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Everyone talks about passive income — how to earn it, how to maximize it, and so on. But the truth is, if you have never generated passive income before, it can seem a bit daunting, bewildering, even overwhelming. This is especially true if you may be looking to generate significant passive capital that you might like to then more actively invest.

But before thinking so big, consider thinking small instead. Starting small is a better, smarter, and easier passive investment strategy, especially for beginners.

The key here is to focus on a few approaches that do not require ongoing effort once set up. Once you learn how to generate small amounts of passive income, then you can graduate to pursuing larger amounts. But to get started, let’s keep it modest.

Invest in dividend-paying stocks

One of the most reliable simple ways to build passive income is through buying and holding stocks that pay dividends. By investing in companies that have a history of paying consistent dividends, you can start earning passive income with minimal effort.

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For example, if you invest $10,000 in a stock that pays an annual 4% dividend, you would earn $400 annually, essentially by doing nothing. To reach $1,000 a month, all you need do is:

• Invest more money, or
• Reinvest your dividends to grow your principal

The key to success here is in selecting stable, reliable, stocks that have a solid track record of paying dividends. Do your homework and look for blue-chip companies (i.e. established, financially stable, profitable companies that are publicly traded).

Rent out your spare space

If you have an extra room, garage, or storage space, you can generate passive income simply by renting it out. Websites like Airbnb make it easy to connect with renters (indeed, 4 million people globally rent out spaces using Airbnb). Depending on your location, renting out a spare room could bring in $100 per night or more. Even at a conservative rate, renting out space for a few weekends a year could quickly add up to $1,000.

Or, what if you have a garage or storage shed that you do not really use? You could rent it out for $100 per month and make $1,200 in a year, really by doing nothing. See? Simple!

High-interest savings accounts or government bonds

Similar to the investing in dividend stock strategy above, here you would put money away in high-interest savings accounts or buy government bonds. No, these do not generate “wow” returns, but we are not looking for that; we are looking for modest, easy, simple, passive returns.

High-interest savings accounts and government bonds fit that bill. They are low-risk ways to earn passive income. Click here for our favorite high-yield savings accounts.

If, for instance, you find a savings account that offers 4% interest, and deposit $25,000 in it, it will generate, yep, $1,000 annually.

Similarly, U.S. Treasury bonds also offer stable returns with minimal risk, making them ideal for this type of investment. While Treasury bonds are subject to federal income taxes, the good news is that they are exempt from state and local income taxes. They can be bought through your own brokerage account or directly from the government at Treasurydirect.gov.

So yes, generating $1,000 in passive income is a realistic goal if you start small and approach it strategically. Create a few of these and before you know it, your passive income streams will grow and help make you some significant money while you sleep.

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