What are the best strategies to start making passive income in 2023?

**Understanding Passive Income**: Passive income is defined as earnings derived from a rental property, limited partnership, or other enterprise in which a person is not actively involved.

The IRS characterizes it as income that does not require you to be actively engaged in the business.

**Dividend Stocks**: When you invest in dividend-paying stocks, you earn a portion of a company's profits distributed to shareholders.

The average dividend yield for stocks in the S&P 500 has been around 2% to 3% historically, which can provide a steady income stream if reinvested wisely.

**Real Estate Investment Trusts (REITs)**: REITs are companies that own, operate, or finance income-producing real estate.

They are required by law to distribute at least 90% of their taxable income as dividends to shareholders, making them a popular passive income investment.

**Peer-to-Peer Lending**: This method involves lending money to individuals or businesses through online services that match lenders with borrowers.

The average return can vary but often ranges from 5% to 12%, depending on the risk of the borrower.

**Creating Digital Products**: Once created, digital products like eBooks, online courses, or stock photography can be sold repeatedly.

The initial effort in creating these products can yield passive income for years without ongoing effort.

**Rental Properties**: Owning rental properties can generate passive income through monthly rent payments.

However, it requires initial capital and ongoing management, unless you hire a property management company, which can reduce profits.

**Automated Online Businesses**: Dropshipping is a business model where you sell products without holding inventory.

The supplier ships products directly to customers, allowing you to focus on marketing while generating passive income.

**Index Funds**: Investing in index funds allows you to own a diversified portfolio of stocks with minimal effort.

Over the long term, these funds have historically returned about 7% to 10% annually, making them a solid passive income strategy.

**High-Yield Savings Accounts**: While not typically high in returns, high-yield savings accounts offer a safe way to earn interest on your savings.

Interest rates can vary, but they can be a better alternative to traditional savings accounts.

**Cashback Rewards**: Some credit cards offer cashback on purchases, which can accumulate over time.

If used responsibly, this can serve as a form of passive income, as you earn money back on regular spending without additional effort.

**Affiliate Marketing**: By promoting products or services through a blog or social media, you can earn commissions on sales generated through your links.

This requires initial effort in creating content but can become a source of passive income over time.

**Creating an App**: If you develop an app that serves a specific need or market, it can generate income through ads, subscriptions, or purchases.

The tech industry has seen apps generating millions in passive income, depending on user engagement.

**Crowdfunded Real Estate**: Platforms that allow you to invest in real estate projects with other investors are becoming popular.

Investments can start with relatively low amounts, and returns can be generated through rental income or property appreciation.

**Investing in Bonds**: Government and corporate bonds offer fixed interest payments over time.

While generally lower in returns compared to stocks, they are considered safer and can provide predictable income.

**Vending Machines**: Owning vending machines can be a surprising source of passive income.

After the initial investment and placement, they can generate consistent cash flow with minimal maintenance.

**Creating a YouTube Channel**: Producing content on YouTube can lead to ad revenue once you meet certain audience thresholds.

While it requires initial effort, successful channels can generate income over time from views and sponsorships.

**License Your Photography**: If you are a photographer, licensing your images on stock photography websites can create passive income as you earn royalties each time someone purchases your work.

**Utilizing Tax-Advantaged Accounts**: Accounts like Roth IRAs or 401(k)s allow your investments to grow tax-free or tax-deferred, enhancing your overall returns and passive income potential when withdrawn in retirement.

**Investing in Cryptocurrency**: While volatile, staking certain cryptocurrencies allows you to earn rewards for helping secure the network.

This can yield high returns, but the risks are significant and must be managed.

**Understanding the Time Value of Money**: The principle of the time value of money states that a dollar today is worth more than a dollar in the future due to its potential earning capacity.

This concept is crucial in evaluating passive income opportunities and understanding the long-term benefits of investing early.