One of my new years resolutions for 2016 was to build a stream of Passive Income. Unlike most resolutions which are easily forgotten once the first week of January comes to an end, this was one I was determined to follow on. I needed to stop being broke and start being flush with cash. I knew that I had to buy more money.
The reasons for wanting to get started on the passive income journey are simple. I wanted to earn continuous streams of money without having to do any work. I wanted to earn money whilst I slept, ate, socialised and played football. I wanted my bank account to keep moving upwards with every passing day. And that is what passive income does.
As the heart of it, passive income is for people who want to be financially free. The idea being once your passive income cross above your level of expenses, you are free to do what you like. No more fighting 7am traffic. No more having a strict 9 – 5 routine. No more going to the job you hate.
Sources of Passive Income
In 2016, I made £1510 in passive income. My passive income was derived from a number of sources such as dividends, property income, cash back, and royalty income. To see other methods of making passive income have a look at this article.
Here is a breakdown of how much passive income I earned from each source.
- Dividend Paying Stocks – I earned £858 across both my high yield and ISA portfolios. Dividends are my favourite form of passive income as it is the easiest to build. Once you do your research and pick the right companies, all you do is sit back and let the dividends roll in. You leverage your equity position and let the company work for you. You let Shell drill oil on your behalf. Let Coke distribute drinks for you. Let AstraZeneca sell medication. Let Tritax collect rents. Let Goldcorp mine minerals. Let Intel and Cisco innovate. Let Easter Lauder make people take that perfect selfie. Let Vodafone connect the world. Simply let winning companies do what they do. By being patient, companies you are a partial owner in will reward you by sending ever increasing streams of cash your way. Have a look at the ‘my journey’ section of this website to see which dividend stocks I have been buying.
- Property Income – I earned £96 in passive income. I wouldn’t be British if I didn’t have any property income. As I don’t have the capital to buy a property outright or to take the buy to let route, I used crowd funding to get my hands on a partial ownership of a property. The crowd funding companies like Housecrowd and Property Moose do all the work from finding tenants to collecting rents. All I have to do is spend the money that comes my way.
I do not include my Airbnb income here as renting a room via airbnb takes a bit of work e.g. meeting the tenant, cleaning e.t.c. The idea of passive income is to do no work.
- Cash back websites – Annual income £110. By buying things I needed using Quidco and Topcashback, I was able to get money back on my purchases.
- Cashback from Santander 123 account – Passive Income of £41. The account gives you cash back on your direct debit payments for council tax and utilities.
- Stock List – Royalty income of £405 earned. In 2015 and 2016, I painstakingly created a list of the best 60-70 publicly traded companies in the world together with my target buy prices for each. This list took countless hours and I read hundreds of annual reports. Since I put in so much work, I decided to make some money for my efforts. I currently sell the list of high returning stocks as well as my buy prices for £45, I know the price seems high but the number of hours put into the research (which I continue to do) far outweigh the costs. I sold 9 copies in the year earning me £405 in royalty income.
All in all, I am happy with this feat. In 2017, I will be looking to diversify my passive income sources even further. Whilst the majority of my 2016 passive income required upfront money (buying dividend paying stocks or buying property), I want to increase my passive income from sources that don’t require upfront money but upfront time instead e.g. writing, royalties e.t.c. Have a look at my article on different ways to make passive income.
I do believe that everyone should have some source of passive income. Who doesn’t want to earn more money without working extra hours? Passive income helps you get ahead with your finances. And by making more and more passive income on the side, you can cut back on the number of hours you work and enjoy more leisure time. In fact, when you have several different streams of passive income, you may even be able to quit your job and still live quite comfortably.