Here are the top 5 passive income ideas or side hustle ideas for 2021. Start these passive income strategies immediately to earn some extra cash or build up a steady side income that’ll help you make money in your sleep.
It’s said that the average millionaire has up to 7 streams of income, while the average non-millionaire only has one. It’s one of the biggest differences that continues to create a wealth gap between the rich and the lower class.
So today, I’m going to break down the paradigm of having multiple streams of passive income and why it’s so crucial in your path to financial success and give you an overview of my 5 favorite passive income streams — that’ll help you actualize your earnings potential and make money in your sleep.
Earned income, Interest income, dividend income, rental income, royalties & licensing, capital gains and business income are the 7 most prominent streams of income held by millionaires.
And most commonly, the millionaire’s earned income is the foundation that’s enabled all of the other passive income streams to materialize — and these other avenues are the ones that usually carry the millionaire to his or her first million and beyond.
Now, why is that? Well, there is a very simple reason for that.
Most of us think that working hard in our main jobs, our earned source of income, with the combination of cutting back on spending, budgeting the right way and putting away as much money as possible — will one day yield a savings account of million dollars and allow us to retire.
And while that certainly can be possible, it’s perhaps one of the more difficult ways to go about it — because in this method, your potential for earning income is directly correlated to the time that you spend in the job. When you work a typical corporate 9–5 job, you are continuously committing 8 hours (or sometimes more) of your service time in exchange for the agreed upon salary to be provided by the company.
And even as your pay grade increases over time, as a result of promotion or movement into a new company, you are still compensated by a fixed amount based on a range of time you continually commit to your job. So because this avenue of income directly leverages your time, and you only have a finite amount of time during the day (24 hours — which need to also be split between health activities like eating and sleeping, and family time with your loved ones), this isn’t a very scalable method of earning money.
So how do millionaires earn exponentially higher amounts of income given that they have the same 24 hours, within the day, as everyone else?
They activate alternative/additional passive income ideas, which all have one thing in common — once set up, they can be scaled to produce an influx of earnings, beyond the amount of time that they spend on them.
You’ve heard of the phrase, “earning money in your sleep, right?” That’s exactly what these are — scalable forms of income that work in the background to help you earn more money in your sleep.
So for the rest of this article, I’ll highlight 5 such avenues you can start in 2021 — and if done right, will instantiate into steady forms of passive income that will provide you earnings beyond your initial time investments.
By the way, for this article, I won’t be looking at things like dividends, interest, rental income or capital gains income because those are things that require large amounts of capital investment upfront to scale — and I wanted to highlight things that you could build and grow through hard work and time instead, not necessarily through the commitment of your money.
1. Blogging/Writing via Medium.com
The first of these supplemental income streams, is to become a blogger — and one of the best blogging platforms to engage in, is called Medium.com.
As you guys are already here, on Medium, I’m assuming you guys have a base understanding on how this platform works (as an income source). But in case you are new to this, here is a quick & simple overview.
Medium is an writing platform and an online collection of publications that showcase a wide variety of topics from an even broader base of writers.
You’ll find content pieces from just about every type of author — from published journalists to head of fortune 500 companies to inspired college students and more. And in terms of topics, you’ll find publications that major in everything from personal finance, to relationship advice, politics, technology and everything else in between.
Medium is very much like the YouTube of writing, a collection of many different articles, from many different perspectives — you could spend hours and hours just reading all of the different content on this site and you’d be informed and entertained.
Now, when it comes to the earnings potential and methodology — here is how Medium pays you, if you become a writer/contributor.
On Medium, it’s completely free to register for an account and write/publish articles on the platform. However, to READ articles on Medium.com, you have to pay a recurring $5 monthly membership fee — which gives you unlimited access to all of the content on the site.
And the way the revenue attribution works is that, as a paying member, when you read an article on the platform and enjoy it, you have the ability to clap for that article showing the author how much you enjoyed or found value in his or her writing. And your views and claps translate into a portion of the reader’s $5 monthly membership fee — getting attributed to that piece of work.
So as you get many different readers coming to your article, assuming they find value in the content and provide you claps, you are getting a small fraction of each member’s $5 monthly fee. If you have a lot of traffic coming to your article or get a large amount of claps from each reader, you could earn a decent amount of income here.
And what makes this a great candidate for a passive stream of income — is that once you’ve expended the energy into writing and posting the article, as long as the readers keep flowing in, you’ll continue to earn an income here, even if you never spent another minute of time on that particular content piece again.
