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How to Earn a Passive Income

Unlocking Financial Freedom: A Beginners Guide to Earning Passive Income

In today’s fast-paced, hard-working world, the concept of passive income and how to obtain it is becoming increasingly popular. Who wouldn’t want to earn money while sleeping, traveling, or spending time with loved ones? Passive income streams offer a way to build wealth without constantly trading time for money.  

In this article, we’ll discuss the benefits of passive income, 8 different types of passive income streams, and how to start earning a passive income to help you move towards a more financially free and independent future for yourself and your family.  

What is Passive Income? 

While an active income is earned by working a job, passive income is earned without having to work too much for your income on an ongoing basis. It’s a way of keeping money rolling in after you’ve clocked out.  

Having a passive income means you can keep earning from anywhere, with the family or off on holiday. It takes pressure off of being reliant on just one income stream and is less work to maintain, however, bear in mind that more work is usually required when first setting up this type of income stream. 

Passive income refers to earnings derived from ventures in which a person is not actively involved. This can include investments, rental properties, and other business endeavors where the individual is not directly trading time for money.  

Benefits of Having a Passive Income 

Financial Freedom 

Passive income provides the freedom to spend your time as you choose. Whether it’s pursuing hobbies, traveling the world, or simply enjoying more time with family and friends, passive income can make the lifestyle you’ve always dreamed about possible. 


Multiple income streams can provide a safety net in case of job loss or economic downturns. This diversified approach to earning helps cushion financial blows and provides peace of mind. 


Unlike a traditional job, passive income streams can grow exponentially over time. With the right investments and strategies, what starts out as a modest income stream can turn into a substantial revenue generator, unlike your 9-5 where you may find that after several years you hit the ceiling in terms of pay rises. 

How to earn a passive income

Popular Passive Income Streams 

1. Property Investment 

Purchasing properties to rent out (either via residential or commercial) can provide you with a steady income stream. With proper management, rental properties can generate monthly cash flow and appreciate in value over time. 

Rental property investments are one of the most popular options for passive income growth within New Zealand and are also considered a low-risk investment as property value has shown to increase at a somewhat consistent rate over the past 40 years. 

2. Rent Out Your Space 

Platforms like Airbnb allow you to rent out your entire property or just a spare room. This can be a lucrative way to earn passive income, especially if you live in a desirable location. You can also rent out spare rooms on a more permanent basis by listing them on TradeMe and getting in flatmates. 

 3. Dividend Stocks and Shares 

Investing in stocks and shares that pay dividends can provide you with a regular passive income. Look for companies with a history of consistent dividend payments. Reinvesting these dividends can further increase your earnings through the power of compound interest. Earning a passive income through the method of buying dividend stocks and shares is also considered a fairly safe investment.  

 4. Invest in Index Funds 

These funds track specific indexes and can provide steady returns over time with minimal management. They are ideal for those looking to invest in the stock market without the need for active trading and are considered a safe investment.  

 5. Invest in Crypto Currency  

One of the most attractive aspects of cryptocurrency is the potential for high returns. Unlike traditional investments, cryptocurrencies can experience significant value appreciation within a relatively short period. Additionally, investors can earn passive income through methods like staking and yield farming. Due to the market being highly volatile, this investment is considered high-risk. 

 6. Create and Sell Online Courses 

If you have expertise in a particular area, create an online course. Platforms like Udemy or Teachable can host your course and provide a revenue stream. Once created, courses require minimal upkeep and can generate income as long as there is demand for your knowledge. 

 7. Sell Digital or Physical Products Online  

Create and sell digital products like printables, templates, or graphics. Websites like Etsy, TradeMe, and your own online store can be excellent platforms for selling digital and physical goods. Using a 3PL to help package and ship physical items can make your online business semi-passive and automating digital product delivery so soon as they’re purchased can make your online business almost entirely passive.  

 8. Affiliate Marketing 

Promote products or services through affiliate links on your blog, website, or social media. You earn a commission for each sale made through your links. Successful affiliate marketing requires a good understanding of your audience and strategic promotion. 


Steps on How to Build a Passive Income 

1. Research and Choose Your Income Stream 

Assess your skills, interests, and available capital to determine the best passive income stream for you. Consider factors like initial investment, potential returns, and your ideal ongoing level of involvement.   

2. Invest Time and Effort Initially to Get Your Passive Income Stream Up and Running 

Most passive income streams require an upfront investment of time, money, or both. For example, creating a course or writing an eBook takes effort initially but can pay off in the long run. 

 3. Automate Where Possible 

Use technology to automate processes and reduce the amount of active management needed. For instance, automate rent collection or set up auto-investing for dividend stocks and index funds. 

 4. Reinvest Your Earnings 

Reinvesting your passive income can help grow your wealth exponentially. Reinvest dividends, rental income, or profits from sales to further compound your returns. 

5. Stay Informed and Adapt 

Continuously educate yourself about your chosen income streams and be prepared to adapt to changing markets or trends. Staying informed helps you make better decisions and optimize your passive income sources. 


Challenges and Considerations

  • Initial Investment 

Some passive income streams require significant upfront capital. For example, purchasing rental properties or investing in high-dividend stocks can be expensive initially. 

  • Risk Management 

Diversify your income streams to mitigate risks. Relying on a single source of income can be risky, especially if market conditions change. 

  • Time and Effort 

Passive income isn’t completely hands-off. Be prepared to invest time and effort initially and periodically to maintain and grow your income streams. 

  • Market Fluctuations 

Stay informed about market conditions that may affect your income streams. Economic downturns, interest rate changes, and other factors can impact your returns. 

Building passive income streams is a powerful strategy for achieving financial freedom. By diversifying your sources of income and investing in various passive ventures, you can create a stable financial future. Start small, stay informed, and be patient as your passive income grows over time. With persistence and smart investments, you can enjoy the benefits of passive income and move towards a financially free future. 

Whether you’re looking to supplement your current income or achieve complete financial freedom, passive income is a path worth exploring. 

If you’re wanting to learn more about how passive income can benefit you through property, apply for a mortgage-free strategy session now to find out more.