The uncertainty brought about by the pandemic has prompted consumers to critically rethink their finances. Some are proactively adopting new habits centered around frugality and a more conscious approach to spending, while others are eager to grow their bank account balance and make the best of their savings.
Passive income traditionally represents one of the best ways to build up a financial cushion to fall back on in times of need. However, relying on conventional means might get you nowhere: Saving accounts that once boasted over a 5% interest rate years ago are now far from profitable. In fact, the average easy-access savings account interest rate in the UK plummeted from 0.59% at the start of the year to only 0.24% today, hitting its lowest point in over a decade.
To face modern financial challenges, you need to leverage modern methods. So, as we look toward 2021, what will be some of the lucrative ways to earn passive income?
Promising opportunities within the sharing economy
When it comes to marrying passive income and the sharing economy, peer-to-peer lending that stands at the forefront of consumers’ minds. Yet, due to the ambiguous rules surrounding the industry, together with fierce competition and regulations, this way of earning has shown little value over the recent years.
While the pandemic has put somewhat of a halt to peer-to-peer exchanges, with consumers being less keen to share spaces or items in order to avoid spreading the virus, this delay is unlikely to be a long-term reality. As biosecurity protocols become the norm, and people continue to develop savvy habits, they will be more prone to renting certain goods and services rather than owning them.
Earning passive income by renting your car might be particularly profitable, considering that consumers will be turning toward local mobility and weekend getaways rather than overseas holidays even throughout the next year. But you don’t need to stop there: Try renting out a spare room, your items, and even your parking or storage space.
Turn to platform empowering investors
According to Financial Samurai, the best passive income streams based on risk, return, feasibility, liquidity, activity, and taxes are currently dividend investing and real estate crowdfunding. While both of these are rooted in traditional investment strategies, it’s their modern twist that makes them so attractive.
There are now diverse investment platforms democratizing the process, bringing opportunities to the fingertips of virtually anyone, with investments starting at less than a hundred pounds. Such a step takes away many pains: With stocks, for example, investing individually has been laborious, and when looking to diversify, the investment takes notable effort or the help of a broker that charges a commission.
And the same goes for real estate. Traditional trust investing requires experienced advisors, giving investors both less control over the process, and imposing transaction costs and fees for portfolio management. Property crowdfunding, on the other hand, puts the investor in the driver’s seat, allowing them to access detailed information and make actionable investment decisions. Added to that, the stream offers returns of up to 15%, making it a potentially highly profitable option for those willing to take the time to learn the ropes.
If you’re looking to explore these passive income opportunities in 2021, get started with low-risk projects. In dividend stocks, these include utilities, telecommunications, or fintech, while in real estate, focus on initiatives formed around debt, rather than equity investments.
Turn active income into a passive stream
Younger generations, in particular, often focus on their active income to gather enough to build up passive streams. By being ingenious with your existing resources and know-how, this can be easier than it seems, and can actually result in interesting entrepreneurial projects.
The past months have seen the boom of online resources – and the trend is showing no signs of stopping. Since mid-March, platforms like Coursera have registered a 500% increase in online course enrollment compared to the same period last year. By turning your knowledge into a lasting digital resource, you can offer an online course or materials such as ebooks and workshops and enjoy long-term yields.
You have a broad palette of skills to monetize. However, whether you choose to sell stock music or images, create an audiobook, start a blog, or create a YouTube channel, know that these strategies call for patience and significant time investment. Moreover, their success will depend solely on the quality of the resource and the value you add to that specific niche.
There’s no doubt that the rapid transition to digital has been further accelerated by the pandemic. When looking to generate passive income in 2021, don’t be afraid to explore the space and educate yourself both on the rules of its game and the current market trends to identify the most promising opportunities out there.
Further reading: Be active if you are passive investing