You probably heard the phrase “make money while you sleep.” Or “make money work for you.”

But what exactly does it mean?

If money doesn't grow on trees, how come the rich and the wealthy keep getting more prosperous and more affluent as the day goes by? Are there some magic beans they planted to make more money?

Why are the rich getting richer day by day?

Millionaires, on average, have at least seven income sources. However, that doesn't mean they have seven different jobs.

Most millionaires have figured out additional income streams apart from their mainstream or primary source of income/money.

This is through the power of passive income. I firmly believe that the way to grow wealth is to diversify how your money comes in.

Think of it this way; seven open faucets will fill a bowl much more quickly than one can. (Come on, you get the idea!)

This passive income, in return, can be a great source of funds for whatever you are trying to achieve financially, whether it's money for a big purchase, down payment on your dream house, a travel/vacation week; passive income could help you reach that goal.

In this post, let's define passive income and how you create one. Furthermore, let's discuss different types of passive income or income streams that will generate your wealth this year and for more years to come.

Let's find out!

Read more: 18 Unique Ways To Create Passive Income and Boost Your Cash Flow.

What is Passive Income

Passive income is a type of source of money where you exert less or little effort in making it.

It's not that you don't make any effort at all. It is also isn't something that will magically fall in your lap.

You may have to do all the hard work at the beginning and let the fund grow, thereby making it passive.

Just because it's passive doesn't mean that you do not need to work at all. A time and effort investment is necessary at the beginning to generate your passive income.

For instance, say you create online courses. At the start, you will do all the course planning, recording of videos, answer sheets, workbooks, etc.

But after spending time planning and creating the content, you upload the course on your blog or any platform for public consumption, you market it and have sales coming in, and the next thing for you to do is wait to get paid and keep the system running.

Therefore, even if you sleep and do minor updates, you still make money, as long as more and more people are availing of your online course.

See the difference now? Other types of passive income can be generated by making Youtube videos, royalties, and investing. (more on this later)

Active vs. Passive Income

Now, how about Active Income? Simply put, in contrast to passive income, an active income is any income stream that requires constant work on your part for you to get paid.

If you don't work, how will you get paid? See, active income is dependent on a stable job. Employees, doctors, and salesman to name a few, make active income through their careers.

In essence, the moment you stop working, you stop earning-that is active income.

So, I have a question for you. Which is better: Active Income or Passive Income?

I will let you decide and see it for yourself.

What are the 7 types of income streams?

Now that you know the difference between active and passive income, here are other types of passive income that you can build if you want to live a richer and fuller life.

P.S. It is how the millionaires think and approach money! These types of passive income are the actual cheat code! Have at least half on the list.

Earned Income

That is income coming from your day job. It means you earned or worked hard for it. It can also be a commission you got from a sale or a one-time project payment.

Profit Income

In other words, business income- this is a type of passive income you generate from the sales in your business or any crafts and stuff you sell on and offline.

Interest Income

The interest income comes from earning interest on the money you invest in a bank, high-yield savings account, or certificate of deposits. Usually, your money bears interest over a specific period.

Dividend Income

A dividend income is money that you get from investing. Dividend income comes mainly from the ownership of stocks.

Some companies pay out a portion of their profits to their shareholders in the form of dividends. This typically happens whether or not a company's stock price appreciates in value or not.

Rental Income

Rental income is money coming from your rent or leasing business. If you are a landlord or real estate investor, you can generate rental income by leasing out residential houses, office spaces, and even land

Royalty Income

Did you know that you can earn another type of passive income through selling your artwork or publishing your book? That is called royalty income.

Anytime somebody would purchase your book or work in a bookstore or online platform, you get paid through royalties. It is passive income because you only exert the work/effort once, and after that, the money keeps flowing with minimal effort from you.

Capital Gains Income

Other types of passive income are capital gains. Capital gains refer to the increase in value of an asset after it is sold. It can come from the sale of stocks or bonds you invest in, or the sale of property that is appreciated in value.

If the market price is higher than the price you bought it, it means your investment earned money. It's also called price appreciation.

How can I make $1000 a month in passive income?

Nowadays, earning $1000 per month or even a six-figure passive income is within reach. Provided you give your best shot, effort, plus nothing can beat hard work. So you gotta hustle hard!

Besides, when you are already earning a passive income that exceeds $1000s, you gain back time that you can now spend more with your loved ones or focus on other strategic deals for your business.