And in order to make that happen, you’ll want to make sure your article is well written and SEO optimized — as well as submit them to publications that have themes aligned with your content, so that it gets exposure within that community of readers as well.
If you’re a writer or just someone that has a lot of thoughts to share, this can be a very enjoyable and lucrative side hustle to explore.
2. Start a YouTube Channel
The next stream of income I’d recommend — is starting YouTube channel.
Now, as a YouTuber myself (Daniel’s Brew YouTube), I’d have to say that starting this form of income is not the easiest — it takes a lot of effort and time upfront to establish your channel and grow a following on this platform. And from a production standpoint, creating a YouTube video, in my opinion, is a bit harder than writing a medium article simply because the nature of the work involved.
You have to plan your script, set up the appropriate lighting and camera gear, film the session, do editing and post production work — and then upload your video onto the platform.
But in terms of the earnings model, it does have some more potential to scale — and here is how it works.
YouTube’s main source of cashflow is its advertising revenue. You know those annoying ads you see before, during and after your favorite YouTube videos?Those are ad placements that YouTube sells to companies, who then supply short commercials or banner ads that play during your favorite content.
And for every ad campaign that is run on your video, there is a CPM or cost per mille that is charged to the advertising company. CPM means to cost per 1,000 impressions — so if a company wanted their ad to be shown two million times, and the CPM cost for the audience segment they were targeting was $9 — they would end up paying roughly $18,000 for those 2 million impressions. (This is, of course, a very simplified explanation of the model — in practice there are other costs and parameters that go into it.)
Now, once the ad impressions are paid for, the ad content starts surfacing within the ad placements set on your videos. So, if you have 3 ad placements on your video, and each placement displays one ad —you would have logged 3 separate ad impressions for your one video view, assuming your video is played all the way through.
And whatever portion of the total advertising cost the company paid for in this campaign, is given to you, the creator, based in proportion to the amount of ad impressions that have run on your video — that is, after YouTube takes their 45% cut.
So, as an example on my YouTube channel, I released this video breaking down the True Cost Of The Tesla Model Y in mid October of 2020. And as of mid December, it’s become one of my best performing videos — with over 29 thousand views so far, over 60,000 ad impressions served, at a CPM of around $16, which after YouTube’s cut of 45%, yields an earnings for me of almost $600 dollars. Meaning this one particular video, on a small YouTube channel like mine (with about 7,000 subscribers), has earned me a total of about $600 dollars over the course of 2 months.
It’s not a huge amount, but not bad — and it continues to earn me a little bit of income, even now. And given that have about 80 videos on my channel so far (with some of them giving me a couple views a day), and the fact that I add about 3–4 videos per month, YouTube on average, earns me about $300-$500 each month.
3. Engage in Affiliate Marketing
The next passive income idea I recommend, is to engage in Affiliate Marketing.
Now, this is actually a better amplifier of existing streams of income as opposed to a stand alone revenue channel — and here’s how it works.
Affiliate Marketing is the online process of earning a commission by referring web traffic to another company or product website. This is very common, especially amongst YouTubers or bloggers that do product review content. As an example, if you look at some of the more prominent tech or camera review channels on YouTube, you’ll notice that the links for the products they showcase in their content, are almost always affiliate links.
These special links take you to the product pages, but has a referral code embedded in the URL that tells the destination site that this user came in through a particular affiliate link. Then when you make a purchase, the person who owns the referral link earns a small bit of commission from the company or product website.
Now, I personally, always use an affiliate link for almost everything I purchase online these days — for 3 main reasons.
A) Affiliate Links Are 100% Free To Use
First, for the user of Affiliate links, they are ALWAYS 100% free. There is never any additional costs to the the person that clicks through to the product using the link. The product is not any more expensive because of using an affiliate link and sometimes, these affiliate links may even drive to a special pricing of the product you want to buy — which would make it even cheaper for the person using the links.
B) Creator > Companies
Secondly, when you buy a product online, especially through large marketplaces like Amazon — no matter what you do, you are helping somebody make more money. If you use an affiliate link, you are helping that creator or referrer earn a small commission, but if you are not using an affiliate link — you are helping the big box companies, like Amazon, keep more of your money. So no matter what you do, you are helping somebody make more money. So, if I were planning on buying a particular product on Amazon anyways, I would much rather Amazon get slightly less profit and pass that commission along to a content creator.
