How To Make Passive Income Online: 10 Proven Ideas
If you want to achieve financial freedom but are not born a millionaire, a Hollywood star or a world-class footballer, you need to start generating passive income.
Note that most people only receive active income. And that puts them in one of two situations:
- They work 40 hours a week for wages. In other words, they sell their time for money until they retire.
- They have their own business. In this case, they invoice according to the number of customers they get, so in practice they are also trading their time for money – and they often work more than 40 hours a week!
Fortunately, there is another way of living that is becoming increasingly popular. A way in which you don’t have to sell your time, because you create an asset that works for you and generates money on autopilot.
I am one of these people. It all started when, after several years without promotions or salary increases in the multinational company where I worked, I created an affiliate website to try and get some extra income.
I did it without any knowledge of programming, design or business strategy. But only one year later, that website made me earn more than 7,000 euros in one month, totally passively.
Although I had only spent a couple of hours on it in the last few weeks, that website was still working 24 hours a day for me, getting visits and generating commissions without me having to do anything else.
Since then I have implemented many other passive systems. What started out as extra money has ended up giving me the financial freedom to leave my job and be free to travel wherever and whenever I want.
Unfortunately, there is a lot of mythology about passive income. Especially people who sell you their goodness without having implemented it and do not tell you the dark side of this type of business.
So, after several years of generating thousands of euros a month passively, I want to share what I have learned with those people who want to discover another way of living.
If you are one of them, in this article you will find the truth about passive income and discover the 10 best ways to generate passive income along with a step-by-step system to implement them.
Here we go.
What is passive income?
Before we get into the subject, let’s agree on what we mean by passive income.
Passive income is income that is generated automatically without any additional investment in time or money.
Once you have started them, they continue to provide you with money without having to dedicate more resources to them. So you get income while doing other things, whether it’s working, travelling or even sleeping.
Types of income
Knowing the three types of income that exist will allow you to evaluate the advantages of the liabilities.
- Income from time: this is where you exchange your time for money. Most people have jobs of this type, where they pay you a salary of X money a month. The problem is that this greatly reduces your ability to generate income, as you are limited by the time you have.
- Income by result: this does not depend directly on the time spent, but on the results achieved. Many commercial or self-employed jobs are like this: if you have a shoe shop, you will earn more money according to the number of shoes you sell, no matter how long it takes.
- Passive income: this may depend on the results, but it does not require you to spend more time and effort on it to keep making money. They do it on autopilot.
There are two types of passive income. Some are unattainable for most mortals, and others can be achieved with some effort:
- The first are those in which your own money generates money for you. Think of interest on a bank account or dividends on shares. The problem? You need to have good start-up capital for the income to be significant.
- The latter does not depend on the money you have. It’s what you get after creating a product or service that lasts over time and becomes an automatic source of income.
A good example of the latter would be writing a book: once published, you don’t have to do anything but wait for people to buy it.
The Internet has opened up a new world of possibilities for passive income. Unlike a few years ago, today you can achieve passive income with hardly any investment or computer knowledge.
As you will see below, there are so many forms of monetisation that with a computer and an Internet connection it is possible to create multiple sources of passive income at any time and place. You don’t need anything else.
Passive income is your best option if you want to earn extra money monthly, get an automatic salary that allows you to leave your job, or want to ensure a good retirement.
The best methods for generating passive income
1. Affiliate Marketing
Income Potential: High. On average I earn more than 3,000 euros per month with each website, with peaks of more than 7,000 euros at Christmas.
Required investment: Low-Medium. Low if you spend your time creating content and getting links (you will only have to buy the domain and hire a hosting), and medium if you hire editors or buy links.
Difficulty: Medium, but growing. There is more and more competition, and you have to do things well to achieve results.
I love this system madly. Thanks to it I got the financial freedom to leave my job and focus on my personal projects.
Moreover, its economic potential is very high, as shown by the income I achieved during the last month of July with some of my most precious websites:
This is the first website I created when I hardly knew anything about affiliate marketing:
After five years it still generates more than 2,000 euros per month.
And this one does not reach the year of life and already invoices more than 2,500 euros every month:
How does affiliate marketing work?
With affiliate marketing companies pay you for each sale you refer to them through your website.
The most common strategy is to create a website where you publish analysis and recommendations for a type of product. For each customer you send them through your links, the seller will give you a commission.
The process is as follows:
- Sign up for affiliate programs. There are many affiliate platforms (such as Shareasale orAwin.) but the best known is Amazon Affiliates.
- Create the website. With this tutorial you can do it in less than 15 minutes.
- Write the analysis and comparisons. You can pay an editor to do this, but it is better to write them yourself at the beginning to broaden your knowledge.
- Position your website in the search engines. It will be more or less difficult depending on the competition you have; if it is high, you will need to invest time and some money to make your website more visible.
An example would be to create a website of coffee makers where you would publish your analyses, linking to their page on Amazon for readers who would like to buy one.
When people search for opinions or comparisons of coffee makers on Google they will find your website, read your article and click on the affiliate link. When buying the coffee maker, Amazon would give you a percentage of the sale.
This is a very passive system because once your analysis is receiving visits, your website will start generating money 24 hours a day. I still remember the excitement of waking up every morning to see how much money I had made the day before!
TL;DR, The key takeaways from affiliate marketing
- Implementing the system requires almost no experience
- No need to manage stock or ship
- Very high income potential
- It can be integrated into your blog if you already have one
- There is increasing competition
- Not all product categories have the same income potential
- In some niches it may be necessary to invest to improve your positioning
2. Sell courses or passive services on a blog
Income potential: Very high. I’m not one of the biggest earners of bloggers, far from it, and yet I charge between 3,000 and 4,000 euros per month.
Required investment: Low. Only the costs associated with a blog (domain + hosting) and creating your course or service.
Difficulty: Medium. To earn money with a blog you need to offer value, solve a need of your readers and master some marketing tools.
For me, this is the BEST way to make passive money. Because in addition to its economic potential, it will help you realize yourself personally and professionally.
I realized long ago that having more money didn’t make me happier. However much income I generate with affiliation, I love the work I do with my blogs.
The idea is to create a blog where you write content on a subject you like and master (productivity, emotional intelligence, travel, seduction, etc), position yourself as an expert, create a passive product and sell it.
A passive product could be a course in pdf, a video course with recorded classes, a book or an area of the blog exclusively for subscribers.
In other words, anything that you can create once and forget about it, and that costs the same to sell as two hundred.
Perhaps you find it difficult to position yourself as an authority on a subject, but I assure you that it is not so difficult. The secret is to overspecialise in a very specific target audience; this way you reduce the number of direct competitors.
For example, you could create a blog about study techniques for Spaniards living abroad, or an emotional intelligence blog for newlyweds.
In my case, as I have been passionate about social intelligence since I was a teenager, I created a blog with advice and resources for introverted people who want to improve their social relations.
When I achieved a good volume of readers, I recorded an online course, put it under a payment system and automated it with an email sequence for the new blog subscribers.
The potential is so high that most successful blogs end up becoming passive businesses by automating paid content.
TL;DR, The key takeaways from selling online courses
- Anyone can create a blog with their knowledge
- The sales process can be fully automated
- More difficult to copy than affiliate marketing
- High income potential
- Personal and professional satisfaction
- It requires differentiation and the creation of high-value content
- You will have to expose yourself publicly (some people have a hard time with this)
- Automating the sales process is laborious
3. Sell courses on platforms
Income potential: Variable according to the subject matter and demand. Although the majority of courses are around 100 euros per month, there are also courses that charge several thousand euros.
Required investment: Low. You only have to record your course.
Difficulty level: Low. No need to build an audience.
If you are attracted by the idea of creating an online course but don’t want to spend months creating content for your blog, you can always publish it on a training platform.
These are platforms like Udemy or Tutellus, where you can earn money by selling your own paid course.
These websites already receive thousands of visits a day from people looking for training courses, and the key is to create one that meets the demand and expectations of users.
The difference with selling a course on your own blog is that at Udemy you will have to adjust its price quite a bit (the vast majority of courses sold cost less than 50 euros), so you will have to sell more to charge a significant amount.
To calculate the economic potential of your course you can use the Udemy Marketplace Insights calculator.
For example, this would be the potential of a photography course for beginners.
In this case, the calculator indicates that most photography courses generate about 30 euros per month, and the most successful ones exceed 400 euros.
But there are also courses with enormous potential, such as web development courses where the most popular ones are generating more than 4,700 euros per month.
If you want to increase your chances of creating a successful course at Udemy, look for topics where popular courses are making a lot of money, you can tell by checking the amount of reviews it has. Ideally you want high demand and a medium to low amount of courses available.
TL;DR, The key takeaways from selling online courses on platforms
- You don’t need to work to create an audience with a blog
- In Spanish there is not much competition (yet)
- The price of your course has a limit (and is not very high)
- The courses with the greatest potential are technical (web development, programming, etc.)
4. Sell your creations on marketplaces
Income potential: Very variable. I know people who earn a few hundred euros a month, although the most popular authors make a living from this.
Investment required: Low. But if you take photos or record music you will need specialised equipment.
