“The Sad Reason the Housing Market Is Booming During a Recession
Do you know what the number one problem is with having a job? —
It’s the fact that you’re only able to earn money for those 8 hours per day, 5 days a week in most cases.
But for the other 128 hours in a given week — you’re not able to make any money at all, and this is essentially the definition of active income where you’re exchanging your time for money.
Most people — if they’re looking to make more money, they think they have to work more hours, and while that is a way to make more money, it’s kind of a lousy solution to this problem.
Sure, you could go out there and get another part-time job on top of your full-time job, or you can work crazy overtime.
But the question at the end of the day here is, do you really want to be working 50, 60, or even 70 hours per week?
I would say most people would answer that with a no.
Now, I personally became obsessed with this idea of earning passive income in my early 20s, and I’ve built up a couple of different passive income streams.
You’re in a bit of a unique situation here because you generally have a lot of time on your hands if you don’t have kids or a family yet — but you probably don’t have a lot of money, and when it comes to earning passive income, you either have to invest your time or invest your money.
These are different passive income streams that work well for people in their 20s.
Compounded 401K Returns
You probably think what a boring way to make passive income, but it’s honestly one of the best opportunities that you have potentially available to you right now in your 20s.
Now, for those who are not familiar, the 401K is an employer-sponsored retirement savings plan where you’re able to set aside a portion of your paycheck before you even touch it and invest it for retirement.
But what many people don’t realize is that many employers out there still offer something called a company match.
What this means is that dollar for dollar — they will often match the amount that you’re putting in, which essentially means they’re offering you free money.
And even if your employer doesn’t offer a company match, it’s still worth it to put something, literally anything into your 401k.
The general psychology here is the fact that when you take money out of your paycheck and set it aside into this investment before you have the chance to spend that money — you are far more likely to figure out how to make ends meet.
Most people, if you give them the full paycheck and then ask them for direct money towards investments, for savings — they’re not going to be able to do that because basic psychology makes us want to spend that money on stuff rather than putting it away and saving it.
So with the 401k — you’re putting that money aside before you have the chance to spend it.
Let me give you a scenario of how much money you could potentially have from a 401k investment —
Let’s say you started at 20 years old and invested in your 401k from age 20 to age 65 at just $100 per week.
Well, by the time you reach retirement age, you would have a 401k worth around $1.8 million from just $100 per week, and that’s simply assuming you take that money and you passively invested in the stock market, which on average returns around 8 to 10 percent per year.
So I don’t care if you just do 1% of your pay into your 401k or do anything at all but trust me, guys, it’s an easy way to make passive income, and you’re going to thank me later.
Becoming an Owner-Occupied Real Estate Investor
As mentioned earlier — a lot of these ideas are going to require you to have some money saved up, and that is why it is so important to build up savings in your 20s, which will allow you to make some of these other moves to earn significant passive income.
What I’m getting at here is rather than going out there and buying a single-family house or renting for your entire life — you eventually want to make it the goal to purchase a two or 4 unit property where you’re able to rent out those other units while living in one of them to offset the mortgage or in some cases pay the mortgage and related expenses entirely.
And a lot of people say that real estate is not passive income, and you have to manage your rentals and all of that.
While I agree with them on that point, but when it comes to an owner-occupied property — it is pretty passive.
I can tell that from my own personal experience.
You already reside on the property. You already have to mow that lawn or have it mowed for you and plow that driveway. All you’re doing is adding some additional units and additional revenue streams to this property that you’re already maintaining.
So I do this with my property personally. I actually have a three-unit property, which also has a cottage, and I live in one of the units, and I rent out the other units and the cottage.
I would say I spend, on average, about one hour per month at most, managing these rentals and taking care of random odds and ends for my tenants.
So it’s very passive and essentially has allowed me to eliminate my mortgage, my earning rental income from these tenants, which pays for the mortgage, and other expenses.
But again, as I mentioned — you’re going to have to save up a lot of money in order to do this.
I was able to use the FHA loan, which was a much smaller amount of money out of pocket, but I still had to come up with $22,000 in order to close on this property and get my foot in the door.
So again — that is why it is so crucial to begin saving money for this type of purchase.
Earning Interest Income From Your Savings
I know this sounds like a boring one here — but this is a very important first step because if you’re looking to earn passive income through other means, pretty much all these different avenues require you to have some amount of capital saved up.
Now, the problem with most savings accounts is that they are pretty boring investments.
Right now, you might earn around a 0.5% APY for an online savings account, and that essentially means if you have $1000 saved up over the course of one year — you might earn about $5 in interest.
Now, I actually just made an investment in a really interesting online savings account called Yotta, which essentially has prize-linked savings.
So rather than earning just a basic interest rate of around 0.5% or something like that, the APY is slightly lower, but you can actually win up to 10 million dollars.
How this works is for every $25 that you deposit into this account, you get one ticket per week into a lottery-type drawing.
But the difference between this and the lottery is that Yotta is FDIC insured, and essentially it encourages you to save money because the more money you save — the more tickets you get for the weekly drawing.
And again, guys, the whole point here is not to become a millionaire from the interest in your savings account. That is just not going to happen unless you hit that jackpot, which is not very likely.
The idea here is to get into the habit of setting aside money — which you will be needing down the road to build other passive income streams.
So starting out and building up a nest egg and having money for other passive income streams and investments is the essential first step.
Earning From Dividend Stocks
This is honestly one of my favorite methods for earning passive income, and that’s because you can potentially get paid in two different ways from dividend stocks.
First of all, you can buy a stock at a certain price and sell it for a higher price down the road — also known as asset appreciation.
The second way to get paid from dividend stocks is those quarterly or annual cash payments.
I love the fact that there are two potential ways to make money with stocks, and the reason I’m bringing these up here for people in their 20s is a lot of people make very risky investments at this age, whether it be options trading or futures or forex, things like that.
While this does work for some people, for the majority of people, making these YOLO type bets means you’re going to essentially blow up your account and lose all of your money.
So I would encourage you — if you do have money to invest, think about a strategy like dividend investing or blue-chip stock investing and rather than buying into these highly speculative, high-risk investments.
Consider something like dividend stocks that are going to be a much safer return.
I do have a lot of surplus income from my different business ventures, so I was able to direct a lot of money towards this account.
Since then, I have built this up to a $100,000 dividend stock portfolio, which now just from that portfolio and me doing nothing at all — I earn around $3000 per year in dividend income.
And essentially, what I do is I take those dividends, and I reinvest them back into the portfolio — which allows me to earn compound interest where my dividends are earning me more dividends.
And again, this is not me investing in highly risky stocks or anything like that. I own companies like 3M, McDonald’s, and Intel, which are time tested, durable companies that are profitable and consistent — they just may not have crazy growth. Still, they pay consistent and reliable dividends, which allows me to earn relatively safe returns.
It’s not realistic to think that you’re going to be able to build a $100,000 dividend portfolio overnight unless you have a lot of money to work with.
But getting started with any amount of money is all that matters here.
Again — you’re not going to get there overnight if your goal is to make $1000 or whatever it is.
The point is just to start because what you do have on your side right now is a heck of a lot of time which can allow you to earn those compounded returns year after year.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions