15 Ways to Generate Passive Income

For many of us, it's hard enough to earn the income we're getting. We may wish for more money, but the thought of more work can be daunting. Fortunately, there are some ways to generate income that require no work -- or little effort. Here's a look at a bunch of them.

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Let's start with a strategy to generate passive income that's only effective at certain times: chasing interest. For many years until recently, interest rates were extremely low -- with the fed funds rate (the rate at which many banks lend money to each other) often not far from 0%. At such times, you wouldn't get much income even if you'd socked away vast sums of money in interest-bearing accounts. But interest rates have been rising. As of Sept. 21, there have been three successive increases of 0.75 percentage points, taking the fed funds rate to 3% or more. So now, if you sock away, say, $10,000 earning 3%, you'd collect $300 per year. If increases continue for a while and hit 7.5%, for example, you could collect $750 or more. When interest rates are high, bank savings accounts, money market accounts, certificates of deposit, and bonds can deliver meaningful passive income.

Then there are dividend-paying stocks. Invest in healthy and growing dividend payers, and you can expect regular infusions of cash into your investment account. Many people assume that dividend investing is boring, but dividends can really boost your portfolio's performance. Yes, many dividend payers may not be exciting companies, but plenty of pretty impressive companies do pay dividends -- such as Apple. And plenty of well-known companies have fat yields these days -- such as Verizon Communications, with a recent yield topping 6%.

ALSO READ: How to Invest in Dividend Stocks: A Guide to Dividend Investing

On top of the dividends you'll get from dividend payers, as long as the underlying company is healthy and growing, you can expect to profit from stock price appreciation as well. That won't arrive as cash, like dividends typically do, but as the value of your shares rises, you'll increasingly be able to shave off and sell some shares for income. This is a classic way to sustain yourself in retirement, if you've amassed a big enough war chest.

Here's some extremely passive income you can collect regularly -- from your employer. Many employers offer 401(k) plans to their workforce, and many of these plans feature matching funds. Employers may no longer want to offer pensions to their workers, but it's common for them to chip in some money to match worker contributions to 401(k) accounts. A typical arrangement might have your company matching 50% of your contributions up to 6% of your salary. So if you earn $100,000 and contribute $6,000 to your account, your employer will chip in another $3,000. That's free money -- always aim to max out any available matching funds.

ALSO READ: What Is a 401(k) and How Do They Work?

This passive income strategy takes some initial work. You start by writing an e-book. It needn't be long, either. Perhaps you can write a relatively short one on a topic you know well, like how to have a boffo vacation in Costa Rica or how to organize your life with Excel spreadsheets or how to be an effective landlord. Once it's prepared and available at sites offering e-books, your work is done. If people buy the book, you'll collect income -- potentially for years to come. It might take some work to promote the book, though, so that potential buyers can find it.

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Most of us have things that others will occasionally need, and with a fairly modest amount of work, we can capitalize on that. For example, you might rent out space in your home -- or rent out your entire home -- for short periods. That's a familiar concept to most of us, but these days there are websites and services that help people rent out their parking spaces, garages, swimming pools, tools, and more.

ALSO READ: 11 Side Hustles for Busy Millennials

Affiliate marketing can be another great way to generate passive income. It does take some work, though, before the dollars start rolling in freely. Affiliate marketing involves promoting products and collecting a commission for doing so. As an example, if you have a sizable following on a social media site or two, you might plug some products you like, with a link (perhaps to Amazon.com, for example) that will credit you and pay you for any sales. You might maximize this by having a blog or a YouTube channel or some other presence with a certain focus, such as travel. Assuming you can attract lots of followers, you can promote travel-oriented products and collect passive income every time someone buys something.

Returning to the terrific passive income strategy of investing in dividend payers, know that there is a certain kind of dividend-paying stock -- REITs, or real estate investment trusts -- that's worth knowing about. A REIT buys real estate properties and then rents them out and pays out at least 90% of its income to shareholders. REITs tend to focus on one or a few kinds of properties, too, such as apartments, retail outlets, medical buildings, industrial plants, and so on. You might look into any that seem very promising to you.

Another way to generate passive income from real estate is by buying actual properties and renting them out -- and then to passively collect rent checks. This strategy can be very powerful and lucrative, but it's not necessarily easy, as it can be tricky and challenging to be a landlord. (You might, of course, enlist the services of a property management company, forking over a chunk of your income for that.)

ALSO READ: 6 Pros and 9 Cons of Becoming a Landlord

This income-generating idea is a bit off the wall, but it's also fairly easy: Sign up to get paid for advertising via your car. A little online searching will turn up some businesses that facilitate this. You might need to have a decent-looking car and drive a certain minimum number of miles in a special kind of location. and you may not love driving around while advertising something that seems silly, but it's certainly easy money.

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This passive income strategy comes with two caveats: First, you may not make that much money from it, and second, you might be tempted to abuse it. We're talking about using credit cards that offer cash back for your purchases -- often a certain percentage. So if you collect 2% back on, say, $1,000 charged to your cash back credit card each month, that's $20 per month, or $240 per year in possible income. Just be sure you're not looking for things to buy in order to collect 2%, because that's counterproductive.

If you know a fair amount about photography and enjoy taking photos, you may be able to collect passive income from stock photographs you upload to a service. If people who need photos see yours and like it, they will pay for it, and the service will pay you a fee. This is a numbers game to a great degree -- the more photos you offer and the more popular they are, the more passive income you might collect. You might also try selling photos on sites such as Etsy.

ALSO READ: 2 Red-Hot Growth Stocks to Buy in 2022 and Beyond

If you're artsy, just as you might offer your photos on a stock photo service, you might offer designs or illustrations on an online service. Spend some time exploring Etsy, for example, and you'll see that you can buy files of designs for wedding invitations, or PDFs of cross-stitch designs or illustrations that you can have printed on a T-shirt. There are also a bunch of sites where you can upload clever or beautiful designs and people can order them on anything from clothing to stickers to mugs, with you collecting a little chunk of change each time they do.

This money-making idea may seem odd, but it's very effective: Pay off your high-interest-rate debt. Imagine, for example, that you're carrying $30,000 on credit cards and paying between 15% and 20% annually on that debt. That means you're forking over between $4,500 and $6,000 annually just in interest alone. Once that debt is paid off, that $4,500 to $6,000 stays in your pocket, where it can be spent on things like food, shelter, or fun.

ALSO READ: Will 2022 Be the Year You Pay Off Your Debt?

Lastly, consider buying a fixed annuity -- especially if you're approaching or are in retirement. With a fixed annuity, you hand over a hefty sum, typically to an insurance company, and in return you can receive a certain sum for the rest of your life. You can arrange for the money to keep coming until both you and your spouse have passed away, and you may be able to have the payments adjusted for inflation as well (though that will cost you, of course).

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Presented by Motley Fool Stock Advisor
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

However much income you're receiving now, don't assume that it's good enough. It might be well worth trying to increase it, especially via one or more passive income strategies. The more income you have coming in, the more you might be able to invest for retirement -- and the more comfortable you can be in retirement.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Selena Maranjian has positions in Amazon, Apple, and Etsy. The Motley Fool has positions in and recommends Amazon, Apple, and Etsy. The Motley Fool recommends Verizon Communications and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.