How to Earn Money -- Without Really Working

It's quite the pipe dream -- you sitting at home or gallivanting about while collecting income you never broke a sweat for. Most of us would love that, though we typically just assume it can never happen.

It can, though. There are lots of ways to collect passive income -- sometimes substantial income -- without working much or even at all.

Image source: Getty Images.

Here are 10 ways to collect passive income:

1. Interest
2. Pay off debt
3. Stock appreciation
4. Stock dividends
5. Rental property income
6. Credit card rewards
7. Residual and royalty income
8. Affiliate marketing
9. Annuities
10. Your home

1. Interest

This is often the first painless money we receive, aside from gifts. When we're still young, we often have a bank account set up for us, and the $100 that grandma and grandpa gave us starts earning interest in it. With the average savings account interest rate at less than 0.50% recently, and even certificates of deposit (CDs) averaging less than 0.75%, interest may not seem like such an exciting way to generate income. That's true enough, but remember that it's not always so. Back in the 1980s, though, interest rates were in the teens and even high teens -- beating the stock market's long-term average growth rates by quite a bit. Such high rates are rare, but there have been plenty of times when interest rates were meaningful, such as in the 5% range. They're likely to return one day.

2. Pay off debt

If you're saddled with high-interest rate debt, you need to pay that debt off pronto -- not only so that you can start moving in the right direction financially and building future security, but also because paying down debt is a way of generating money. How? Well, imagine that you've been carrying $20,000 in credit card debt for years, being charged 20% interest (a not-uncommon rate). That would have you paying $4,000 in interest annually. But if you paid off, say, $10,000 of that this year, you'd be avoiding paying 20% on that debt and would get to keep $2,000 in your pocket.

3. Stock appreciation

Next up is stock appreciation. When you invest in stocks, you aim to buy low and eventually sell high. Ideally, you'll be a long-term investor and will let your solid holdings grow over many years. If you spend, say, $3,000 on, say, Scruffy's Chicken Shack Inc. (ticker: BUKBUK), and its stock doubles over four years, you'll have generated $3,000 -- in exchange for little to no work. You do have to put in a little work studying companies, selecting which ones to invest in, and keeping up with their progress, but you're not likely to work up a sweat doing so. And you might just opt for a low-fee, broad-market index fund, which takes hardly any work at all, while delivering market-matching results.

The table below offers an idea of the kind of wealth you might build with different investments. It assumes an average annual growth rate of 8%.

Data source: Calculations by author.

4. Stock dividends

Stock price appreciation isn't the only way to generate income from stocks. You can also enjoy dividend income, if you've invested in dividend-paying stocks. Dividends aren't guaranteed -- companies in trouble will occasionally reduce or eliminate them -- but most companies manage to avoid that and want to keep their dividends reliable and growing. Here are some familiar companies and their recent dividend yields:

Data source: Yahoo! Financial.

You might also want to look into real estate investment trusts, or REITs, which work much like stocks but are special kinds of corporations that invest in real estate and pay out most of their income to shareholders.

Image source: Getty Images.

5. Rental property income

Another way to generate seemingly easy money via real estate is to buy properties and rent them out, collecting rent checks each month. That can seem like a tantalizing proposition, but know that it's often not as lucrative as it may seem, and can actually be hard work sometimes. After all, you will still be on the hook for insurance and taxes, and you'll have to pay for repairs and maintenance, too. Whenever the property is empty, you'll be collecting no income, and when it's occupied, some tenants can be troublesome, not paying on time or at all, or calling you at inconvenient times with problems. Still, when you have good properties and good tenants and have perhaps hired a property management company as well, you may be able to net some meaningful income with little work on your part.

6. Credit card rewards

This way to collect passive income is very passive and very easy. Simply use a generous cash-back credit card or two when you spend money. There are some cards out there (often only given to those with good credit) that will pay you 2% or so on almost everything you charge, while other cards offer up to 5% or 6% on certain spending categories, such as supermarkets, gas stations, or restaurants. Other cards are tied to certain retailers -- such as Amazon.com, Costco, or Walmart or other companies, offering a percentage off your spending with those companies. Many travel cards offer generous rewards as well.

7. Residual and royalty income

If you can create desirable images or graphics, you may be able to collect residual or royalty income from them. For example, take photos that many people might pay for and upload them to stock photography sites such as iStock.com, stock.Adobe.com, Alamy.com, and shutterstock.com. Upload clever designs to sites such as Teespring.com, Zazzle.com, RedBubble.com, and CafePress.com, and people may pay to have them printed on T-shirts, mugs, and more. You could even write an e-book and self-publish it, selling it online, via Amazon.com's direct publishing service or elsewhere. There is work involved in your original creation, but after that, as long as there are buyers, it's all gravy.

8. Affiliate marketing

If you can build a web destination that attracts a lot of visitors, such as a blog about some interest of yours, you may be able to make money off advertisements on it. If you write about photography, you could host ads for cameras and related equipment, and people who click on the ad -- and, ideally, make purchases -- will produce income for you. If you have a travel blog, you might do a review and link to books about various destinations and then collect a small cut of any sales those links generate.

Image source: Getty Images.

9. Annuities

Annuities are easy income -- but you have to have a hefty sum with which to buy the annuity, and you'll want to invest some time learning all about annuities and picking a few good ones, too. After that, though, regular checks will arrive like clockwork, either immediately or whenever you specified for them to start. Favor fixed annuities over variable or indexed annuities, which can have steep fees and overly restrictive terms. Here's what you might collect from various immediate annuities at recent interest rates. (When interest rates are higher, insurers will offer greater payouts.)

Data source: immediateannuities.com.

Deferred annuities (sometimes known as longevity insurance) are also worth considering. They start paying you at a specified point in the future, and they offer greater payouts, as the insurers get to hang on to your money for a while before starting to pay you, and they can use that money until then. As an example, a 60-year-old woman might spend $100,000 for an annuity that starts paying in 15 years at age 75, and might collect $1,104 per month or $13,248 per year starting then. Deferred annuities can be a good way to prevent running out of money late in life.

10. Your home

Finally, your house is another way to generate income, and you have a bunch of ways to do so. You might just rent out some space in your home or the whole home now and then, via services such as Airbnb.com, VRBO.com, Homeaway.com, or FlipKey.com. You might also refinance your mortgage, if prevailing interest rates are now about a percentage point better than your home loan's rate. Another option is a reverse mortgage, where you essentially borrow money from a company, with your home as the collateral. You don't have to pay back the loan until you're no longer living in the home (such as if you die or move to a nursing home). That's great for some people, but it also means there's no home to leave to heirs -- unless the heirs can pay back the loan.

A little creative thinking might turn up even more ways to earn passive income. See what strategies would work best for you.