Passive income: A beginner’s guide


Written by:


When looking for side hustle ideas, it’s important to understand the difference between passive income vs. active income.


You have heard these terms before, but you might not have a crystal-clear understanding of them. If you want to explore a side hustle where you build up the income over time and it eventually pays you residually, passive or semi-passive income ideas would be a good option for you. Or if you’re a current freelancer looking for ways to turn your active income into passive, this could definitely help you out.


In this article, you’ll learn the difference between passive income and active income.


You’ll also be reading about:

  • Examples of passive income
  • Examples of active income
  • Passive income and active income ideas
  • What’s better: passive income or active income?

There’s a lot to cover. Let’s get into it!

Passive Income vs. Active Income

The main difference between passive income and active income is that passive income is generated by assets or systems. In contrast, active income is money you get in exchange for your time or a specific action.

What is passive income?

First, what is passive income?  Passive income is money you earn in your sleep. So, essentially, it’s the income you’re making without actively doing anything. To create passive income, it takes some work or money in the beginning to lay the foundation, and once everything is in place, the income can be turned on like autopilot with little to no maintenance required to keep it going.


For example, if you’re a blogger, you could have written a blog post last month linking to affiliate products. Someone could click the affiliate link and buy the product today, earning you a commission. You did some work last month to research and write that blog post. But after you published it, no other work was done and, today, you earned money through an affiliate commission! Sometimes this could also be considered as semi-passive income if some minimal work is required to manage it like website updates, regular blog post updates, etc.


Another example is if you write an eBook and promote it on Pinterest using Pinterest pins.  After writing the book and posting the pins, you do nothing else. Pinterest will circulate your pins across the platform, sharing it with more potential buyers, which can help you sell the book!


Passive income is the creme de la creme of income! It’s the money that is most highly sought after because it’s an easy way to create recurring income for yourself automatically with minimal to no maintenance.

Examples of passive income

Here are a few more examples of passive income:

  • Selling digital products, like courses or eBooks
  • Display ad income
  • Social media ad income
  • Affiliate marketing commissions

All of these passive income ideas require work up front to create the passive income stream. But once you’re done with the set up, you can start earning income passively without doing anything!

7 passive income ideas

First, the only way where you can make 100% passive income without any work put in up front is investing is the stock market. We love M1 Finance for its user-friendly app and easy way to research and learn about stocks while investing in ETFs. However, for the ways to make passive income from your creative energy, check out these seven passive income ideas and examples.

1. Selling courses on Udemy

Udemy is an online course marketplace. It has a collection of over 100,000 video-based courses that teach students on a variety of topics from python programming, watercolor painting, stock trading and more. As a Udemy seller, you have an opportunity to create a video course on virtually any topic you like and sell it to Udemy’s audience.


After you build the course, there’s nothing else you need to do. When a customer buys your course, Udemy will handle the sale transaction, releasing the course to the student and the payment to you. You can create multiple courses based around your expertise and make money in your sleep!


Other sites you can do the same with include:

2. Etsy digital product selling

Etsy is a handmade marketplace where sellers create and sell their handmade creations online. Etsy stores feature physical and digital goods. Examples of products you can find on Etsy include WordPress themes, gluten-free cookies, digital art, graphic t-shirts, coffee mugs and more.


To earn income passively on Etsy, you’ll want to focus on the digital goods, but some physical goods can be sold for passive income, like print-on-demand products.


Examples of digital goods you can sell on Etsy include:

Print-on-demand products you can sell passively include coffee mugs, sweatshirts, t-shirts, hats and other goods supported by POD companies like Printful.

3. Monetize a blog with affiliate marketing

For bloggers, there are plenty of passive income opportunities, one of which is affiliate marketing. Affiliate marketing is about referring products to customers that can earn you a commission if your referral results in a sale. For example, you could refer an Instacart subscription in your blog. When a viewer clicks your affiliate link and buys, you earn commission.


Here are 22 easy affiliate programs for bloggers you can check out.

4. Place ads on your blog

Another way to make money passively blogging is with ads. You can partner with an ad network like Google Adsense and set up ads to be placed throughout your blog. You make money when your website visitors click the ads. They don’t have to take action like buy or sign up. You get paid on the click! This is one of the easiest ways to make money passively as a blogger.


Examples of ad networks include:

Keep in mind that there might be requirements for joining an ad network. For instance, with Mediavine, in order to be accepted, one of the conditions is that you should have at least 50,000 sessions per month in blog traffic.

