People strive to find the key to working less and earning more. If you want to live an early retirement life, you need to have your money work for you. Warren Buffet famously said, “If you don't find a way to make money while you sleep, you will work until you die.” The best way to get your money working for you is to buy income-producing assets, and these assets will continue to create money even while you sleep.
Having assets that constantly generate income is one of the best things you can invest in. If you want to be wealthy, having income-producing assets is vital.
What Are Income-Producing Assets?
Income-producing assets are those assets that can generate income. We are talking about a business, stocks, or real estate, and these are all places you can invest your money to create more income.
In January of 2021, I wrote a post called How Owning Assets is Better than a Job. If you want to make more money and have that money work for you, you need to own assets, especially those that create more income for you. Having a house that you live in may not sound like an income-producing asset until you dive into house hacking that can help pay for your mortgage.
So it would help if you thought about how your assets can produce income for you.
12 Best Income-Producing Assets
There are so many assets people can go out and buy. Here is a list of some of the best income-producing assets you can buy today.
1. Dividend-Paying Stocks
You cannot go wrong with buying dividend-paying stocks. A dividend is a share of the profit from the company, and the company usually will pay dividends quarterly to its shareholders. The great thing about this is that you will have a good cash flow going on. It is truly unique.
If you can buy up enough dividend stocks, the cash flow could be more cash than you make a month. How great is that?
If you are looking for some good dividend stocks, the Dividend Aristocrats would be the first place to check out. These companies have increased their dividend every year for the last 25 years in a row, and that is some great consistency.
The next place to look at some great dividend stocks would be to check out the Dividend Kings. These companies have increased their dividends for the last 50 years, which is genuinely a consistent way to invest.
The cash flow you can get from dividends can do wonders for your portfolio, and it can even replace your day-to-day job. So it is a great place if you are looking to have your money work for you.
Related: SCHD vs VYM: Which is the Better Dividend ETF?
2. Index Funds
Since we talked about dividend stocks, I want to talk a bit about index funds. Index funds give out dividends just like dividend stocks. The cool thing is you can buy a dividend stock ETF, which will have a good majority of some of the best dividend stocks out there in the ETF.
An index fund is a type of passive mutual fund that tracks a particular index. VTSAX is a great index fund. This index fund tracks the entire U.S. market. Vanguard Index Funds are some of the best index funds around. Fidelity Zero Funds are another great option to have index funds at a low cost.
The great thing about index funds is that they will track the market and be very passive. You can keep pushing money into it, and at some point, the value will be big enough to stop working. Plus, you can invest in some of the best companies around the world. That is music to my ears.
Related: Here Are 9 of The Best Index Funds To Create a Long Term Portfolio
3. Rental Properties
One of the most incredible places is a rental property when you want to have some cash flow. You buy the property, fix it up, and you rent it out. There is a monthly payment every month. You front-load the work and make sure that the tenants are taken care of, and your property is taken care of.
This one is what a lot of people enjoy doing. You can easily create a bit of real estate empire that brings you enough money to replace your job. Who wouldn’t want the extra cash flow from rental properties?
If you do not want to deal with rental properties, you could always go into REITs. Rental properties can sometimes have a downside. You are the landlord and must fix things, renovate the place, and find tenants as well. This can sometimes be a hassle.
REITs are for those people that like the idea of real estate and like cash flow as well. A REIT is a Real Estate Investment Trust. It is a big company that buys a bunch of properties and rents them out. They must give out 90% of the profits as a dividend, which is an excellent dividend for so many people.
REITs are a type of dividend-paying stock without the tax benefits of the dividends. They are great if you want to have some good cash flow. Every month, they will be paying a dividend to the shareholders, and that is consistency.
5. Short-Term Rentals
You can rent these out if you have a house, a spare bedroom, or even a garage apartment. Airbnb is a big company that was able to make share rooms a great business. I have some friends who would rent out their upstairs bedrooms on Airbnb to make extra money, and they were not using those rooms to rent them out to people.
