Scared of a Potential Recession? Passive Income May Help

A woman wearing earbuds and holding a cup of coffee is approached by a disembodied hand holding out a dollar bill.

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We explain this method of making extra cash without burning out.

It’s rough out here: Many of us are currently reeling from soaring inflation rates and are rightfully concerned about the prospect of a recession. But if you’re already fully employed, how can you prepare for the future without taking on another job and risking burnout? On the other hand, those of us who are retired may be curious about seeking out cash flows that we can juggle between our other many post-retirement plans (including costly and time-consuming moves for the adventure-bound among us). Passive income is especially exciting if you’ve already exited the workforce because you can spend your time on hobbies and travel as your savings quietly grow.

Regardless of whether or not you’re employed, if you’ve got some start-up cash there are plenty of interesting options for gaining passive income. Some might even engage your passion and creativity while some might take you on a new journey that will awaken your inner entrepreneur. Who knows — if you’re still working full-time, you may even stumble upon a means to retire early or transition away from your current profession.

What is Passive Income?

Streams of passive income will differ (sometimes wildly), but passive income is always a means of earning money that will involve minimal effort from you. Forbes defines passive income as “money you can earn without too much ongoing effort. After you identify and establish a stream of passive income, you won’t need to tend to it every day—but that doesn’t mean you won’t have to do some work now and then.” Initially, you’ll have to invest a substantial chunk of either money or time. Eventually, however, the investment will accrue extra cash with minimal maintenance. As Forbes says, you’ll have to check in and maintain your income stream consistently — though not constantly.

If you’re willing to wisely and carefully consider investing, we’ve amassed a few common methods of earning passive income.

Common Passive Income Ideas

Rental Properties

Arguably, the most well-known form of passive income is purchasing property. Naturally, this option can have a pretty high start-up cost — if you can withstand a little collaboration, you can consider using a real estate investment trust or real estate crowdfunding platforms. Or, if you have trusted family or friends who are interested in passive income, you can team up with them.

If you purchase property, you can decide whether you’d like to rent to another household or put together a vacation rental to host on a site like Airbnb. You can also choose how involved you would like to be in maintenance. If you have a lot of experience fixing up a house or apartment, you can cut down on costs by managing the property yourself. Or, if you’re willing to part with a bit more money, you can hire a property manager.

On a side note, you don’t need extra money to make passive income from real estate — sometimes, all you need is space. If you have a spare room or are going on a vacation and planning on leaving your home unattended, consider renting some space out on Airbnb. If you’ve ever dreamt of owning a quaint little bed and breakfast, now might be the time to bring your fantasy to life.

Dividend Stocks

Investing in stocks is also a pretty well-known method of putting together a low-maintenance income stream. However, the stock market can be pretty opaque, and if you’re just now trying to build a portfolio, you may be overwhelmed. A really approachable way to embark on this confusing financial adventure is to dabble in dividend-yielding stocks. Nerdwallet defines dividend-yielding stocks as “payments a company makes to share profits with its stockholders. They’re paid on a regular basis, and they are one of the ways investors earn a return from investing in stock..” They’re less of a risk than a traditional growth stock and make for a more consistent and predictable cash flow.

You should note that a dividend will be paid per share of stock. So, “if you own 30 shares in a company and that company pays $2 in annual cash dividends, you will receive $60 per year.” Therefore, to make significant amounts of money, you’ll have to buy a significant amount of shares. This form of passive income can still fail, too — according to Forbes, failing companies may decrease dividends or be completely unable to pay investors. If you’re a finance nerd, you might be excited about researching the best investments.

If you’re pretty risk-averse but are still interested, look into exchange-traded funds (ETFs). Bankrate defines ETFs as “investment funds that hold assets such as stocks, commodities and bonds, but they trade like stocks. ETFs also diversify your holdings, so if one company cuts its payout, it doesn’t affect the ETF’s price or dividend too much.” Bankrate argues that ETFs are beginner-friendly because “they are easy to understand, highly liquid, inexpensive and have far better potential returns.” Like any investment, though, ETFs do contain some degree of risk as the stock market rises and falls. If you feel at all uncomfortable, take your time and do as much additional research as you can.

Creative Content

If you’re not willing or able to part with thousands of dollars — or, potentially, tens of thousands of dollars — you can start monetizing one of your creative passions. This method will invariably require more time and effort, but could be an exciting opportunity for personal growth.

If you’re a writer (or just an expert on any particular subject), look into ebooks. We’ll be honest: Writing is a time-consuming investment, but self-publishing is remarkably accessible. You can also find plenty of resources online that will teach you how to market your book on Amazon. The downside is that a series of ebooks will be much more successful than a single book — you may need to be honest with yourself about whether or not you’re willing to sustain a consistent amount of effort. Additionally, you’ll likely need to hire an editor, which will cost money. Also, marketing your book won’t necessarily be free. But you can amass a readership, which can be endlessly rewarding. This method can be a fun way to challenge yourself and build community while also earning some extra cash.

If you’re a hobby photographer, consider using sites like Getty or Shutterstock to sell images online. Once you’re approved, you can upload as many photos as you like. There are a few major downsides, though. You need excellent hardware to get the best photos, which can be expensive if you don’t already own that equipment. Plus, because you’re only paid whenever people download your photos, you might upload dozens of photos without earning revenue. You’ll probably have to play around with many different types of shots, which can be exhausting. But if you don’t mind experimenting a bit with your photography, this might be a good choice for you.

If you’re a musician, you can also monetize your work for passive income. Creatives will pay for the rights to your songs in their own content. According to Forbes, you can try sites like Pond5 or AudioJungle.net.

Advertising on Your Car

If you have a good driving record, companies may want to use your car for advertisements. Forbes says that sites like Free Car Media and Wrapify (among others) will cover your car with ads for free. Keep in mind that you’ll need to seek out companies carefully; there are scammers who prey on this industry.

Be Careful and Have Fun

While generating passive income can be confusing and intimidating at times, it’s also a wonderful way to discover new strengths or put years of expertise to good use. Keep in mind, though, that the most important thing about earning passive income is to proceed with caution and confidence. Do as much research as you need — read books about investing in property, listen to financial podcasts if you’re interested in stocks, and consult your friends and family before making any sudden moves. Always be aware of pyramid schemes and multi-level marketing companies (if a company requires you to buy their products and/or recruit other salespeople but insists you’ll get to “be your own boss” and “run your our business,” run for the hills), and check out the FTC’s breakdown of how to avoid common real estate and investment scams. Once you feel well prepared, enjoy the thrill of pursuing hands-off money.