5. Become a writer on Medium

Medium is a publisher that features thousands of writers that create stories on their platform. It’s free to join and you can create content about your favorite topics, monetizing your work to make passive income through:

  • Affiliate marketing
  • Medium Partner Program

First, affiliate marketing with your Medium articles works the same way as blogging. You refer products in your Medium content, linking with your affiliate link and when a visitor clicks the link and buys, you earn a commission.


Next, the Medium Partner Program is an opportunity to make money on the views your articles receive. After doing the work of writing your article, all you do is meter your work through their partner program, and you can earn money passively on the reads your articles get in the future.


To learn more about Medium, check out how to join.

6. Build a sales funnel for sales on autopilot

A sales funnel is a selling tool that can help you funnel leads through a process with the end goal of selling them a product. You set up a sales funnel using email automation software like Converkit. It starts by collecting the lead. You’ll attract leads online, and the goal is to collect their email address. Once you have the email address, you can use an automation sequence to send a series of emails to the lead on autopilot, warming them up until eventually you present them an offer to buy.


The offer can be your product like a course, eBook or digital product you have created. It can also be an affiliate offer.

Sales funnels are an excellent selling tool and a great way to make a lot of money passively.

7. Setup Pinterest affiliate marketing

Setting up Pinterest affiliate marketing can be a fun way to use social media to earn income passively.  The way Pinterest works is, you create a Pinterest pin and post to Pinterest, where it’ll live on the platform and circulate across the network.


You can create a few pins per day or batch-create pins to post on one day or over a time period using a tool like Tailwind.

The pins you make can link to affiliate products. When a Pinterest user comes across your pin and buys through your affiliate link, you earn a commission. Once you have your system down, you can potentially make a lot of money.


This affiliate marketer makes $28,000 per month with Pinterest affiliate marketing.

What is active income?

Active income is the opposite of passive income. It’s income tied to work you’re actively doing. An example would be working an hourly or salaried job. You are actively working to earn money. When you stop working, you stop earning.

Most people have to start with active income. It’s easier and faster to make than passive income, in my opinion.


Think about it. Get a job, work, make money. Pretty simple right?


But with passive income, after you do your initial setup, the money doesn’t just start pouring in. It can take some time to ramp up and it’s not guaranteed the way active income can be. And to start building passive income streams, you’ll likely need income to invest.


For example, to create a digital product like templates or an eBook, you might need word processing software or graphic design tools.  To earn from ads or affiliate marketing on a blog, you’ll need to build the blog first, which takes startup costs. That upfront investment will come from active income. So, to build passive income, you’ll probably need to make active income first.

Examples of active income

Active income is tied to any income you have to work for which can include working a 9-to-5 job or being a business owner. Active income usually comes before passive income but, once you have your passive income streams in play, they can grow and potentially exceed your active income one day. Many people start building passive income streams for this reason and eventually they can leave their source of active income behind.

5 active income ideas

1. Hourly job

An hourly job like working for a restaurant, retail store, or auto repair shop pays you a rate per hour for every hour you work. If you earn $15 per hour, then if you work 30 hours for the week, you’ll make $450 for the week ($15 x 30 hours).

You only earn that money if you work the hours. This is exactly how active income works.

2. Freelance pay

When you work as a freelancer, you work as an independent contractor and usually work for a variety of clients rather than 1 employer. You would get paid per project or per hour, depending on how you structure the pricing for your services.

This is active income as you are getting paid for your service.

3. Salaried job

A salaried job pays you an annual income for working full-time. You’re trading your time for money, just like with an hourly-paying job.

4. Small business

small business, whether it’s product-based or service-based earns money tied to actively working. While some businesses can make money passively, many companies make money only when actively working, like an independent contractor that makes base pay on the number of hours they work or the amount of product they can produce.

5. Commission income

Commissions are tied to sales income. In some professions you work, your entire income or part of your income are from commissions, which comes from your sales performance. For example, a car salesperson can earn 25% commission on the profit of new car sales. That commission is directly tied to their selling ability. If they are successful in working to sell the car, then they earn the commission.

6. Tips

Tips come from actively working in service-based jobs like restaurant service, delivery, bartending, etc.

Which is better, passive income vs active income?

I think most people would say passive income is better. Many would want to earn income in their sleep.  How amazing would it be to relax on vacation, eat a nice dinner with your partner, hike or take a nap and make money in the background while you’re living life? That’s what you can experience with passive income.