Short-term rentals can be anything from Airbnb to VRBO. There are so many opportunities to rent out space to make a little extra cash.
6. Low-maintenance Business
When you think of an excellent low-maintenance business, you need to think about a company that takes low commitment time. I usually think about a laundromat or even a car wash, and these businesses do not need much time to watch after.
Having a business is an excellent way to create some income. This is an incredible income-producing asset because, with low effort, it can bring in revenue that otherwise you would not get.
Think about a type of business that needs low maintenance. Try to figure out something you can be relatively simple to operate. Then make it happen. Get your money working for you and invest it.
Websites can be something that has a high ROI (Return on Investment). Most people quit after a while working on a website, and that is understandable. It takes hard work, time, and capital investment to get something off the ground and going.
Once you figure out how SEO works, you can make your machine work on autopilot. I follow several bloggers that create a monster of a website, and these websites bring in so much cash that they can sit back and let their writing do the work. You develop a piece of work, and it continues to sell long after you have posted.
That is the cool thing about blogging. I know even after a year of blogging, that money is starting to roll in. It takes time and effort to make these things happen. After a while, these tiny businesses start to bring income into your pocket.
8. Your Own Products
Creating a product is useful, and people will need certain things or be taught how to do something. We are in the age of technology, where we can create books, apps, and courses.
Amazon has made it easy to create books and even sell other products on the web. There are companies like Etsy that allow you to sell your creative products to anyone. Making your products have unlimited options, and you can continue to create and sell.
9. Savings accounts
Savings accounts are a great way to earn a little bit of interest on your money. Back in the day, savings accounts used to be the rage, and now with higher interest rates people are starting to save more. Now with interest rates getting higher, people are starting to put their money back in a bank.
It has been lucrative to put more into savings accounts and CDs or even Treasury bills. My favorite savings account is Ally Bank. It has a pretty good yield of 3.4% so you are making some money. It is a win-win for savings.
10. Self-Storage Units
I never really thought about Self-storage units as a place to make money. Let’s think about their business model. It has low maintenance, and with the multitude of stuff and things people have and collect, they will need to store it somewhere. They will then buy a storage unit from the owner and store if for a couple of months.
This is also a great passive income idea. There is little to no staff needed at these places.
The people renting the unit need a key to get in and out, and that is it. It is such a great idea to own storage units, and the beauty of it is that people will constantly need more storage.
11. Certificate of Deposit (CDs)
A certificate of deposit can be a great thing when interest rates a little higher. You can go to the bank and get 3-4% on a CD, and then wait until it matures, and you would have made money on them.
If you want a safe place to put your money, a CD is a good place. It is at least earning some money, and that means it is an income-producing asset. It is a place to have your money working for you.
Since inflation is eating away at our money, it is probably better to invest it in an index fund or a better place of value to gain a better return.
Lastly, bonds are also an income-producing asset. Bonds are like an IOU to banks, companies, and the government. They will earn you interest, and you will earn income on the money you use to buy the bonds.
There are some suitable ETFs that go along with bonds as well, like the Vanguard ETF BND, it is a total market bond ETF.
These are just 12 different income-producing assets that you can go out and purchase now. These assets out there can produce income and help you achieve your wealthy retirement. When having your money work for you, you need to think about what makes money.
Stocks make money. Products and businesses make money. Owning real estate makes money. These are all things that can help alleviate your wealth creation to another level. You need to start. Start simple by investing in index funds. Then branch out to do more. As you learn more, you can create more, invest more, and at some point, you will notice that you have created an empire of income-producing assets that will continue to create wealth even when you have passed away.
What are some of your favorite income-producing assets?
For beginners, M1 Finance offers a great platform to start investing and grow your money.
I’m Steve. I’m an English Teacher, traveler, and an avid outdoorsman. If you’d like to comment, ask a question, or simply say hi, leave me a message here, on Twitter (@thefrugalexpat1). Many of my posts have been written to help those in their journey to financial independence. I am on my journey, and as I learn more I hope to share more. And as always, thanks for reading The Frugal Expat.