While we’re not in a recession yet, some experts predict one may happen in the next year. As a financial planner, I always advise preparing for the worst-case scenario with your money. Making a plan before something happens can help ensure you end up on top.
One way to prepare for a recession is to increase your income. While you could ask for a raise or pick up a side hustle, consider passive income, which helps you build your earnings without much effort.
Here are some of the best recession-proof methods to make passive income, allowing you to build a more secure financial future.
Buy a Rental Property
Investing in rental properties can be an excellent source of passive income. Even during a recession, people still need a place to live. By purchasing residential or commercial properties and renting them out, you can generate a steady stream of income. Plus, real estate tends to appreciate over time, making it a promising long-term investment.
While managing rental properties does require some initial effort, you can always hire a property management company to handle the day-to-day operations, allowing you to enjoy a truly passive income stream.
If buying an entire property seems out of reach, consider investing in real estate investment trusts (REITs) that offer dividends that can serve as passive income.
Invest in Dividend Stocks
Investing in dividend stocks is another great way to earn passive income. Dividend stocks are shares of companies that distribute a portion of their earnings to shareholders on a regular basis. By owning these stocks, you can receive periodic payments without having to actively work for it.
During a recession, some companies may reduce or suspend their dividend payouts as their profits fall. But by diversifying your portfolio and investing in well-established companies with a track record of consistent dividends, you can minimize the impact of any potential setbacks.
Open a High-Yield Savings Account
High-yield savings accounts are a safe and secure way to earn passive income. Plus, in today’s high-interest rate environment, you can find high-yield savings accounts offering APYs as high as 5%.
During a recession, when the stock market becomes volatile, having emergency funds in a high-yield savings account can provide financial stability. These accounts offer better interest rates than traditional savings accounts, ensuring your money works for you, even without any effort on your part.
Consider Peer-to-Peer Lending
Peer-to-peer lending platforms have gained popularity in recent years as an alternative to traditional banking. These platforms connect borrowers with directly with lenders, allowing individuals to lend money directly to others in exchange for interest payments.
When you loan money to an individual (or business), you may make money when that loan is paid back with interest. Keep in mind that depending on who you lend to, peer-to-peer lending can be risky as there’s always a risk of default.
One way to minimize this risk is by carefully selecting borrowers with good credit histories and diversifying your investments across multiple loans.
Create and Sell Digital Products
There are plenty of ways to make money online — if you know where to look. If you have specialized knowledge or skills, consider creating and selling digital products such as e-books, online courses, or stock photography. Once you’ve created these products, they can be sold repeatedly without requiring much additional effort.
Creating digital products does require some upfront work, but once they are available for purchase, you can sit back and watch the sales roll in. Additionally, during a recession, the demand for online learning and digital resources tends to increase, making this an ideal time to tap into this market.
Build an Affiliate Marketing Business
Affiliate marketing is a popular method of earning passive income. It involves promoting other people’s products or services and earning a commission for every sale made through your referral. By building an online presence and strategically promoting relevant products or services, you can generate income even while you sleep.
During a recession, people may be more cautious with their spending, so consider focusing on products or services that offer value and are likely to be in demand regardless of economic conditions.
Building multiple streams of passive income is a smart way to secure your financial future, especially during a recession. By diversifying your income sources and investing in recession-proof strategies, you can create a resilient financial foundation.
Remember, generating passive income requires initial effort and research, but once you build it, it can provide you with ongoing financial stability and the freedom to pursue your passions.
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