Interested in making money while you sleep?

by | Feb 18, 2021

In the previous blog, we learnt that the worst investment we can make is exchanging our time for money. Instead, if we really want to live the lives of freedom we deserve, we need to pursue opportunities for other streams of income.

We need to start making money while we sleep!

But how can we do that?

Well, in today’s blog we are going to take a look at:

  • What is passive income?
  • Why you need passive income,
  • How to build passive income, and
  • Five popular ways to generate a passive income.

If you’re a forward-focused thinker, you may be dreaming about the day you finally leave the workforce to enjoy an easier life in retirement, or you might even be considering reaching financial independence earlier, getting out of debt, funding overseas holidays or many other life goals.

I’ve recently addressed developing SMART goals and how to avoid failing to meet them.

But a dream without a plan is just a wish. So, we have also learnt about financial plans, and why you need one, learn more here.

Sure, with determination and dedication you probably can achieve financial freedom on just your 9-to-5. But, to put some wheels on those dreams, to create momentum and get things seriously moving, you are going to need to start building other streams of income that don’t involve exchanging your time for money. Passive income.

There are plenty of different passive income options and explanations of how to build it. If you’re new to the idea, I’m about to introduce you to it.

What Is Passive Income?

For most people, the concept of passive income has an element of mystery and intrigue to it. For others, it’s their way of life.

Passive income is money you earn in a way that requires little to no daily effort to maintain.

Having a source of passive income can completely turn things around for people. Think about it — if you could put in some upfront work into a project that would generate income for years to come, would you pass up on that opportunity? If you are inclined to put in the early efforts, passive income could prove to be significantly beneficial.

The litmus test is that you should be able to maintain your full-time job, which takes up the majority of your working hours, whilst still managing your passive income streams.

Passive income ideas—like renting out property or building a blog— generally take some work and initial investment to get up and running, but they could eventually earn you big money while you sleep.

Why Build Passive Income?

Your income is your greatest wealth-building tool—a tool that typically requires your active participation in the form of a full-time job, which is you trading your time for money. You know what I’m talking about! Even if you love your job, I’m willing to bet you wouldn’t mind earning some extra income without the blood, sweat, tears and time commitment of another job. Here’s what building a passive income can do for you:

  • Help you achieve your life goals faster.
  • Take years off your financial plan timeline.
  • Strip years off your mortgage.
  • Create an opportunity to retire early.
  • Protect you from a complete loss of income if you lose your job.
  • Provide an additional source of income.

Building your passive income requires an upfront investment in either time or money (or both) and usually involves a lot of nurturing in the beginning. But after some time and hard work it starts to build and maintain itself, providing consistent revenue without much effort on your part.

How Much Money Can I Make?

Passive income generally won’t make you wealthy overnight, so forget about any get-rich-quick schemes you’ve heard of. But steady, profitable passive income options can build some serious money over the long haul. We’re talking anywhere from a few thousand dollars to hundreds of thousands of dollars—depending on the income stream.

How to Build Passive Income

If you search online for ways to build your passive income you will find countless examples. So, let’s take a slightly deeper dive into popular passive income options. But first…

Investing for Retirement

When we say “passive income”, some people understandably think of investing in the share market, because this can often produce the largest results with the least amount of input. But for most people, investing in shares should be part of your long-term plan to fund your retirement. It’s TIME IN THE MARKET rather than TIMING THE MARKET where you can make your most returns from investments, for the least amount of risk.

So, whilst investing is a form of passive income, investing as a key component of your retirement plan should be thought of as additional to your passive income. When it comes to investing, be sure to learn about asset allocation, and the concept of buckets (find out more here) and be clear on where investing sits within your financial plan.

We want to think about passive income as a type of low-effort income that can be utilised in all 3 asset allocation buckets. Your:

  1. Safe & Secure Bucket,
  2. Growth Bucket,
  3. Dream Bucket.

It’s simply understanding our buckets, and our risk tolerance (click here).

Let’s take a look at five of the most popular options of creating a passive income below. 


Making money from rental properties is often seen as being less risky than other forms of investment. However, while it may seem more straightforward, there are pitfalls to be aware of.

Here’s what you need to consider about investing in property.

