As an entrepreneur who runs a service-based business in the wedding industry, I'm always looking for ways to bring in passive income. I don't want to work more than 50 hours a week, and in order to keep that work-life balance, I've found I need new ways of generating income that don't involve so much of my time.
Over the years, I've made passive income by selling online courses and ebooks, and doing affiliate advertising on content I create for my own website or social media channels.
With the talk of a potential recession approaching, I've found myself nervous that I'll need to find new ways to bring in money. That's why I asked financial planners to share some recession-proof passive income streams that might be worth considering.
1. Open a high-yield savings account
While opening a high-yield savings account isn't going to net you thousands of dollars in passive income each month unless you have a ton of money to set aside, financial planner Susannah Snider says it's still worth considering.
Interest rates are still relatively high. While the national average interest rate for savings accounts is 0.41%, the best high-yield savings accounts are offering rates north of 4% — over nine times more.
Plus, Snider says, "If you can lock up cash for a little longer — one or five years, for example" — in a certificate of deposit, you may be able to earn even more.
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2. Build a real estate portfolio
Investing in real estate is a passive income stream that also includes tax benefits, and one that financial planner George Nicola says is worth considering in the case of a recession.
"The passive income derived from term rents and leases is recession-proof and has a low correlation to market volatility," Nicola says.
While owning real estate can require some active management to maintain high occupancy and ensure the upkeep of the property, you can also consider investing in dividend-generating REITs (real estate investment trusts) as another way of earning passive income.
The best real-estate investing apps, such as Fundrise and Crowdstreet make real estate investing more accessible and help diversify your investment portfolio.
3. Invest in self-storage
If you have the cash available and you're looking to take on a new business venture, financial planner Tammy Trenta says it could be a good idea to look into investing in self-storage facilities.
Since recessions might call for people to sell their homes, downsize, or temporarily move to new places, investing in self-storage facilities could not only be a good investment but also a good source of passive income.
You can invest in self-storage facilities in many different ways, whether you want to buy your own facility or invest in specialist REITs that operate a large portfolio of self-storage facilities already.
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4. Rent out a popular item
One way to start a passive income stream is to look around your house and see what you have that other people are eager to rent.
Financial planner Marli Erickson says that if you have the capital available, you can even consider purchasing an item that is in high demand to be rented.
"During a recession, individuals do more of their chores themselves that require specific equipment and tools," says Erickson. "Get a utility trailer, as an example. Your investment will be around $2,000 and you can put a photo of the trailer on your Facebook page and put signs on it that it's available for rent."
In this example, she also advises adding a truck, tools, garden equipment, tents, and sporting goods for a larger inventory.
You can list items that you want to rent to others on a variety of websites like Friend With A or Loanables. Every time the item is booked, you get to pocket the cash.
5. Self-publish books
If you enjoy writing or have always wanted to write a book, financial advisor Joseph Hogue says self-publishing is a great way to earn passive income during a recession.
"Everyone has a book idea in them," says Hogue.
Once you know what you want to write about, Hogue says it's not only easy to publish the book on your own, using platforms like Amazon Direct Publishing or Barnes and Noble Press, but you can price the book low enough that a recession won't affect people's decision to purchase it.
While it's not easy to become a best-selling self-published author, Hogue says the benefit of publishing your book and putting it on a book retailer's e-commerce platform (like Amazon, Apple Books, or Barnes and Noble), is that you might get traffic from people searching for books on a daily basis, as opposed to just writing blog posts on your own website (which might only attract a limited and smaller audience).
This article was originally published in July 2022.
