- One of the most common misunderstandings in the realm of finance is that passive income is money earned without working.
- The good news is that passive income is one of the most effective strategies to increase your wealth and improve your standard of living.
- Almost all of the world’s 2300+ billionaires made their fortunes from passive income.
One of the most popular misconceptions in the financial world is that passive income is money made without working. Nothing could be further from the truth. There is more to it than meets the eye.
What is passive income?
Passive income is acquired over time as a result of investments and activities that do not end when the income source ends. Passive income includes rental property revenue, dividends, and royalties.
When people hear the term “passive income,” they immediately think of becoming wealthy. The good news is that passive income is one of the most effective strategies to increase your wealth and improve your standard of living. In truth, becoming a multimillionaire in South Africa and around the world is practically impossible without a variety of sources of income.
Almost all of the world’s 2300+ billionaires made their fortunes from passive income.
It’s natural to believe that people like Jeff Bezos make their billions because they work for Amazon. That would be problematic because his income will presumably decrease the day he resigns from Amazon.
Only his pay, which is around $US140, 000 per month, would be lost if Bezos resigned from Amazon. He will, however, continue to increase the value of his stock and dividends, which is how he makes his billions. That is what we refer to as passive income; you work for it, but it will continue to pay you even if you stop working.
5 Ideas for passive income for 2022
1. Invest in Dividend Stocks
Investing in stocks is one of the most common ways of wealth creation in South Africa and throughout the world. However, you ought to be smart in picking your stocks. If you are investing for the purposes of generating passive income, you need to invest in certain types of stocks, ones that have a good track record of issuing dividends at least once per year.
Top Dividend Stocks in South Africa
| 2022 Ranking | Company | Dividend Frequency Per Year | Market Capitalisation 000,000 (ZAR) |
| 1 | Fortress REIT B | 2 | 2109 |
| 2 | Hyprop Investments | 2 | 6110 |
| 3 | Redefine Properties | 2 | 13200 |
| 4 | Vukile Property Fund | 2 | 5259 |
| 5 | Tsogo Sun Gaming | 2 | 3650 |
| 6 | Growthpoint Prop | 3 | 139000 |
| 7 | MAS Real Estate Inc | 2 | 7140 |
| 8 | Nedbank Group | 2 | 53217 |
| 9 | Investec | 4 | 10153 |
| 10 | Absa Group Limited | 2 | 83053 |
2. Affiliate Marketing
Affiliate Marketing is fast emerging as a great source of passive income in South Africa. Basically, affiliate marketing entails marketing products of a company you do not work for. Whenever you make a sale you get paid a certain percentage, best known as a ‘commission’.
That sounds like a lot of work, right? Yes, it is! That’s the theoretical explanation of what affiliate marketing is. Most affiliate marketers are website owners, YouTubers, podcasters, social media influencers and bloggers.
They have existing communities and followers, all they do is post a link of a product to their followers and get paid commission whenever a purchase occurs.
This has created a lot of millionaires in the past 10 years. This is most ideal for someone with basic web skills including but not limited to social media skills.
If you have a website that targets South Africans you can start your affiliate marketing by signing up for Admarula or Offerforge. Admarula and Offerforge are the two market leaders in South Africa on affiliate marketing.
3. Buy shareholding from your employer
This may sound impossible or unlikely but it’s quite a normal practice by high performing employees who are financially literate. If you are working for a small to medium-sized company and you believe the company has a great future, you can talk to the company directors and offer to purchase company shares.
When proposing to buy the shares, you need to have a clear way of financing the purchase. If you are going to purchase them for cash, you need to have a sizable amount, preferable not less than your annual salary.
The best way to offer the purchase is a direct deduction from your salary on a monthly basis. This usually works well with companies that have cash flow challenges. This strategy will likely do well in 2022 when companies are extremely low on cash flow due to COVID-19 lockdowns.
Some companies are sceptical on selling shares to employees, but some are quite open about it. They see it as a vote of confidence in the future of the company.
Either way, it is a great source of passive income. The day you leave the company, you only forfeit salary and bonuses, but you will continue to earn through growth in share value and dividends.
4. Selling Information Products
If this era has proven anything, it is that information is both power and cash. If you are skilled in a certain area and know how to write, you can develop courses which you can sell through platforms like Udemy or Skillshare.
If you are not camera-shy, you can develop lessons and distribute them via youtube. You will be paid through google’s monetization program or you can even get sponsors whom you will have to mention during the video.
The long and short of selling information products is that if you know something that most people don’t, you can commercialise it.
5. Peer to Peer Lending passive income
This is arguably the best way to earn passive income. Peer to Peer lending is the process of granting a personal loan to another person through a third-party platform.
This works well because you don’t have to do much, the platform vets all loan applicants and calculates the risk levels.
Should you ever decide to make passive income through peer-to-peer lending, the best way to start would be focusing on platforms that provide lending for social good like Prodigy Finance.
Prodigy Finance is a peer to peer lending platform that gives loans to postgraduate students mainly from developing countries to study in top universities around the world.
They have so far given loans to more than 19000+ students from 150 countries. Prodigy Finance was founded by Cameron Stevens a South African student, after facing challenges himself of raising funds to do his MBA at Insead in France.
Conclusion
These are five ways you can use to earn passive income in 2022. Some of them will require you to put effort and much focus on developing them until they get to a point where they can start generating income for you.