Passive income comes with less stress and worries, knowing that even if you don't work for a while, you can still eat, breathe, and live.

That's why many people choose to create a passive income or a lucrative side-hustle/gig on the side towards building their dreams.

I'll tell you that right off the bat, if you have at least one of the types of passive income above, you can have the rest. Or, if you're a corporate worker, you can use your 9-5 to build all the others.

Once you make a dollar as passive income, you'll never look back and will always want to make more.

21 Types of Passive Income That Will Help You Build Wealth

1. Dividend stocks investing

This is probably one of the tried and true means to create a passive income. The key here is to cleverly select corporations who pay their shareholders a bountiful amount of dividends from the company.

When you own stocks that pay dividends, you are essentially receiving a share of the company's profit. Hence, dividend investing allows you to create a stream of income apart from the growth in your portfolio's market value from asset appreciation.

2. Real estate

The real estate passive income is a classic one. Significantly, you invest in lands, or you purchase an apartment or condo and rent it out.

As the property value increases, your investment moves higher too. Furthermore, the rental income you get monthly is passive income because you simply wait to receive a rental check every month.

However, keep in mind the initial investment cost you have to make, such as the down-payment, maintenance, construction, utilities, and a lot more paperwork involved in real estate.

Did you know that you can invest in real estate even with little money? Find out how here.

3. P2P Lending

P2P Lending stands for Peer-to-Peer or person-to-person lending. An alternative method to financing, P2P is undoubtedly making noise in the financial realm.

Essentially, P2P lending allows individuals to borrow money directly from the other person. No need for banks or other financial institutions to get involved. Usually, it is done electronically or online via apps and financial technology platforms that allow P2P lending.

Think of it as micro-investing. However, if you chose to invest here, do it at your own risk. Remember, it is not always guaranteed whether you will get your money back plus the interest; some borrowers bail out and scam other people.

Therefore, as with any other investment, invest only an amount you can afford to lose, set your own rate, and do your due diligence to at least verify and trust the borrower.

4. Rent your extra space

Another excellent passive income idea is renting your extra space on Airbnb. If you have zero funds for real estate, why not become a landlord or landowner using your own room?

Most significantly, tourists and foreigners would most likely find a place to stay for their short trips. So be a good steward and hostess now and make money!

Ensure to keep your extra room safe and tidy so you get a five-star review from guests, thus boosting your profile and also means more money!

5. Advertise with your car

An asset is anything that is producing value or money to you. Aside from the convenient transportation, your car is bringing in, not to mention the maintenance, gas, and whole other vehicle expenses, why not make money out of it by turning it into an asset?

One is through car advertising. Companies such as Wrapify and Carvertise will pay you money for placing ad stickers or statement decals on your car.

Sometimes you can opt for a per-promotion basis to freely wear off sticker ads after each promotional campaign period. Don't worry; those materials they put on your car are safe, and they will not place it unless without your consent.

6. Self-publish an e-book

One of the best types of passive income is royalty payments. Every time someone buys your work or a copy of your book, you earn money through royalty fees.

Nowadays, it's super easy to create and publish your book. The most famous one is through e-book publishing. There are also many self-published authors today.

The level of effort in self-publishing to gain passive income is between 5-6 out of 10 since initially; you will deal with the tedious task of hitting your number of words, deadline, revision, manuscript, etc.

Don't forget to include marketing and promotional costs or effort, but you can always utilize social media to promote your work; it's free.

7. Sell courses

Selling online courses can also bring you passive income. If you are knowledgeable in a particular subject, you can teach and sell courses about it.

For starters, you can upload your video tutorials, modules, and worksheet in Skillshare or Udemy. Then after some time, you can go offering premium classes and price it right. Now, every time someone wants to access your entire course, you will get paid.

There is a massive demand for online courses today as more people are going online and looking to learn more skills at their own pace. So, you can most definitely make a profit out of this channel.

8. Rent storage space

Do you have extra storage or warehouse space? Instead of letting it gather dust and get eaten by the earth, why not use it to make additional money for you?

If you are not using that space, you might as well make money out of it. Companies are looking for storage rooms, people searching for a small space to rent for whatever purpose they may have.

You can help by providing a solution to them and in exchange you earn money.

