A new year always brings with it fresh optimism and hopes of doing better.
Despite salary increases generally not keeping up with inflation, there is yet hope that for consumers drowning in debt that it is not yet over – with 11 months of the new years still to go.
The general advice from personal finance experts is to cut back on spending in order to be able to pay off debt. But what about those of us who have cut back as far as we can?
Finding ways to make extra money through side-hustles or side-gigs is a possible solution. However, if overworking yourself means less time with loved ones, more stress and more burnout, then now is probably the time to consider ways to earn passive income.
Passive income is generally earned with minimal labour and involvement on your part, according to Shafeeka Anthony.
Importantly, passive income is not a second job or side-hustle for which you need to do ongoing work in order to receive payment, says the JustMoney.co.za marketing manager.
Examples of passive income include renting out a property, earning dividends from shares, writing a book that you can self-publish free on Amazon, or reselling photographs through an agency such as Shutterstock or Getty Images.
“If you have expertise in a particular sector, you could create a teaching product to pass on your knowledge,” says Shafeeka.
“Another option, if you spot a product gap in the market, is to hire a freelance industrial designer to develop a prototype and then take it to a contract manufacturer. You can then sell this product online using automated payment options.”
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Generating passive income does require an initial investment of time and money, and you may need to acquire additional assets and skills. You can, however, start off on a small scale. Here's how:
- Begin with research
The classic how-to book on passive income is The 4-Hour Work Week, by Timothy Ferriss.
- Build up an initial lump sum
Set clear financial goals and develop a budget in order to build up an initial lump sum. Automatically transfer a portion of your pay cheque into a savings account, or join a reputable stokvel. Pooled money earns better returns because of the higher capital, and shared fees are lower.
- Sublet
If you do not own property, you can sublet a room in your flat, a parking space, or even your car.
Keep in mind that you will need the approval of your landlord and body corporate; and, in the case of your car, you will require your insurer’s approval.
Be sure to also check for a potential increase to your excess or premium.
- Invest
Rather than trying to pick individual shares, try investing in a unit trust geared at generating high dividends.
The Satrix Dividend Plus Index Fund, for example, consists of 30 high dividend-yielding companies.
- Rent out property
Pooling resources with friends could enable you to enter the property market, or to buy a larger property. Some financial services groups offer collective buying home loan schemes.
Appoint a property manager and delegate the property management.
- Consult a financial adviser
Finally, discuss your plans with your bank manager or a trusted financial adviser who understands your short, medium and long term goals.
It would be unwise to withdraw hard-earned funds from an investment to start a new venture, without being aware of the short-term tax and long-term retirement implications.
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“Once you are committed to putting in some initial work, your efforts should pay off. You’ll enjoy extra flexibility and security when you are no longer solely dependent on a job income to cover your living expenses,” says Shafeeka.
“Automation and other forms of technology have opened up many new avenues for generating passive income. You are unrestricted by geographical boundaries and there are enormous opportunities to scale up.”
