It takes money to make money, right? It turns out, you may have more hidden assets than you think you do, which you can leverage to generate passive income.
This post is all about where some of those hidden assets may lie, how to use them for passive income generation, and where you may add some additional passive-income-generating-liabilities - not just assets - to your portfolio.
1. Unused Credit
Good credit is a major asset. If you do not currently have a good credit score, you should immediately start building this up by paying down debt (to zero), making all payments on time, yet still using your credit frequently. And if you already have good credit, you can use this for a wide variety of credit options. And some credit you probably already have on credit cards, going unused every month. There are ways you can use this credit available to you to generate passive income every month!
The best credit cards for this process include Chase and Citi cards that let you use this credit as a loan. This unique product lets you access this credit as cash in your bank account. You can pull this money, use it as you wish, and pay it back before month's end for a 0% interest loan. You can repeat this loan process monthly for a revolving loan at 0% for earning passive income.
2. Portfolio Line of Credit
For those who have investment accounts, you likely are already aware of the value of investing your money. But if you are new to this world, you might not realize that this brokerage account is a major asset you can leverage as collateral for a portfolio line of credit. Depending on your brokerage, this may look differently. For example, I use Wealthfront, which allows you to secure a portfolio line of credit, no questions asked, at 30% of your portfolio after it reaches $25,000 currently at a rate of 3.65%. At this low rate of debt, you simply need to find a secure investment opportunity whose return is greater than your rate of borrowing.
3. IRA Personal Loan
If you've been socking away income into a retirement savings account, like a Traditional or Roth IRA, this may have grown into significant hidden asset you didn't realize you could tap once a year to earn income passively. I will admit this technique will not generate huge amounts of income, and it will feel uncomfortably risky for some, but it's waiting for you if you choose to try.
This requires you to pull out money from your account. You have 60 days to return it. If you return it within that 60-day window, you just gave yourself a 0% interest loan! The downside? If you fail to return that money, you will not be able to return it. Plus, you will be hit with early withdrawal penalties! All in all, a bad outcome. Another downside is a bit of added tax reporting purposes. I'll admit, it is not much. But still not zero. You will have to essentially report your withdrawal, and note that the "rollover" contributions (i.e., returning your money in equal amounts), to render a zero tax liability on the process. You are only allowed one rollover per year, so you also don't want to do this trick if you think you may need to perform a rollover in that given year.
4. New Credit
One option is to apply for a new credit card. One of the tricks I've taken advantage of for passive income generation involves the acquisition of a new credit card with 0% interest for 15 months and a $200 intro promo when you spend $500.
Like the other tactics, the key is converting this credit into cash in the bank that you can use for passive income purposes. To do this, you can perform this little gift card maneuver I discovered. First, you buy gift cards. These gift cards should be Visa or Mastercard gift cards that can be used anywhere. This will earn you your intro promo cash. You can also earn cashback if you optimize the locations you purchase these gift cards. Next, you load them into Venmo. Then, you send cash to your friend (or spouse) using that card. You'll have them immediately send that cash right back to you. Finally, you can transfer this cash in your balance to your bank, all for free! Now you can use that cash like you would any other passive income generation process.
5. 401(k) Line of Credit
For the BigCo workers, you may have a 401(k) (which you should be contributing to if you do, along with all the matching opportunities many companies offer). Many institutions also let you take out a line of credit against this pot of money. Just like your portfolio line of credit, these are often very low interest. If you do not have restrictions on how you can use this money, you may have a great hidden asset for investing at a rate higher than your loan rate!
6. PayPal Credit
PayPal Credit is another new one I discovered that works much like the New Credit Card (Number 4). PayPal Credit has a nice feature. For purchases over $99, you do not pay any interest if you pay back the debt in full within 6 months. This long length of zero-interest debt allows you to do some long-term staking for passive income generation. Simply pay back the loan before 6 months, and repeat! This is a great option that, unlike the new credit card intro APR promo, won't go away in 12 months, so you can keep cycling this process over and over.