My Top 3 Passive Income Sources

Well team, welcome to 2023! I hope you guys had a great holiday period. Hope you got to spend some time with your friends and your family, and I hope you're gearing up for a really, really big year ahead. It's obviously the start of a new year, and right now is a perfect time to revisit your financial goals and update them for the next 12 months. I'm sure for a lot of people, making more passive income is probably high on the list, especially with the reduction in discretionary income we've all felt recently due to, of course, high interest rates and inflation.

So in this video, I wanted to revisit the topic of passive income and give you my take on the three best ways to reliably generate passive income in 2023. All right, let's do it!

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So for this video, what I've done is really taken the time to think about the best but also the most realistic passive income ideas that are applicable to most people for 2023. I've actually grouped them into three different categories of passive income. But before I start with the list, I do want to temper expectations a little, because what you tend to find online is a lot of hype around the idea of passive income.

It's obviously a very appealing topic, and people online love to use the sex appeal of earning millions while sitting on a beach. They like to try and click bait, sell courses, and get themselves rich by preying on people that think that passive income is really easy like that. I do hate to be the bearer of bad news, but passive income is definitely not a get-rich-quick, you know, earn millions, sip and pina coladas in the Bahamas kind of scheme.

In fact, in most cases, it can be just as much work as actually going to work. So the way that I like to see passive income is not making money while doing no work; I treat passive income as a model of income.

You can have passive or active income. Active income simply means you're trading your hours for money, AKA you're going to your day job. You show up, you work eight hours, and regardless of how much you get done or how hard you're working, you get paid for working eight hours.

Whereas passive income, on the other hand, is the model of income where you put in a lot of work up front, usually for nothing, and then once you've completed the project, it has the potential to earn you money for a period of time out into the future with low requirement of active work.

So book royalties are the classic example. You write the book, you make nothing while you're putting in the hard effort, the blood, sweat, and the tears to write it. But then once you finish it, once you release it, then it has the potential to earn you money for the rest of time, really depending on how successful that book becomes.

So please remember, passive income is just a model of income. It is definitely not easy, and it's definitely not a get-rich-quick game.

So with that said, what, in my opinion, are the best strategies to generate passive income in 2023? Well, the first category, unsurprisingly, is investing. This is, you know, by far going to be the most applicable way to generate passive income, regardless of who you are or what you do.

Could be bonds, it could be stocks, it could be property, or any fixed income investment. But I think for most people—and know this as advice, this is simply my opinion—I think for most people, utilizing the stock market will probably be the most applicable passive income strategy.

Reason being is that it's obviously very accessible, it's generally quite liquid, and you don't need a massive chunk of money to start. So what do you buy? Well, of course, I can't tell you that because it's going to be different for everybody, and it's probably worth seeing an advisor to help you know figure out what is best for you.

However, some of the passive income structures that are out there include things like Real Estate Investment Trusts that collect rent from a portfolio of properties. They pay out the rent as a dividend to their shareholders. You could buy a Bond ETF that receives bond interest payments from, say, the US government and then distributes them out to the shareholders.

You could buy a dividend ETF, which buys dividend-paying companies and then distributes those dividends as a dividend to you. Or you could just buy a dividend-paying company by itself. There are many different options out there, but always remember these two rules of investing no matter what you buy.

Number one: Make sure you understand what you're getting yourself into, because sometimes these investment vehicles do get complex. So make sure you really do your research before buying, and definitely get help from an advisor if you need it.

And then number two: Ask yourself, is this passive income source stable? Is it reliable? You know, if you don't know, don't buy it. For example, say a stock has been paying an $8 dividend every single year, and they make $10 in earnings per share.

Sounds great because they're literally giving you 80 percent of their earnings as a dividend—awesome! But what if the company has a really bad year next year, and their earnings drop from $10 to $5? Well, if they maintain an 80 payout ratio, your dividend just went from eight bucks a share to four. Or, probably what's more likely in that case, the company actually cancels or suspends their dividend until they've sorted out what's going on with their business.

Because remember, companies don't have to keep paying a dividend to common stockholders. So if you're buying a dividend-style investment, just remember that it's not quite as simple as buying an oil company and just moving on and forgetting about it. You need to put in the hours to check whether the company is financially robust and managed well enough to continue paying you those annual dividends.

And one resource I would definitely recommend for this step is Seeking Alpha, who are also the sponsor of today's video. And the reason being, with Seeking Alpha Premium, you get very comprehensive tools like 10 years of financial data, news articles, earnings call transcripts, etc.

But you also get ratings and analysis on whether the company holds up as a passive income source. For example, if you just type in, say, Johnson and Johnson, you can scroll over to the dividend tab and see the sector-relative ratings for dividend safety, growth, yield, and consistency.

And beyond that, you can actually click on each one and get a detailed understanding of how Seeking Alpha themselves came to their conclusion. Now, you don't blindly follow this rating—definitely not—but it does help you avoid making really big blunders, and it also helps you understand what you need to be looking for when we're discussing reliable dividend stocks.