But not everyone is after passive income, and it’s important to keep in mind that active income is necessary for most people. It’s one of the quickest and easiest ways to earn steady pay. You know that if you put in the time to work that you will make money, guaranteed. That peace of mind is something that many people are happy enough with and don’t care to pursue passive income.

Final thoughts on passive income vs active income

So what wins, passive income or active income?




Active income is necessary for a lot of people. You need active income first before you can pursue passive earnings.

Why not do both? Passive income can be a very fulfilling way to make money, but it can take a lot of work and it’s not guaranteed. It can take a long time to start earning income passively, which is why active income is so crucial.




This article
originally appeared on and was
syndicated by

More from MediaFeed:

38 ways to earn passive income


Having more than one source of income is pretty common these days. For some people, it’s a way to make ends meet. For others, it’s a way to grow their wealth. It can also be a way to feel more financially secure. If one source of income dries up, there is another that can fill in the gap. While a common source of income is the type earned from a regular job, there is also passive income.


Creating and managing passive income streams isn’t a passive activity. It requires upfront work and sometimes investment to build up a source of passive income. Depending on what your passive income source is, such as a blog or podcast, it may require you to put in time each week to keep it earning you cash.


Related: 25 things to know when renting out an Airbnb



Khosrork/ istockphoto


Passive income is money that you earn without active involvement. In other words, it is income that isn’t attached to an hourly wage or annual salary. Passive income streams could include things like cash flow from rental properties, dividend-yielding stocks, sales of a product (that requires little or no effort), royalties and more.


SARINYAPINNGAM / istockphoto


In addition to passive income streams, there are other types of income you can earn:

  • Earned income: This is the most common type of income
  • — money you make from a job. With earned income, you are trading your time for money.
  • Profit income: Profit income comes from the sale of a product after expenses have been deducted.
  • Interest income: This can be money earned from one entity lending to another entity, such as a person, company or bank. This can also be referred to as interest from accounts such as savings accounts and certificates of deposit (CDs) in which you receive a 1099-INT at the end of the year.
  • Dividend income: Most dividend income is earned by the distribution of income from companies to shareholders owning stocks that pay dividends.
  • Rental income: Rental income is earned when you rent or lease a house, car, or other property you own to someone else.
  • Capital gains: This generally refers to profit (or gain) that is subject to taxation when you sell an asset such as stock or real estate. There are both long- and short-term capital-gains tax rates depending upon how long you held the asset before sale.
  • Royalty income: Royalty income is generated when you own the rights to a piece of art, music, literature or another asset licensed for other people to use, or from the extraction of oil, gas, or minerals.


Pinkypills / istockphoto


There are only 24 hours in a day. If you go to a job each day that pays you a set amount of money, that is the maximum amount that you’ll ever make in a 24-hour period. That is called earned income.


By investing some of that earned income and creating sources of passive income, you may be able to increase your earnings. Diversifying your income stream may also improve your financial security.




  • More free time: By earning money through passive income sources, you might be able to free time in your schedule. You may choose to spend more time with your family, pursue a creative project or new business idea, or travel the world.
  • Financial security: Even if you still plan to keep your 9-to-5 job, having multiple sources of income could help increase your financial security. If you lose your job, become sick or get injured, you may still have money coming in to cover expenses. This is especially important if you are supporting a family.
  • Tax benefits: You may want certain legal protections for your personal assets or to qualify for tax breaks. Consulting with an attorney and/or tax advisor to explore setting up a formal business structure like a sole proprietorship, a limited liability company (LLC) or a corporation might help you decide if this is a good route for your particular situation.
  • Location flexibility: If you don’t have to go into an office each day, you’ll be free to move around and, possibly, live anywhere in the world. Many passive income streams can be managed from your phone or laptop.
  • Achieve financial independence: The definition of financial independence is having enough income to cover your expenses without having to actively work in order to cover living expenses. This could allow you to retire early and have more freedom to live your life the way you choose. Whether you’re interested in retiring early or not, passive income can be one way to help you reach financial independence.
  • Pay off debt: Passive income may help you to supplement your income so that you will have the opportunity to pay off any debts more quickly.




Although it might sound like a dream come true to quit your job and travel the world, earning through passive income is not quite that simple.

