We can finally turn our backs on January, a month that felt like it went on way too long! I didn’t manage to save that much last month and in some previous years haven’t saved anything in the first weeks of the year either. Yet even if I was starting out with zero cash right now, here are a few ways that I can still make passive income in 2023.
Generating money to then invest
There are two ways I can free up some funds going forward to invest. One way involves reducing my spending habits. So when my February paycheck comes around, my reduction in spending will leave me with a net surplus. I can then take this amount and invest it in stocks to get my year started properly.
The other way is to receive more income. Obviously, this is easier said than done. Yet some annual bonuses get paid at the end of January. So if I’m in a fortunate position to receive this, I can have a surplus of money to put to work this month.
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Even though the second idea is more one-off, the first concept (of reducing expenses) will allow me to have a source of savings not only for February, but for the rest of this year.
Investing for potential gains
Now that I’ve figured out how I can generate some savings, my focus turns to investing it. Sure, I want to generate as much income as possible, but I want to do it in a sustainable way. That’s why I’ve got a few methods to take advantage of.
The highest risk option, in my opinion, is to invest now in growth stocks. I’d pick a mix of US tech giants and UK companies. I can find some good value here, due to the aggressive selloff from 2022. Even some large-cap names fell by a considerable amount (Amazon shares dropped by 50%).
I can generate passive income here by trimming profits later this year if my call is correct. If I buy now and we see a strong rebound (which we have started to see in January), the value of my investment will rise. Let’s say I invest £1,000 and the stocks rally by 20% by year-end. From this, I can bank £200 as income and leave the £1,000 invested for 2024.
My risk is that if my view is incorrect and the share price falls, I’ll have no income to take out later this year.
Banking on traditional dividends
A more traditional way for sustainable income generation is via dividends. The current average FTSE 100 dividend yield is a generous 3.54%.
When aiming for sustainable income this year, I don’t need to rock the boat too much. There are 19 FTSE 100 stocks that have been paying a continuous dividend for a decade, or more. I’d aim to pick a selection of these with the highest yields to be able to pick up dividend income later in 2023.
Granted, these companies might not be offering a double-digit percentage yield. But I’d much rather be confident on receiving some income than the possibility of receiving nothing.
I’m aiming to mix together both ideas for income from my savings this year.