Pros of investing in property Cons of investing in property
  • Less volatility – Property is seen as less risk than shares or other investments.
  • Income – You earn rental income if the property is tenanted.
  • Capital growth – If your property increases in value, you will benefit from a capital gain when you sell.
  • Tax deductions – You can offset most property expenses against rental income, including interest on any loan used to buy the property.
  • Physical asset – You are investing in something you can see and touch.
  • No specialised knowledge required – Unlike some complex investments, you don’t need any particular specialised knowledge to invest in property.


  • Cost – Rental income may not cover your mortgage payments and other expenses.
  • Interest rates – A rise in interest rates will mean higher repayments and lower disposable income.
  • Vacancy – There may be times when you have to cover the costs yourself if you don’t have a tenant.
  • Inflexible – You can’t sell off a bedroom if you need to access some cash in a hurry.
  • Loss of value – If the property value goes down you could end up owing more than the property is worth.
  • High entry and exit costs – Expenses such as stamp duty, legal fees and real estate agent’s fees.




I touched on this earlier under investing for retirement. Perhaps the most passive of passive investments – buy your shares and receive your dividends without the need to do much more. Unlikely property there is no maintenance to worry about, and no costs like insurance, it’s just buy and forget about.

You can get started investing in shares with relatively little money, unlike property there is no need to borrow to get into the market. But while the act of investing in shares is pretty passive, the research that goes into selecting them is active. You need to consider if you have the time and knowledge to understand how a business is performing before deciding what to invest in.Shares also have the benefit of being wonderfully liquid – you can sell your shares and have the money in your bank account in less than a week, and often a lot shorter.


Passive income doesn’t come much easier than via ETF’s (Exchange Traded Funds) and Managed Funds. ETF’s and Managed Funds allow you to invest your money in a basket of assets or companies with a single trade. Place your money in these funds, and aside from a little bit of paperwork, you have nothing to do but decide what to do with your returns, which come either quarterly or six-monthly.

Managed Funds and ETF’s come in a wide range of shapes and sizes and cover a range of assets, from shares to property, and bonds. They can focus on Australian assets, or those overseas. They can also focus on certain economic sectors, or invest according to a theme, such as ethical investment.

You can also get funds that have a mixture of assets. Your superannuation account probably has this type of fund – Balanced, Growth etc. They allow you to adjust the level of risk carried by your investment, to align with your comfort level and investment time frame.

Managed Funds and ETF’s come at a cost – clearly, the fund manager isn’t working for free. So before you invest, make sure you understand the costs.


I’m sure you’ve seen plenty of examples of affiliate marketing around the web.

When a podcast host asks you to go to for 10% off the standard price – that’s affiliate marketing – they will earn a commission from every sale made.

Similarly, on most blogs there will be links to books that you can buy on Amazon or a software product that you can subscribe to. These are all viable ways that someone with a degree of publishing flair can build a passive income stream.

Affiliate programs can be a great solution for all involved. The content creator builds a following in a particular niche. They build up trust, so in most cases, they won’t want to promote a product that is rubbish. They become gatekeepers. Their audience understands this and has trust in the creator. So they’re directed towards products and services with a high likelihood of being relevant to them and of good quality. And the producer of the product gets to put their wares in front of a highly targeted audience.


Amazon’s business allows people to sell products on its site, which means you can take advantage of this brand name’s tremendous reach and influence. Over 50 percent of sales on Amazon are made through third-party sellers. In its 2020 Small Business Impact report, Amazon revealed it shipped out more than 3.4 billion third-party items in just one year. So, it’s plain to see that buyers do trust and buy from third parties.

These are just a few options for a passive income. There are dozens more that you might find more appealing or that might suit your goals or lifestyle more. I recommend you do your own research to find the best fit for you.

How many passive income streams do you have already?

Note: The information in this article is general in nature as it has been prepared without taking account of your objectives, financial situation or needs.

B M Peachey

B M Peachey, has over 15 years of experience investing in property and the stock market, in both New Zealand and Australia. She has a post-graduate degree, with qualifications in Finance and Mortgage Broking and in Accounting and Bookkeeping. She is passionate about ensuring people have access to credible, reliable, and easy to understand information to help them get in control of the life they REALLY want to live.

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    Disclaimer: The information in this article is general in nature as it has been prepared without taking account of your specific objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.