By Melanie Pinola

Four Low-Risk Ways to Generate Passive Income and Make Your Money Work Harder for You

Four Low-Risk Ways to Generate Passive Income and Make Your Money Work Harder for You There are several relatively simple ways to generate more wealth that don't involve shady "get rich quick" schemes or heavy upfront investments. Here are some tips and resources for building multiple streams of income and getting a higher rate of return on your money.

The Goal

Our objective here is to put our money to work in more ways than one and also build additional streams of income so we get closer to financial freedom. The ideas here won't make you instantly rich, but they also won't require a lot of upfront investment or risk.

Sheryl Schuff, a CPA, author, and consultant who helps people start and manage online businesses, says creating multiple streams of income is definitely the new "job security."

When you have multiple revenue streams, you won't be affected as much by the loss of a client, a product supplier, or an affiliate relationship.

Similarly, having other income streams besides your 9-to-5 job can limit your financial vulnerability if you lose your job—it's one way to prepare if you think you might lose your job.

Your additional income stream(s) can be something you're actively involved in: a side business, for example, or creative endeavor like writing a blog. It can also be passive income—that is, regular income that doesn't require a lot of maintenance—such as rent you get from your property or royalties from book sales. Investment interest and dividends also have the potential to provide a greater stream of income.

This guide focuses on simple methods for passive income streams you can get started with right away, since they tend to be the most efficient ways to get more out of your initial time and money investment.*

1. High Yield Checking or Savings Accounts

An easy way to make your money work harder is to improve the interest rate on your savings. The average savings or money market account today yields less than 1% interest, but we can do better—without taking on more risk.

Although high-yield savings banks don't generate as much interest as they used to, online banks still tend to generate higher interest rates than traditional brick-and-mortar accounts. To compare online bank rates, take a look at Bankrate's account finder tools, localized for your area.

Four Low-Risk Ways to Generate Passive Income and Make Your Money Work Harder for You Another option not often discussed: high yield or reward checking accounts, usually offered by smaller banks and credit unions and still insured by the FDIC. You'll have to jump through some hoops, like making a minimum number of debit card transactions per month, but in return you can earn more than four times the average measly interest rate. One source for finding these types of accounts is Deposit Accounts (or just do a Google search for "reward checking accounts" or "high yield checking accounts" + your state).

You won't get rich by switching to a higher-yielding checking or savings account, but you will end up with more savings. Each dollar you earn and save will generate more interest earnings. (More risky investments are beyond the scope of this article, but a source for beginning investors is the Investor's Clearinghouse, a non-profit which provides tools and articles for everything from bond basics to top investment scams.)

2. Rental Income

Often—or, at least before the real estate bust—much advice about generating wealth involved a lot of real estate speculation or flipping of properties (buying fixer-uppers or undervalued properties and then selling them for much higher). After all, some of the most prominent filthy rich celebrities, like Donald Trump, made their fortunes by investing in real estate.

However, investing in real estate is much more risky than it used to be, requires a lot of work finding the right property and qualifying/paying for it, and usually also comes with a lot of headaches. Being a landlord often means dealing with difficult or deadbeat tenants, costly property repairs, and other aspects that make managing this type of investment less profitable than it sounds.

You can still rent space or gear you already own, however, without any additional investment or much trouble. Previously mentioned Zilok lets you list all sorts of items to rent—everything from tools to furniture to cabins. One of my friends has made some side income renting out professional-grade film equipment he bought for a couple of previous projects. You can even rent out a prime parking spot via Park Circa.

If you have a spare room in your home, attic space or a basement, renting out that part of your home is another way to make more from what you've already got. You can determine a fair rental price for your area with Zillow's Rent Zestimate. (You'll still have to deal with all the landlord, or roommate, hassles, but it's less of a significant investment than trying to become a real estate mogul.)

3. Putting Your Knowledge on the Web

There's a ton of information online for the blogging model for generating passive income. This makes finding trustworthy information more difficult.

The simplest path is to start blogging about something you're very passionate about — widgets, for example — and add affiliate links to different widget stores (e.g., via the Amazon Associates program) in your blog posts (with the required note that these are ad-sponsored links). See our beginner's guide to making a web site or other blogging resources to get started creating the site itself.

There are a great many affiliate programs you can get started with, including Google AdSense, Commission Junction and LinkShare. If you're ready to enter the great wide world of adding revenue-generating ad links to your site, Schuff recommends IM Report Card for checking out reviews of various programs and look for well-known, trustworthy bloggers who write about this topic.

Perhaps the most important thing when you're doing this is that you only embed the links to products or services you would honestly recommend to others. Most people like product recommendations from people they trust (you, the blogger), but we're all wary of shills.

4. Selling Information Products

Is there a book in you? Every sort of specialized knowledge or skill has the potential to be packaged as a book, ebook, CD, DVD, game, poster and/or many other formats. Mitchell York, who writes about entrepreneurship for About.com, says that information products don't have to be revolutionary to be of value. The web makes selling information products (e.g., how to grow the largest tomatoes in the Northeast) less expensive to produce and market. It's pretty easy to publish your book on Kindle or Apple's iBooks.

Other types of passive income include royalties from photographs, artwork, patents, or other intellectual property you can license out.

How to Get Started

To find more opportunities for you, consider: What do you own or know that others might want to pay you for? What are you most interested in? Consult with friends and family to discover ways you can apply your unique capabilities towards either passive income (e.g., a static website with ad revenue or a self-published book) or active income (a part-time consulting business).

Get Professional Help

Schuff says that the most important advice she can give is to create a solid foundation by getting help from a competent professional in setting up your accounting system and, if needed, business structure. Whether you're an entrepreneur or someone just looking for some money on the side, be sure to track your progress:

Your financial books and records aren't just a bunch of numbers. They tell you how your business is doing. When you understand what the numbers are telling you, you'll know which of your products and services are the most profitable, whether your cash flow is enough to pay your bills, and how much you can afford to spend on equipment and supplies.

If you have any tips or experience to share about putting your money in motion, please share them with us in the comments.

_{* These ideas all are based on the assumption that you have the basics down first: a healthy emergency fund and your debt paid off.} Photo by HarshLight

Sheryl Schuff is the go-to person at The Web Sellers Circle for questions about accounting, bookkeeping, and QuickBooks and serves on the panel of experts at the International Association of Solopreneurs. You can find her blog at SherylSchuff.com and follow her on Twitter @SherylSchuff.

You can contact or follow Melanie Pinola, the author of this post, on Twitter.