Let’s admit it. Having a passive income or ‘making money while sleeping’ is one of the financial goals that most of us desire to have. Whether you are a young adult or a career executive building your wealth in pursuit of financial freedom, I’m pretty sure that you have spent time looking for the best ways to generate passive income.

Before diving in to the various ways of creating passive income, let us first define what it means. Does it really mean growing your money while you sleep? Passive income—or unearned income as defined by the Internal Revenue Service (IRS) —is income that requires minimal effort to obtain. It is the opposite of active income, which is income received from a job or business venture that requires active participation, which means that your hard-earned money can really grow while you sleep!

Exciting, right? What makes it even more exciting is that we have rounded up these twenty proven ideas to create a passive income to build your wealth this year. In an article by Forbes, it has categorized three best ways to generate passive income:

1. Investing
2. Asset Building
3. Asset Sharing

To know which of these can be your best sources of passive income, read on.


Basically, investing is using your money to buy assets that increase in value over time. Simply put, you buy assets that you anticipate will make profit that you can get in the long run. You have to remember, however, that investing requires an upfront big amount of money to start, but has the great potential of higher returns.

Here are various ways of investing that you might want to consider for you to start building passive income:

A. Dividend Stocks

A dividend stock is a publicly traded company that regularly shares profits with shareholders through dividends. The higher your share of stock is, the higher dividends that you’ll receive. However, note that choosing the right stock takes a lot of effort and education as well. You may choose between individual companies, high-yield mutual funds, or exchange-traded funds.

B. Peer-to-Peer Lending

Also referred to as P2P Lending, as its name denotes, is the process of lending to a third party, and loaning money to borrowers who typically don’t qualify for traditional loans. You earn through the interest paid for by the borrower’s loan. As the lender, you also have the ability to choose the borrowers to mitigate your risk.

C. Real Estate

One of the best passive income ideas for young adults, is investing in real estate. It is one of the traditional ways to generate passive income and its value appreciates over time. Owning a land, house, or a rental property are just some of the ideas of how this can be a great way to buld your wealth. Remember though that repairs, maintenance, and operational expenses may cut down your income.

You may also opt to invest in e real estate investment trusts (REITs) or real estate crowdfunding to save you from worries.


Asset building requires a considerable amount of time in formulating or researching products that will sell. Compared to investing, asset building is a cheaper alternative to investing since the idea of an income-generating asset depends largely on your preferences, whether it is a digital product, tangible product, or a service.

Read on to know the ways on how to start making passive income through asset building.

A. Create Digital Products That Sell

E-books, courses, music, art, or anything that may be sold online and generates an income is a digital asset. There are various platforms where you can list your products to start selling. Just a heads-up though, you have to create extremely saleable products to be successful in this endeavor.

B. Build An App

Everyone has a smartphone nowadays, and that smartphone has apps that rake money for its creator by just simply being installed in your phone. If you have something in mind that you think will be helpful for people, go build that app! Facebook and Twitter were once just ideas waiting to be realized.

C. Do Affiliate Sales

This is one way of earning passive income online which happens when someone makes a purchase after clicking a link or using a referral code that you published on a certain platform. In affiliate sales, you will earn a commission or a percentage on the purchase made.

Affiliate links may be found in comments, product reviews, video contents, group discussions, or just about any space in the web. Just keep in mind that to be successful, you must have earned a relatively good reputation by having a huge number of following, or consistently high-quality contents.


In asset sharing, passive business income may come from selling or renting out assets that you already own. Just like investing, this requires a huge sum of money to be able to generate income.

You may find how to turn your assets to be the best sources of passive income below.

A. Rent Out Cars, Or Storage Spaces

If you have a spare room in your house, you may want to consider putting it out for rent for storage or other similar purpose. You may also turn your car into an asset instead of a liability when you are not using it, or if you have an extra car that’s rarely used.

B. Advertise On Your Space Or Car

If your space is located in a busy street, take advantage of the traffic in your area by running advertisements on your space or on your car. This way you earn a passive income and also help other businesses within your area grow!

C. Room Or House Rental

Renting out an extra room in the house is be one of the proven passive income methods. This is particularly true for houses near colleges or university, or for families starting out.

House rental is also another way of creating passive income. Instead of selling the house, most people prefer listing their house for rent, as it provides a steady source of income with minimal cost to them.


There is no such thing as making your money grow just by sleeping on it. Keep in mind that passive income always requires something up front: time or money. It becomes passive after a considerable amount of time, effort and money are put into it, and you get to enjoy its profits without doing any further work.


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