Difficulty: Medium. You will need technical knowledge to create quality products.
If you have some technical skills such as music composition, programming or photography, you also have the possibility to turn it into a recurrent income using platforms that act as a marketplace.
The idea is simple: you join one of these sites and they include your work in their product directories. Every time someone buys a license to use your content, you get a commission that usually ranges between 30% and 60%.
The negative side is that in photography and music there is a lot of competition and if you are not a professional in the field you will find it difficult to stand out. Besides, the prices (and therefore the commissions) are usually low.
Although there is a growing supply, the market for WordPress templates and plugins is not as saturated and creating them is not as complicated as it may seem. There are very good guides and free courses where you can learn the HTML, CSS and PHP programming languages.
These are some of the most popular marketplaces:
- For templates or plugins you have Themeforest. It is one of the most popular platforms, where some authors have reached a turnover of more than 1 million euros a year.
- For photography, you have image banks such as Shutterstock or Fotolia, where you will receive a percentage of the subscriptions of users who download your photos.
- For music you can license your creations in Premium Beat, Audio Network or AudioJungle.
TL;DR, The key takeaways from selling your creations on marketplaces
- Infinite number of potential clients.
- It is a totally automatic income: you only have to upload your creation to the platform and collect its benefits
- Generally the income is not very high
5. Publish ebooks
Income potential: Low. Of course you won’t get rich, but you will get extra money every month (I get around 150 euros per month).
Investment required: None unless you write by hand and consider the paper as an expense.
Difficulty: Low.
With the emergence of the electronic format, publishing a book is no longer a utopia.
You can be lucky enough to have a publisher take an interest in your work (as I did) and print and distribute it to you, or you can publish it yourself as an ebook on many online platforms such as Amazon.
Furthermore, unless the content is quickly outdated, once published it becomes a totally passive income that will continue to provide you with benefits for a long time to come.
To publish your book you have two options:
- Publish it with a publisher. You will probably get more circulation and sales, but your percentage will be around 8-15% of the book’s price.
- Self-publish. You will probably sell less, but in exchange you can get 70% of the selling price.
The most popular option is to self-publish a book as an ebook on Amazon. In fact, almost half of the best-selling books there are self-published. You only have to sign up for their Kindle Direct Publishing service to do so.
You can also self-publish in print. In that case you have several options:
- Convince a small publisher
- Paying a printer to do a print run
- Use a print on demand service, where the book is only printed at the time someone places an order, avoiding the costs of printing an edition and storing the stock. Amazon also offers this service.
The success of your book will depend on many factors: the subject matter, the title, the readers’ reviews and of course its quality. But once published, you don’t have to worry about anything else.
TL;DR, The key takeaways from publishing Ebooks
- Totally passive (it can generate income for many years) if the subject matter does not expire
- No cost associated with it other than your time
- Anyone can really write a book
- You will have a hard time achieving the first sales
- Income, unless you create a bestseller, is not too high
6. Rent a property
Income potential: High, but depends on location and characteristics. I earn about 1,000 euros per month renting my flat when I travel for several months.
Required investment: Very high if you have to buy a property to rent it.
Difficulty: Low.
In the end, the brick is the brick, however digital we may be.
Not all passive income is online. A good example, due to its simplicity and ease of management, is renting a flat or premises. Moreover, if the location is central and the property has good conditions, the economic potential can be quite high.
The main disadvantage is that, if you are not lucky enough to own a property that you can rent, you will have to make a very high initial investment to buy it or it will be out of your reach.
Add to that the repairs, possible conflicts with tenants and the fact that you are ultimately responsible for the property.
On the other hand, your biggest advantage is that it is a very stable income.
You don’t depend on traffic to your blog, views of your videos or number of clients. For this reason, many people who start earning money on the Internet end up reinvesting it in a property to rent.
TL;DR, The key takeaways from renting property
- One of the most stable passive incomes there is
- High economic potential
- Even if you are not renting, you have a property of your own
- Buying a property to rent is a big investment
- Depending on the tenants you have it can be a real headache
7. Monetize a website with Display Ads
Income potential: Medium. Although with my websites I generate more income with affiliation than I would with Adsense (just a few hundred euros a month), there are many who earn several thousand with this system.
Required investment: Low-medium. If you write the content yourself and improve the positioning, you will only have to buy the domain and contract a hosting.
Difficulty: Medium-high. The best niches are usually very competitive and dominated by professional SEOs.
One of the most popular ways to generate passive income is by using advertising to monetize websites.
Personally, this is my unfinished business. By focusing on affiliation and blogging I haven’t really got into this mode, but I have colleagues who are achieving spectacular results.