9. Affiliate marketing

If you are not yet familiar with how affiliate marketing works, basically, you will sign up to become a company's affiliate or representative.

Depending on the arrangement, companies will give you a unique link, and every time people use that link of yours to purchase the company's product, you earn a handsome profit share.

Affiliate marketing is closely related to brand ambassadors or ambassadresses. Many people reported generating six-figure income out of their affiliate marketing business. You can start through blogging and social media.

If you'd like to get started, here's a training program that helps you get set up and holds your hand throughout the process

10. Digital products

Unless you're living under the rock, well, you know you can make money by providing digital products. So what exactly are those?

Digital products are products that you sell online without physical substance or form. Although, if you've made quite enough revenue, you can turn it into a physical one, like a pdf e-book, to an actual book.

From your blog, you can sell downloadable templates or sheets. Maybe an e-book or graphics for printed designs and more. Anything in image or pdf format can be your starting point for digital products.

Many people prefer digital products, because first of all, you need not worry about inventory and storage space. Moreover, buyers can quickly receive the product upon payment.

For instance, online courses, music, web elements, graphic arts, photos, printable templates, sheets, online planners, and e-book are a few examples of digital products.

11. Sell stock photos

If you've got a thing for photography, earn money by selling it! Getty Images, iStock Photo, and Shutterstock are a few websites that you can sell or license your images and photos online.

Of course, the initial investment here is camera equipment and your photography skills. It's best to build an online photography portfolio first to share it with your potential clients who can pay you a premium amount for a quality photo you can provide.

12. Digital ad space

Everything is now digitally interrelated. Almost half of our life is enclosed in a small rectangular piece of a device with our identity, financial information, private photos, and more.

Plus we can also bring it anywhere we go. With so many websites competing for space on the internet, why not earn money from it?

If you have a website or blog, you can place ads on it and get paid by the number of people who will click and purchase on that displayed ads and banners on your website.

You see, that's how many bloggers earn money by placing digital ads around their websites. You most likely see it; of course, they're popping up everywhere!

Another type of passive income is building a membership website. With it, you can earn money for any number of people who will sign up or purchase your tier package or avail of your membership offering.

It is especially applicable if you have gained enough following of your brand or a professional offering and premium service. A similar approach to this is what gamers use in Twitch.

To access full review or full coverage of their game stream, live stream, etc., you have to pay through Patreon and choose how to support or avail of membership tiers to get perks and many more freebies or goodies as a premium subscriber or supporter.

Creatives and other content creators also make use of this payment approach.

13. Build an app

Probably the best type of passive income. If you have a solid background or skill in programming and a few coding, you can turn your idea into a gorgeous app.

You must also have a relative knowledge of UI design, mobile, and app development. After the tedious process of all of it, you can list your finished product on Google Playstore or Apple store.

Any download proceeds for in-app purchases are all yours.

14. Network marketing

Multi-level marketing or network marketing is a legit business to make money. Although scams have smeared it in recent years and a lot more controversy surrounds it, network marketing is still in.

How to make money from it? Well, either you buy and re-sell the company's product through word of mouth or direct sales or recruit another human being to join your network team.

As opposed to a pyramid scheme, network marketing has an actual product offering while the former has no real product that is sold. It only benefits the person on the top by bringing in more people and get their money. Sort of like “robbing Peter to pay Paul.”

If you ever get into network marketing, here are two words of caution. First, watch out for scams that are pyramid schemes wrapped in disguise. Second, make sure that you actually believe in whatever product you'll be marketing.

15. Dropshipping

In the dropshipping method, the passive income effort level is mostly at 8-9. You don't need to take care of inventories and shipping logistics; all you have to do is take orders and coordinate with the vendor about the product and its shipment status.

You might need to actively promote and post pictures of the item to find your leads or prospective customers.

As the vendor directly ships the product to the customer, once the buyer confirms that he had received the product, you get your payment as well.

16. Rideshare driving

Another way to generate money from your car, which is a creative type of passive income, is to sign up with a rideshare service.

Say you have a personal business to attend to in the nearby city. Why not pick up a few customers along the way? You can sign up for a ride-sharing or even food delivery service as you go. Not to mention the tips you could collect.

This would be best as a part-time job, though, because if you take it as your full-time job, then it won't be a passive way to earn. Driving and maintenance costs can take a lot of time, energy, and effort if you do it all day.