So this is all a part of Seeking Alpha Premium, which is normally $239 for 12 months. However, because I've partnered up with them, they're being very generous and they're offering the followers of my channel basically an annual subscription to Seeking Alpha Premium for $99.

So it's a very good deal! If it's something that you're interested in, you can check out the link in the pinned comment and the description. And of course, thank you very much to Seeking Alpha for supporting the channel with their sponsorship.

Anyway, that's definitely method number one: investing. And it's going to be the most applicable passive income source for everyone. But now, I want to talk about two other strategies to achieve long-term passive income.

The first is by building a social media audience. Now, this in itself is not passive at all. This requires constant active work. However, one thing I didn't even think about when I started this YouTube channel that I've since realized is that there is an unbelievable power to unlock passive income sources if you've built an online community.

If you have an audience, for example, you can make YouTube videos, you could write a book, you could make an online video course, you could start a podcast. It's all very doable if you have an online community. Now, all of these ideas do take a hell of a lot of work, both to start and to maintain.

But as I said before, they do follow the passive income model. For example, look at this video on YouTube: "How to Tie a Tie" by Tie Hole. This is uploaded to YouTube 12 years ago and now has a hundred and two million views. And you know the crazy thing? This channel doesn't have that many subscribers, and their last video was literally three years ago.

That is crazy! Here's another example: how many creators do you see, you know, releasing books in their niche? It's like everywhere. The classic example is some like cooking-related social media personality then going on to release their own cookbook.

Yes, obviously it's a lot of work, and they need to continue promoting it once it's out into the world. But they don't have to write the book again. Same story with online courses. Say you run a woodworking Instagram page; you can make a course detailing how to make a chest of drawers or a chair.

Same thing. Yes, you have to, you know, work hard, and you have to make the course. Yes, you have to actively promote it once you've finished the course, but the course itself—well, once it's done, it's done.

So I really believe that this strategy can genuinely unlock many passive income sources. And the best thing is, you know, when building a social media presence, the more you grow, the easier it becomes to grow more and the easier it is to make more money.

So realistically, I think if you can find some sort of niche that you're really passionate about, once you hit about maybe 50,000 to 100,000 followers, that's usually the inflection point where these passive income sources become very viable. And while every case is different, in my experience, this will probably take you about two years of consistent posting to accumulate—if you're smart and you have a good social media strategy.

But once you hit that inflection point, you know, it's off to the races. So that, in my opinion, is the second method to achieving fairly reliable passive income. It may not be for everyone, but I do think that anyone can try it. And you know, if you're passionate about it, then sometimes, you know, you can achieve some pretty crazy things.

But with that said, let's now move on to the last category of passive income, which is again very applicable to everyone. But I will say this one is definitely the hardest of the three, and that is to build your own business and then transition yourself to a passive stakeholder.

And yes, obviously social media is a business, but here I'm just talking very generally. You know, you're a plumber, you start your own plumbing business. You like baking, you start a bakery. You do personal training, whatever it is.

So the idea here is that you go out on your own with whatever it is that you do, and then over time, you scale up your business to have then employees—maybe you get some admin stuff. It becomes a full, proper business, and then the idea is that down the track, once the business can sustain itself, you transition yourself into a passive owner's role and can still reap some of the rewards.

It's kind of like investing in a dividend stock, but you've actually taken the long way around, and you've actually built the business; you're invested in yourself. And this version of passive income can take many forms. You might hire a management team to run almost everything, and maybe then you just stay up to date with what's going on and assist with the big decisions. That's one way; it's the way to remain in control.

Or you could simply sell a majority ownership stake in your business and become a passive shareholder under new ownership. Either way, there is risk, because you're basically handing over control. But obviously that risk is less than the first scenario when you're technically still at the helm.

And also, in the second example, one thing that's worth considering is whether it might actually be better to sell 100 percent of the business while you know for certain that it's absolutely humming very nicely and it is actually very valuable, and you can sell it for a lot. Yes, you wouldn't get passive income from it anymore, but you would ensure you get a good sale price, and it does eliminate the risk of, say, new owners coming in and the business running poorly, making your stake worth less over time, and obviously your passive income goes down as well.

But overall, business ownership is definitely a way to generate passive income if you structure things well and you build a well-oiled machine. However, having said that, I definitely do want to acknowledge that this is extremely hard. It's very, very hard. It's a very long process, and it might not be of interest to a lot of people.

But overall, guys, with that said, they are the three passive income strategies that I would look at in 2023. I'd love to hear from you guys as well. Definitely let me know what you're going to be doing to try and boost your income—your passive income next year.

As always, thanks very much to Seeking Alpha for sponsoring. Remember, you can get that massive discount on Seeking Alpha Premium by checking out the link down below. But apart from that, guys, thank you very much for watching! Like this video if you did enjoy it, subscribe if you'd like to see more, and I'll see you guys in the next video.