It is becoming increasingly important in these times to allow your money to work for you if want to build wealth. There are many paths to wealth creation, like investing, saving and even the increasingly popular and proverbial “side hustle”, but an overlooked source of wealth generation is passive income.

What is passive income?

Passive income is, as the name suggests, a way to earn money passively. An active income is generated from your primary source of employment, without which you would not get paid. Funds raised from a passive income don’t require you to actively work in order to make money. So, let’s say you’re a data entry officer at a company, you would earn an active income at the end of each month, provided you turn up for work each day that you’re supposed to be there. If you walk off the job, then your income, that regular pay cheque you generate each month, would stop and you would have given up your active income. No work, no pay. You need to keep working if you want to continue earning an income. With an active income, time literally equals money.

Is it for you?

With a passive income, you can make money without “working” or, even while doing something else. Make money in your sleep. It doesn’t require you to quit your full-time job by doing a lot of active work in order for you to continue making money. Let’s say that, for whatever reason, you’re in possession of storage space. Knowing the demand is great for commercial and domestic storage, you could decide on renting out your space and passively keep money flowing in each month for as long as you want.

Now, please don’t misunderstand. A passive income is not meant to be seen as some fly-by-night, get-rich-quick scheme. Yes, it is entirely possible to build a passive income stream with a relatively small investment, but the same amount of commitment that is afforded your full-time job is also required to build a passive income. Especially initially. There can be a lot of upfront work, which takes place in the beginning.

Let’s say you decide to invest in the stock market — which is a great way to build a passive income stream, by the way. The world’s wealthiest people, after all, are united by a common theme: investing in securities. Initially, you have to commit to doing your research as to what the composition of your investment portfolio will look like, and saving your money, and then making the decision about whether you’ll use a brokerage house or go it on your own. These are decisions that are not to be taken lightly, and whilst the act of investment is by and large passive, the research is most definitely active. (Business titan Warren Buffett is said to read a staggering 500 pages a day of annual reports so as to better understand which businesses are doing well, and in so doing, he improves his ability to invest in stocks.) Then you invest and, though you don’t completely forget about your money (it is wise, after all, to check in time to time to see what’s going on with your investment), by and large, you now simply go about your life as you wait for your funds to grow.

Passive income ideas

There are so many opportunities to earn a passive income. In addition to investing in stocks and bonds, you can also monetise your interests, things that are second nature to you. Create a YouTube video. Write a book and get it published on Amazon.

If there’s something this strange time of mixed economic fortunes necessitated by the novel coronavirus pandemic has taught us is that we have to think creatively and adjust our pre-pandemic mindset. No crisis should go to waste, and this is no time for the airs and graces of yore. Advertise on your car. And, OK, the idea of a stranger living in your space can feel intrusive for some, but what about that guest room at the back of your home sitting there idly? Rent it out to somebody who is downsizing or offer it on AirBnB. Leverage your assets. Have money to invest? Become a silent business partner. Invest in real estate.

Recently, I heard about someone living in the inner city who makes an active income by raising and selling chickens not just to grocery shops in her community, but also bigger establishments. Makes sense, right? Jamaicans are huge chicken eaters. In a short space of time, she has employed someone to help with her chicken business. She has a big yard space so she decided to create a passive income stream by renting out space at the front of the house for functions in her community. And where do the function organisers source chicken for the soup they serve at the function? Correct!

This scenario may not be for you, still I can’t help but applaud her innovation, her flexibility and willingness to do what needs to be done to lay a foundation for her family’s financial future.

Passive income is the embodiment of the buzz phrase “work smart not hard”. If you’re innovative, you can come up with a ton of ways to make your money work quietly for you.