The idea is similar to affiliate marketing. Here you create a website with information about a topic, place ads and earn money every time a reader clicks on one.
This system is called PPC (Pay Per Click), and it is how the most important ad network in the world works: Google Adsense.
With Adsense you do not choose what type of ads appear; Google does it automatically according to the theme of your website and the reader’s profile.
That is a great advantage because you can show personalized ads for each reader, maximizing the money you earn because it increases the chances of them clicking on them.
The economic potential of Adsense depends on three things:
- The theme you have chosen. According to this you will earn more or less money per click because the ads that will be shown will be different.
- The number of visits your web has
- The percentage of those visits that click on the ads
To find out the potential of a theme, use the Keyword Planner. There you can see how many people search for information on that topic in Google and how much advertisers pay per click (you get 40%).
For example, if you were to create a website about recipes, each click from readers would generate between 0.24 and 0.28 euros and you would get 40% (approximately 0.105 euros per click).
If 2 out of 100 readers clicked on your ads, and you had 100,000 visits per month, you would earn 210 euros per month.
In this case the click is paid little, so to earn a good figure you would need to have a huge volume of visits.
In any case, if you create content that is not quickly outdated and monetize it with Adsense, you can take a good money in a totally passive way.
TL;DR, The key takeaways from monetizing a website with Display Ads
- It requires hardly any investment
- Relatively simple to implement
- No need to constantly update content (unlike affiliate marketing)
- High competition in markets where Adsense pays best
- You will usually need a very high volume of visits
8. Create a Youtube channel
Income potential: Very variable. If you really want to make money, you will have to upload videos constantly (which makes it less passive).
Investment required: Low. Only the cost of recording and editing your videos.
Difficulty: Medium. Youtube has become very popular, and although there is more and more competition, there is also more audience.
Creating a Youtube channel and publishing your videos will allow you to earn passive money with advertising as they achieve visualizations.
However, if you really want to earn a significant amount of money you will have to spend time on it. Most professional Youtubers devote entire working days to their channel.
How much money can you earn with Youtube?
Although some Youtubers make millions of euros a year, you can actually count on your fingers.
On average, Youtube advertising pays between 0.20 and 3 euros for every 1,000 views of a video.
As in the case of Adsense, this figure depends on the theme of the channel. In channels about curiosities or video games it is less, while channels about financial issues tend to pay more per viewing.
Let’s make a calculation. Imagine if you managed to grow your channel to 100,000 subscribers, a pretty interesting figure.
If you were to upload a video every week that achieved 75,000 views and Youtube paid you 1 euro for every 1,000 views, your income would be approximately 300 euros per month.
What this means is that, to earn a salary, you need to publish videos regularly. That’s why it’s not a very passive system (except for viral videos or with thousands of daily searches).
Besides advertising, there are other ways to earn income with a Youtube channel:
- Make agreements with companies to sponsor or advertise your videos
- Sell personalised merchandising such as T-shirts and caps with your channel logo
- Receive donations from your subscribers through Patreon
TL;DR, The key takeaways from creating a youtube channel
- Youtube is the second largest search engine and is growing
- There is still relatively little competition
- The investment is very low (you only need a camera and a microphone)
- Not very passive if you want to generate significant income
- Building an audience takes time
- You are at the mercy of Youtube policies and changes
9. Dropshipping
Income potential: Medium-high. Depends on the type of product and the margin you achieve with the manufacturer.
Investment required: Low. Only the cost of the domain and the server.
Difficulty: Medium. The key is to find a reliable manufacturer that offers you an adequate margin.
The dropshipping system allows you to generate income with an ecommerce without having to make shipments or manage stocks. This makes it a totally passive method.
The idea is to create a website that acts as an online shop where you will attract customers and collect orders, and partner with a manufacturer or wholesaler to take care of shipments.
There are programs that send the order data to the manufacturer in real time. This way, the product can be delivered to the customer without your intervention.
The profit margin of dropshipping can reach 50%. The main disadvantage is that you do not have control over the delivery and the state of the goods.
This means that if the shipment does not arrive or a return has to be attended to, customers will complain to you and you will have to resolve the issue with the manufacturer.
And that can be a real headache.
That’s why it’s important to work with serious and reliable manufacturers, who allow you to synchronise their stock with your product catalogue so that no discontinued or out-of-print references appear in your shop.
Fortunately, there are platforms that put you in touch with manufacturers who work with dropshipping. Some of the best known are:
- Aliexpress: a huge Chinese platform with thousands of suppliers.
- Oberlo: an American website where you will only find products that are sold through dropshipping
- DHgate: another Chinese giant, specializing in electronic products.
Amazon also offers a model very similar to dropshipping, called FBA (Fulfillment By Amazon). These are products from external vendors where distribution and after-sales are handled by Amazon. You will recognise them because the seller’s brand appears next to a “managed by Amazon”.
In this case you will have to send an initial stock to Amazon for storage and shipment. Then, you will use some program like Woocommerce to integrate your online shop with Amazon FBA and have them ship from there.
TL;DR, The key takeaways from creating a youtube channel
- You do not need to make any initial investment (except with Amazon FBA)
- High revenue potential
- No shipment or stock management required
- You depend on the reliability and stock of the manufacturer
- In the most attractive markets you will have to adjust your prices quite a bit
- It’s easy for the competition to copy you
10. Social trading
Income potential: Very variable. Depends on your strategy, investment and, of course, luck.
Investment required: The minimum is usually around 200 euros.
Difficulty: Low.
If you are attracted to the idea of generating passive income with trading but you are a novice, social trading can be a good alternative.
It is an investment system that allows you to replicate the movements of the biggest experts on the stock market. In this way (theoretically) you increase your chances of making money.
The key to success is choosing well those traders you are going to copy. To do this there are online platforms where you can see their profiles, with the percentages of successful operations and other statistics, and which also act as social networks to exchange ideas.
Currently the market is dominated by two platforms:
- Ayondo: although its social network part is less developed, it offers a lot of statistical information about the traders, making your choice easier.
- eToro: one of the pioneers in social trading, it already has almost five million users so you can replicate the trades of the best.
Since the software simply copies their investments on autopilot, after choosing your “model” investors you hardly need to do anything else.
The stock market doesn’t appeal to me much, so I use social trading as a long term investment with small amounts to diversify my other sources of income.
Remember that there is a lot of risk in the stock market, even for the best traders, and while they can afford to lose a lot of money, most mortals can’t.
TL;DR, The key takeaways from creating a youtube channel
- Ideal for novice traders
- You can invest in the same things as very experienced investors
- Allows you to trade various instruments (currencies, stocks, etc.)
- It can be quite risky
- Don’t believe anything that will last in the long run
The main mistake on the way to passive income
I have already shown you that there is another way of life. One in which you are the master of your time and can work from anywhere in the world.
However, very few of us have managed to make this utopia a reality. And in my experience, this is due to three fundamental factors.
People don’t believe it
Anything that involves making money on autopilot over the Internet sounds like a scam or a joke, so it’s not surprising that many people are wary of it.
I still remember when I was creating my first affiliate sites. I would meet my friends and explain my projects to them in the hope that they would join me in trying, but although many of them were fed up with their work or earned a pittance, none of them did.
None of them believed that what I was telling them, however logical it seemed, would provide them with even one euro.
In fact, not even now that I earn about 5 figures a month do they ask me how I do it. They still think it’s not going to work for them.
Our damned mind prefers the certainty of the known, however bad it may be, to the insecurity of the unknown.
All I can tell you is that, once you’re on the passive income wagon, you’re continually surprised that so few people are getting on it.
People don’t act
Then there are the people who do believe it but never end up launching their project because they fear failure, and nothing seems good enough to them.
Perhaps they spend months looking for the perfect theme for their blog or the most suitable niche for their website. But how they really learn is by doing, not by reading.
You may not have the best theme or niche, but you will only discover what really works as you work on your project. And, although nobody talks about it, you are always on time to change your business model.
Think less. Act more.
People don’t get involved
From time to time, some guru appears saying that you can create a passive business with little effort and dedicate yourself to living the rest of your days lying on a beach sipping from a coconut in your hand.
Then a legion of followers usually forms around you. They follow you on Twitter, Youtube and create Telegram channels where every day they spend hours looking for tricks, formulas and plugins.
The guru begins to share success stories of his followers on social networks, giving more fuel to his ardent fans.
However, most of them end up leaving after a few weeks. Why?
Because the guru has omitted two truths:
- Building a passive income source requires a huge initial effort
- A passive business is never 100% passive
Don’t be blinded by promises of easy money and don’t waste your time looking for shortcuts or tricks. There is no such thing. Just get to work and be patient, because you will need it.
For all this, the best way to create a business that provides you with a passive income is to do it without stress. No rush. Otherwise you’ll throw in the towel when four months have passed and you still haven’t earned a euro.
Don’t pin all your hopes on it. Create your passive business while maintaining your current source of income; that will free you from the pressure of having to get immediate results.
If you do that, sooner or later the fruit of your efforts will come. And maybe you’ll discover another way to live, too.
If you found this article useful and you want to send me a morale boost, tell your friends. Or better yet: click on one of the social network icons below 👇