In times of economic uncertainty, it’s natural to feel a bit uneasy about your financial stability. The fear of losing a job or struggling to make ends meet can be overwhelming.
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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.
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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.