C) Appreciation For The Writer/Creator
And third, for those writers/creators that provide me value through their content, I want to support them by using their affiliate links — especially since it’s no extra cost or extra effort for me to click their links on products that I was going to purchase anyways. It’s my way thanking them for their hard work.
So, now that you know what affiliate links are and why you should utilize them — how do you get started on this?
Well, one of the biggest affiliate programs out there is the Amazon Associates program. To register for an affiliate account here, you must first have a digital property that drives traffic — meaning you need a blog, a social network handle, a YouTube channel or some other form of content that brings in web traffic. Once you have that, you can simply register all of the pertinent details on the Amazon Associates site (on their sign up form) and then start generating affiliate links of the products you want to refer and simply copy and paste those links onto your digital property.
And again, because these links rely on traffic that already comes to your property to get exposure — this revenue model works best as an amplifier of the traffic that you already receive for your content, as I mentioned earlier on.
4. Custom Designed Merchandise
The fourth passive income idea I recommend — is to engage in custom designed merchandise, on sites like Redbubble or Teespring.
The concept behind this business model is pretty simple.
If you are an artist or creative designer, you can come up with your own digital artwork and upload the designs onto a print vendor like Redbubble or Teespring. These vendors have digital storefronts that showcase your design on a variety of different merchandise form factors, like mugs, iPhone cases, t-shirts, hoodies, etc, and have approximately 2 million visits a month from online consumers looking for new and uniquely designed apparel.
Let’s say a consumer selects a product with your design, that they want to purchase. Once they complete the checkout, the vendor takes on all of the responsibility of printing, producing and fulfilling the product to the end customer — and then they return to you (the artist of the design), a certain percentage of the sales profit, as your commission.
And in most cases (like on Redbubble), you have direct control of the markup and the final price of your merchandise — so you can decide how much profit you’d like to bring in with your designs.
If you are a creative artist or designer, this is the perfect way to generate a stream of passive income, because you simply upload your designs and just wait for your merchandise to be sold. The upfront work of designing the artwork would take some effort, but after that, it would be almost no additional work to maintain this source of passive income.
What do you guys think of this design?
It’s one of my wife’s creations — if you like this style of digital artwork, make sure you check out my wife’s Redbubble store here.
5. Open Your Own Etsy Store
And lastly, another side hustle idea — is to open up your own Etsy store.
Etsy is a digital marketplace for unique and creative handcrafted arts and products. Full of listings from independent artists and creators, this ecommerce platform offers an impressive array of merchandise ranging from hand-crafted jewelry, apparel, furniture to toys and even pet supplies.
The difference between Etsy and vendor sites like Teespring and Redbubble, is that for Etsy, the platform serves primarily as the sales engine that allows listings and transactions of products that are already made and in its retail-ready form. On Etsy, most sellers already have inventory that they’ve created and are looking to utilize the storefront to market, sell and fulfill their products.
Now, how the business model works is that you list your products on your Etsy store and set the sales price, and when a consumer buys one of your items, Etsy deducts a 5% transaction fee and a 3% payment processing fee and remits to you the remaining balance — similar to any other marketplace like Ebay or Amazon.
(There are also other fees & taxes like VAT, advertising fees, etc — based on your location and whether or not you choose to utilize paid ads. Be sure to check the Etsy Help Center Page for a comprehensive review of all fees and costs involved in selling on this platform.)
When you receive your payment from Etsy, simply subtract the your COGS or cost of goods sold (in other words, the production cost of your item), and you are left with your profit margin.
If you are a producer of physical items like jewelry or woodwork or arts & crafts, this would be the perfect medium for you to get more exposure for your products and to increase your sales volume.
So those are the 5 best passive income streams I recommend you start in 2021 to help you get one step closer to financial success and ultimately long term wealth creation.
Remember, half the battle is just starting it — and the other half is sticking with it. Like all things, your passive income ventures may start small but if you persevere — it can grow into a very substantial and stable stream of revenue.
**** Disclaimer *****
The content here is strictly the opinion of Daniel’s Brew and is for entertainment purposes only. It should not be considered professional financial, investment or career advice. Investing and career decisions are personal choices that each individual must make for themselves in accordance with their situation and long term plans. Daniel’s Brew will not be held liable for any outcome as a result of anyone following the opinions provided in this content.