  • Earning passive income is not a passive activity: Whether you earn passive income through a rental property, running a blog or in another way, you will still need to put in some time and effort. It takes time to get these income sources up and running, and they don’t always work out as planned. If, for example, you run an Airbnb, you have to maintain the property, ensure a high-quality experience for guests, and address any issues or concerns guests may have to secure positive reviews.
  • Passive income requires diversity: In order to earn enough passive income to quit your job and cover all your expenses, you would most likely need more than one source of income. Although you may no longer need to clock into a 9-to-5 job, you will likely still need to spend time managing multiple income streams.
  • It’s lonely at the top: It might sound great to never have to go to the office again and to have the freedom to travel, but earning money through passive income can become lonely. Not having anyone to talk to during the day might make you feel lonely, and if you aren’t self-motivated, you may find it difficult to stay on task if you need to manage your passive income streams.
  • Getting started may require investment: Depending on how you plan to earn passive income, it may require an initial financial investment. You may need money for a down payment on a rental property, the development of a product you plan to sell or for investment into dividend-yielding stocks.




There are a number of ways to earn passive income. Some options, like the following, take relatively little active supervision.



SIphotography / istockphoto


By simply putting your money in the bank, you may be able to start to earn passive income on it. If you invest in an FDIC-insured account, the first $250,000 of your money is protected. There are both banks and online platforms that offer high-yield savings accounts.


Although this may take an up-front investment, buying into a business and becoming a silent partner can be another passive income source.


Using a peer-to-peer or crowd-lending website, you can be matched to an individual seeking a loan and lend your money as an installment-type loan, earning interest on it. You might earn even more than from a bank, depending on the loan.





Another popular passive income source is rental property. You might want to purchase a home to rent out to an ongoing tenant or list a property on a short-term rental site like Airbnb. Hiring a property management company lessens your day-to-day involvement, thereby making this venture more passive than active.


If you don’t have thousands of dollars to spend on a piece of property, you can always check out your options on crowdfunded real estate sites like Fundrise and CrowdStreet. For Fundrise, you only need $500 to start.


There is no guarantee that investing in dividend-paying stocks will continue to earn you passive income, but some investors may enjoy the thrill of the ups and downs of the stock market. Dividend-paying stocks typically pay investors quarterly or annually and often allow investors to reinvest the dividends.


If you’re just getting started with investing, you may want to use automated investing tools to help you choose the appropriate allocation of assets for your goals.


AndreyPopov / istockphoto


When you open your retirement account, you can choose to invest it however you want. One way to earn passive income on a retirement account is through mutual funds. You can choose the level of risk you want to take with your money by finding a mutual fund that is higher or lower risk.



Flickr: American Advisors Group


When you join a company’s affiliate program, you earn a commission from every product that someone purchases from that company. All you have to do is post the link on your blog, website or social media pages. Amazon Associates is a great place to start.



CarmenMurillo / iStock


Another one of the best passive income opportunities is renting out your car on a site like Turo. It’s basically the Airbnb of cars, and, according to Turo, the average annual income for one car on the site is $10,516.


If you have a clean driving record and a newer car, consider getting in touch with a car advertising agency. You simply drive around town with ads on your car and easily earn passive income.





Do you have space in your driveway that you aren’t using? Then rent it out on platforms like Stow It, where you can find people who will pay to rent out the space.





If you have extra space in your garage, shed or storage unit, then you could earn passive income by using a peer-to-peer storage site like Stashii to find people who need your space.



DFTidrington / istockphoto


You may not have space to store other people’s things, but you might consider investing in a real estate investment trust (REIT) that focuses on storage units. For example, one option is Public Storage, which has ownership or interest in 2,548 properties located in 38 states.


Perhaps you don’t have a car, but you do have a bike that’s just sitting around. Your bike could be a lucrative passive income source, especially if you live in a high-traffic area. List your bike on Spinlister to get started.


Even if you don’t own a rental property, with your landlord’s permission, you may be able to rent out a room in your apartment or list it on Airbnb and start adding to your passive income streams.


If you love pets, you can earn passive income by welcoming pets into your home while their owners are on vacation. For instance, you could charge $30 to $80 per day just for running a doggy daycare. You can gain clients through word of mouth or use a site like Rover to find customers.


When your friends go out of town, they may need someone to stay in their home and do simple things like water their plants and collect their mail. You can easily make money and have somewhere new to stay for a little bit. Along with making yourself available to friends, you can sign up to be a house sitter on



Valeriy_G / iStock


Some domain names are cheap, while others cost a lot of money because they are in high demand. One thing you could do to start another passive income stream is to purchase domain names you think will be popular. Purchase low for around $10 to $100 and then sell them for a much higher price later on.