17. Rent your car

Or yet another genius way to make money from your car! If you have a spare car or say you won't be using your car for some time, you can rent your vehicle to drivers and earn a portion of earnings from the service. Turo is a great website for this.

Ensure though to clarify and coordinate your terms and whether your car is in perfect condition. If it's okay with you to have someone else ride it, then go ahead and do so.

18. Become a social media influencer

Are you an aspiring Youtuber or social media influencer? Well, you can earn passively through posting and building your content across different social media platforms.

Brand sponsorship is one way; others will allow you to keep the product. So that's a full payment plus a free product! Yay!

You can also earn through affiliate links and Google Adsense. So, if you have something to share with the world and are passionate about creating content that inspires and helps people solve their problems, this might be a promising career for you.

Related: How Much Money Do Youtubers Make Per View-Earn Money with Youtube

19. Invest in Variable Life Insurance

VUL, or in other words, Variable Life Insurance, is another type of investment with joint insurance.

Insurance plus investment? Why not?

It would be best to inquire with your financial consultant about the suitable types of insurance for you.

In VUL, you are paying for insurance premiums, and a portion of that payment goes to money market funds that financial managers invest. After a fixed period, you get to reap the amount gained from the investment with protection while also being insured.

20. Flip websites

You buy, modify, and then sell domain names or websites at a markup price with a website-flipping business.

Every time someone buys that website or domain from you, you earn passively. So, all you have to do is buy, flip, and sell.

21. Angel investor

Lastly, to earn passively, you can also become an angel investor. An angel investor finances small businesses and startups in exchange for equity ownership or part revenue.

Becoming an angel investor needs only enough funds to sustain the business, but you can also have a say in overall operations and business model.

It is also called private investor or seed investor.

If you've got boatloads of money, then why not? After all, all you have to do is fund the business and wait every month (depending on the agreement) to get your profit share.

How can I make passive income with no money?

Earning a passive income is made possible by a bunch of free resources online. Although in some countries it is still limited, we can make use of what we have now.

What's stopping you from creating that Youtube channel or launching your lifestyle blog? Today is the best day to start diversifying and earning other income streams, even if you have little or no money.

But first, here are some points you need to know.

Fix your mindset.

I used to think that getting a ‘good job' was the end goal, so I didn't care much to seek other sources of income until I learned otherwise. Getting other sources of income seemed like ‘a bonus', but instead, I've realized this is ‘the norm' for people looking to create sustainable wealth.

We shouldn't rely on one income alone if we want to become wealthy. Most significantly, if we're treading through waters just to get by.

Get rid of limiting beliefs.

Unlearn any self and financial-limiting beliefs that keep holding you back such as:

• I have to quit my job to go all-in
• Only the rich can afford to
• I have to do something big right off the bat
• It's not for everyone
• I need to be very business savvy

Stop that! It exists only in your head. If you haven't noticed, those are petty lame excuses to get started. Therefore, be conscious of what you feed your mind. What you believe in is your reality.

Turn your passion into profits.

You may already have something you love doing or are learning about, which can be turned into a business.

However, this is not necessary.

You can work backward with a proven profitable business model and emulate it. There are so many of these available.

Quit the research.

Chances are, you already know all these and want to add another income source (whether through investing or a business), but you're buried deep in research trying to get it perfect from the jump.

At some point, you have to step away from all your piles of research and just go. If you were waiting for a sign, this is it.

Start small.

Maybe you think you have to start big or do nothing. You couldn't be any more wrong. Today, many big businesses – Microsoft, Apple, Skyscanner (which started as a simple spreadsheet) all began with little or no money.

Investing $10 per day for 20 years will get you $141,120.53 at 6% interest.

Network within your niche.

Whether you've started or are thinking of starting, whatever area you choose to go with, don't underestimate the power of a network.

Connect with similar people in that area and leverage the collective expertise and knowledge of such communities.

Wrapping Up

Passive income is undeniably a great way to build sustainable wealth.

Most significantly, when we want to retire or as we approach near retirement life.

As early as now, you can slowly transfer your active income to passive income and seek more creative and smart ways to widen your income stream.

You must also let go of the misconception about passive income about doing no work at all, not even lifting a finger. Initially, you'd still do minor works and then wait to earn passively.

The summary of it all is to make your money work for you. So, what's holding you back?

Which ones do you have or do you want to work on next? Share your thoughts below.