,000 subscribers. Here, you need to keep creating new content regularly or you will quickly drop in rankings. Same goes for making money if you are an influencer on Instagram. If you have a lot of reach, companies are only too happy to work with you. Influencer marketing is called this.
Affiliate marketing or advertising on your website (blog): if you have a well-visited website or blog, affiliate marketing or advertising can make money. Affiliate marketing involves having a link on your website or blog and if someone purchases something or registers through this link you receive a small amount of money for it. The same goes for advertising on your website (simply views can make money even then). To raise a reasonable amount of money this way, you will have to have a lot of visitors and this is really only possible if you update your website very regularly or post new blogs. So this requires quite an investment of time.
Royalties: a royalty is a payment for using someone’s right. Here you can think of a book, music or an invention. If you have written or created a song, you get money every time it is played (on Spotify or the radio, for example). Writing a book is also a good way, although of course that is a tremendous amount of work. Plus: to make real money with a book, in my opinion, you have to sell many copies.
Digital products: this is booming, thanks in part to the rise of the knowledge economy. People who have certain knowledge and expertise about something incorporate it into training courses, e-books and webinairs and sell it online. This requires quite a time investment, but if you have a really good online product then you can lean on that for a while. Of course, it is crucial that you also have reach and a target audience for this.
Examples of digital products for passive income
- E-book. An e-book is a digitized book that the participant can read on their own and learn more about a topic. In an e-book, you may want to add assignments in addition to theory.
- Video Course. Video courses consist of just short videos that make up a series and teach the viewer something about a particular topic.
- Online training or program. These are online learning products that allow you to gain knowledge on your own. You help your participant master new knowledge and apply it in their own practice.
Why?
One reason to create passive income is that it can help you become or be financially independent. We advocate creating multiple sources of revenue. With regard to our investments, we understand that we should not bet on 1 horse, often we do so around our income. Investing both time and money so that this will make you money later without having to do anything for it can be smart and give peace of mind.
Conclusion
Generating passive income often sounds nicer than it is. You will have to invest time or money (or both) to create it. Before something makes you real money, you must have invested heavily. Are you already getting sleepy rich? Do you have passive income sources? Or do you have another tip or idea on how to generate passive income?
Want to really get started generating more income? Check out our e-course Boost your Income and learn all about negotiating, passive income and side hustles.