Have you ever done a home improvement project that required you to purchase tools? You may never need to use those tools again. Thankfully, now you can rent tools, and rent out your tools, on peer-to-peer platforms such as Sparetoolz to earn passive income.



artisteer / istockphoto


Let’s say you don’t have any songwriting ability, but you would like to make money on other artists’ work. You can invest in royalties through Royalty Exchange and earn passive income on the intellectual property.



Drablenkov / istockphoto


You can make thousands of dollars per month if you own a billboard where companies can advertise their products and services. Do your research and make sure you get the right permits before committing to a billboard.





If you don’t have the time or energy to create content for your own blog, then look into ones that are already successful and see if the owners are willing to sell. You could also hire someone to manage your blog so that you’re truly earning in a passive way.


If you have a special skill or knowledge about a certain topic, you may be able to create a video course where you teach people about that topic and charge them to take the course.



fizkes/ istockphoto


You may want to research online platforms where you can sell everything from digital art to e-books. Whether you’re an artist, graphic designer or writer, you can create digital products to sell online.



DMEPhotography / istockphoto


Many companies, bloggers and individuals use stock photos on a regular basis. You may be able to upload your best photos to stock photo sites and earn passive income on them.


If you’ve been dreaming about an amazing phone app that you think a lot of other people would use, you may want to look into hiring a development team to create it.


You may be able to earn passive income through sales of a product that you create. This could be a book that you write or a physical product that you design and make. You might also list items you already own on sites like eBay and earn extra income through those sales.



CrispyPork/ istockphoto


Do you love to write songs? Then you could license your music and start to earn passive income. You’ll just have to team up with a music licensing company to get started.





Through platforms like Amazon’s KDP, you can self-publish a book and earn a royalty on it every time someone makes a purchase. You will be able to set the price of your book and be in full control of your book’s Amazon page, where you can list pictures of the book, reviews and videos promoting it.


You can start selling books online without having to write anything. How? By focusing on blank books, such as journals, sketchbooks and planners. Simply find a design you believe will appeal to people and begin collecting royalties when people buy your books.





Another artistic endeavor that could be a good passive income stream is creating greeting cards that you sell to a wholesale or retail stationery company that accepts independent artist submissions.



VictoriaBee / iStock


If you want to sell products online but don’t want to store any of the goods, you could always look into dropshipping to earn passive income. With dropshipping, you don’t have to have much money to start since you don’t need inventory to fulfill orders for customers.





If you like to write and are passionate about a certain topic, you might want to start a blog and earn money through ads and affiliate links.


If you enjoy creating videos more than writing, then consider starting your own YouTube channel. Once you get enough viewers, you can earn passive income through YouTube advertising.


Podcasts are all the rage, and they can generate some passive income streams for you. If you start a podcast that resonates with people, then you can grow your audience and monetize your show by sponsoring with ad partners. If you get enough listeners, you may be able to sign up for podcast advertising networks.



vadimguzhva / istockphoto


When people are out at a bar or nightclub or they’re frequenting a cash-only business, they may need cash right away. If you own an ATM business and you place your ATM in high-traffic locations, you could start to earn passive income through surcharge fees. Typically, you could earn around $3 per withdrawal.


Similar to an ATM business, a vending machine business allows you to use your creativity and determine high-traffic areas where you could make a lot of money. If you buy in bulk, you’ll be able to save on the snacks and drinks you purchase for your machines.


No matter which type of passive income you choose to pursue, it’s important to keep track of your finances and both your short-term and long-term financial goals.


Tracking multiple sources of income in a monthly budget can be a complex task. To be profitable, it’s important to pay attention to how much money you put into the maintenance of your passive income stream(s), such as property upkeep or monthly online services.




Establishing passive income streams is one way to diversify your income and can help you build wealth and achieve financial freedom in the long term. There are a variety of ways to earn passive income, such as through investing, rental properties and earning royalties. Some passive income sources require a financial commitment upfront, such as purchasing a rental property, and others may require a time commitment.


Learn more:

This article originally appeared on SoFi.comand was syndicated by


SoFi Money
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA/SIPC. Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.

SoFi Invest
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA/SIPC. SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.

1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.

SoFi’s Relay tool offers users the ability to connect both in-house accounts and external accounts using Plaid, Inc’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score provided to you is a Vantage Score® based on TransUnion™ (the “Processing Agent”) data.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.


designer491/ iStock



monkeybusinessimages / istockphoto


Featured Image Credit: