{"id":11163,"date":"2025-06-30T11:58:12","date_gmt":"2025-06-30T17:58:12","guid":{"rendered":"https:\/\/www.lexingtonlaw.com\/blog\/?p=11163"},"modified":"2025-06-30T12:52:55","modified_gmt":"2025-06-30T18:52:55","slug":"how-to-make-passive-income","status":"publish","type":"post","link":"https:\/\/www.lexingtonlaw.com\/blog\/finance\/how-to-make-passive-income.html","title":{"rendered":"How to Make Passive Income &#038; Why You Should"},"content":{"rendered":"<div class=\"wp-block-image\">\n<figure class=\"aligncenter\"><img decoding=\"async\" width=\"1500\" height=\"500\" src=\"https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2018\/12\/passive-income-hero.jpg\" alt=\"woman making passive income\" class=\"wp-image-11169\" srcset=\"https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2018\/12\/passive-income-hero.jpg 1500w, https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2018\/12\/passive-income-hero-1100x367.jpg 1100w, https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2018\/12\/passive-income-hero-768x256.jpg 768w, https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2018\/12\/passive-income-hero-600x200.jpg 600w, https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2018\/12\/passive-income-hero-300x100.jpg 300w\" sizes=\"(min-width: 767px) 600px, calc(100vw - 35px)\" \/><\/figure><\/div>\n\n\n<p><em>The information provided on this website does not, and is not intended to, act as legal, financial or credit advice.\u00a0<\/em><a href=\"https:\/\/www.lexingtonlaw.com\/disclaimer\" target=\"_blank\" rel=\"noreferrer noopener\"><em>See Lexington Law\u2019s editorial disclosure for more information.<\/em><\/a><\/p>\n\n\n\n<p>It\u2019s every person\u2019s dream \u2014 earning money while they sleep. And, through passive income, it can be a reality.<\/p>\n\n\n\n<p>By definition, passive income sounds too good to be true. Colloquially, it\u2019s defined as money you earn by putting in little to no effort. While there\u2019s some truth to that, there\u2019s no such thing as getting money for doing nothing.<\/p>\n\n\n\n<p>Setting up a passive income stream is all about utilizing your skills and time for the maximum return. It\u2019s not so much about working&nbsp;<em>less<\/em>&nbsp;as it is about working&nbsp;<em>smarter<\/em>.<\/p>\n\n\n\n<p>If your interest is piqued, read on to learn more information about passive income and how to make it below.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What is Passive Income?<\/h2>\n\n\n\n<p>Passive income is earnings derived from an enterprise in which a person is not actively involved. What that really means is that passive income is not tied to how many hours you work. In order to better understand what this means, take a look at the three different types of income:<\/p>\n\n\n\n<ul>\n<li><strong>Passive:<\/strong>&nbsp;income from work in which a person is not actively involved<\/li>\n\n\n\n<li><strong>Earned:<\/strong>&nbsp;income from paid work (also known as \u201cactive\u201d income)<\/li>\n\n\n\n<li><strong>Portfolio:<\/strong>&nbsp;income from investments, dividends, interest and capital gains<\/li>\n<\/ul>\n\n\n\n<p>If you have a salaried or hourly job, you\u2019re making earned income. This is probably from the type of income that people are most familiar with. Passive income is a different model entirely because it allows a person to earn money without trading their time for money one-to-one.<\/p>\n\n\n\n<p>There is no \u201ccorrect\u201d way to make money. Once you understand the different types of income, you can decide which aligns with your life goals with respect to work and money.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Why Should You Earn Passive Income?<\/h2>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" width=\"570\" height=\"250\" src=\"https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2025\/06\/Blog-Post-Resizes.png\" alt=\"Four benefits of passive income\" class=\"wp-image-21490\"\/><\/figure>\n\n\n\n<p>After studying the habits of millionaires, Tom Corley, author of <em>Rich Habits<\/em>, found that over half of self-made millionaires had at least three streams of income. Much like the proverb \u201cdon\u2019t put all your eggs in one basket,\u201d having multiple sources of income is a key ingredient in setting yourself up for financial freedom.<\/p>\n\n\n\n<p>This is because we only have a finite amount of time to earn active income. When you limit yourself to earned income, you\u2019re capping the amount of income you can generate based on your physical limitations. After all, there are only so many hours in a day.<\/p>\n\n\n\n<p>Here are just a few benefits of passive income:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-you-can-achieve-true-financial-independence\">You can achieve true financial independence<\/h3>\n\n\n\n<p>Passive income can help you achieve true financial independence, which means having enough income to pay your living expenses for the rest of your life without having to work full time. Passive income is crucial to the FIRE (Financial Independence, Retire Early) movement, a movement dedicated to achieving financial independence and retiring early. Whether you\u2019re committed to retiring early or not, passive income is a great way to make progress towards your\u00a0<a href=\"https:\/\/www.lexingtonlaw.com\/blog\/life-events\/retirement-planning-guide.html\" target=\"_blank\" rel=\"noreferrer noopener\">retirement<\/a>\u00a0goals.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-you-ll-have-more-time-to-focus-on-the-things-you-care-about\">You\u2019ll have more time to focus on the things you care about<\/h3>\n\n\n\n<p>When your cash flow is automated, you can focus your attention on other things such as big picture ideas, creative pursuits and even family or travel.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-you-re-not-tied-to-any-one-location\">You\u2019re not tied to any one location<\/h3>\n\n\n\n<p>Most passive income ideas are location agnostic. That means this type of income lends itself well to the work-from-home, entrepreneurial lifestyle. Or you could spend more time traveling!<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-you-can-pay-off-debt-faster\">You can pay off debt faster<\/h3>\n\n\n\n<p>Not all passive income ideas require money to start, so if you\u2019re struggling to\u00a0<a href=\"https:\/\/www.lexingtonlaw.com\/blog\/credit-101\/whats-the-right-way-to-pay-off-debt.html\" target=\"_blank\" rel=\"noreferrer noopener\">pay off debt<\/a>\u00a0you might want to explore a source of passive income to help supplement your regular income. You can funnel your earnings straight toward your outstanding debts.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Passive Income Ideas<\/h2>\n\n\n\n<p>Passive income can be broken down into two categories. Those that&nbsp;<em>do<\/em>&nbsp;require capital to start, maintain and grow and those that&nbsp;<em>do not<\/em>&nbsp;require capital to start, maintain and grow.<\/p>\n\n\n\n<p><strong>Passive income is all about \u201cfront-loading\u201d your time and\/or money.<\/strong><\/p>\n\n\n\n<p>You will have to do the work upfront to automate the process. Once that\u2019s done you can continue to enjoy revenue month after month with minimal adjustments.<\/p>\n\n\n\n<p>If you want to invest money, here are some examples of investments that generate passive income:<\/p>\n\n\n\n<ul>\n<li>Investing in index funds or dividend-paying stocks<\/li>\n\n\n\n<li>Buying a rental property<\/li>\n\n\n\n<li>Opening a high-yield savings account<\/li>\n<\/ul>\n\n\n\n<p>Or, if you want to invest time:<\/p>\n\n\n\n<ul>\n<li>Creating a proprietary digital property, like a mobile app<\/li>\n\n\n\n<li>Starting a blog<\/li>\n\n\n\n<li>Licensing a business idea<\/li>\n\n\n\n<li>Licensing your photos<\/li>\n<\/ul>\n\n\n\n<p>While you\u2019re setting up your new income stream, keep in mind that there truly is no such thing as \u201cfree money\u201d.<\/p>\n\n\n\n<p>You\u2019ll feel even more satisfied with the reward knowing what it took to get there. While there\u2019s no one magic trick to getting passive income to work for you, with so many different methods, there\u2019s surely one option that will fit your situation and skill set. Set up your passive income stream today to start making money, free up time and set yourself up on the path to financial independence.<\/p>\n\n\n\n<p><strong><em><a href=\"https:\/\/lexingtonlaw.com\/disclaimer\" target=\"_blank\" rel=\"noreferrer noopener\">Note:<\/a><\/em><\/strong><em>\u00a0Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Setting up a passive income stream is all about utilizing your skills and time for the maximum return. It\u2019s not so much about working less as it is about working smarter.<\/p>\n","protected":false},"author":63,"featured_media":11169,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[534],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v18.1 (Yoast SEO v18.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>How to Make Passive Income &amp; Why You Should - Lexington Law<\/title>\n<meta name=\"description\" content=\"Setting up a passive income stream is all about utilizing your skills and time for the maximum return. It\u2019s not so much about working less as it is about working smarter.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.lexingtonlaw.com\/blog\/finance\/how-to-make-passive-income.html\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How to Make Passive Income &amp; Why You Should\" \/>\n<meta property=\"og:description\" content=\"Setting up a passive income stream is all about utilizing your skills and time for the maximum return. 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