What if your money could make money while you sleep?

What if you could build income streams that don't require trading your time for dollars?

And what if the path to financial freedom isn't just making more money at your job… but making your existing money work for you?

Here's what most people get wrong about passive income: They think it's a get-rich-quick scheme. They see influencers claiming they make $10,000 a month doing nothing. They assume passive income means zero effort and instant results.

The reality? Building meaningful passive income requires either significant upfront capital, significant upfront work, or both. But once you've built it, passive income is genuinely life-changing.

In today's edition:

✅ 5 proven passive income strategies with real numbers
✅ How much capital you actually need for each approach
✅ Realistic timelines and expectations
✅ Which strategies work best for different situations

Bon appétit! 🧑‍🍳

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Let's set realistic expectations first. Passive income is not free money that appears with zero effort. It's money your investments earn for you, and it takes years to build to meaningful levels. But it's worth pursuing because eventually, you can have income streams that don't require your time.

This is the classic passive income play. You buy quality companies that pay consistent dividends, and you receive quarterly cash payments just for owning shares.

Some of the best dividend stocks are "dividend aristocrats.” These are companies like Coca-Cola, Johnson & Johnson, and Walmart that have increased their dividend size for 25+ consecutive years. These boring, stable companies churn out profits year after year.

The numbers: A lot of quality dividend stocks yield 3-5% annually. Some yield more, even up to 20%, but sometimes you need to be careful of those; if a company’s paying you a ton of their profits, how are they going to grow?

So, Want $1,000 per month? You'll need $240,000-400,000 invested at 3-5%.

Yes, that's a lot of money. Which is why dividend investing is a decades-long wealth-building strategy, not a quick win. But dividend stocks also grow in value over time—you're building wealth while generating income. If you reinvest dividends, compound growth accelerates dramatically.

Best for: Long-term wealth building. Perfect for families working toward financial independence or early retirement.

Here’s a guide to building your $1,000/month dividend portfolio →

Real estate has always been a proven path to passive income, but you don't need $500,000 and a mortgage anymore.

REITs (Real Estate Investment Trusts) are companies that own income-producing properties. You buy shares like stocks, and they pay 3-6% yields. Minimum investment is just one share (typically $50-200). Highly liquid, professionally managed, but you control nothing.

Farmland investing through platforms like AcreTrader lets you own pieces of real farms. Minimums are around $15,000, historical returns are about 11% annually, but it's illiquid (meaning you can't quickly sell). As with any investment, only invest what you can afford to lose.

Real estate crowdfunding on platforms like Fundrise pools money to buy commercial properties. Minimums are $10-500, expected returns are 8-12%, but hold periods are often 5+ years and platform risk is real.

Rental properties are the traditional route: buy a property, rent it out, collect cash flow. Requires $60,000-100,000 down payment, potential cash flow of $300-800/month per property, but it's not truly passive. Tenants call at 2am about broken toilets.

Best for: Diversification beyond stocks. REITs are simplest for beginners. Rental properties are best if you have significant capital and can handle the work.

Here’s a guide to real estate investing in 2025/2026 →

Business Development Companies (BDCs) are publicly traded companies that lend to small and mid-sized businesses. When you buy shares in a BDC, you're investing in a company whose business model is to provide loans. The BDC earns interest from those loans and is required to distribute 90% of taxable income as dividends to shareholders (that’s where you come in!). Average yield for BDCs is typically high, often in the 8% to 15% range, with recent figures showing averages around 12.6%.

The catch is that higher yields mean higher risk. If borrowers default on their loans, you lose money. Economic downturns hit private credit hard. BDCs are also publicly traded, so share prices fluctuate… You could earn 10% in dividends but lose 20% in share value during a recession.

Best for: Investors wanting higher income who can tolerate higher risk.

A guide to private credit and other alternative investments →

Treasury bills are boring, but they work. You lend money to the US government for 4-52 weeks and earn 4-5% interest. Virtually zero risk, but feels like it barely beats inflation after taxes.

Best for: Emergency funds, short-term savings, or money you absolutely cannot afford to lose. Not for long-term wealth building; stocks will massively outperform over time.

These ETFs (like JEPI, QYLD) use a strategy to generate extra income: they own stocks, then sell "call options" on those stocks to other investors. A call option is essentially a contract where someone pays you a fee for the right to buy your stock at a specific price. The important part is that you pocket that fee as income, which is why these ETFs can pay 8-12% yields monthly.

But here’s the cost: You're getting paid today in exchange for giving up big gains tomorrow. If the stocks you own shoot up 30%, you don't get to keep most of that gain; you already sold the rights to it. You traded the potential growth for immediate cash.

So you're limiting your potential upside to guarantee 8-12% returns. Not bad, but again, investing in growth stocks could get you far better returns over a 20-30 year time fram than that. It all depends on your goals and timeline. For example, when stocks have a great year up 25%, your covered call ETF might only be up 8%. From 2014-2024, QQQ (regular Nasdaq ETF) returned about 400% total. QYLD (covered call version) returned about 50%. That's a devastating difference.

Best for: Retirees needing income now who don't care about growth OR people who have a sizable portfolio already and want to earn some income on it. Bad for anyone focused only on wealth building.

Here's a realistic approach: Start with mainly index funds and growth stocks in your 20s-40s, with maybe a tiny bit of covered call ETFs if you’re interested (you can reinvest the yield!). Then maybe add some dividend exposure through dividend stocks or REITs as you build capital. You can use T-bills for your emergency fund.

Or, you can just go all growth stocks and ETFs until retirement. It depends on how aggressively you want to grow your portfolio over time vs. how badly you want to protect the wealth you already do have.

The most important lesson for your kids: Money can work for you. You don't have to trade time for dollars forever. If you invest wisely over decades, passive income can eventually cover your expenses!

Passive income isn't magic, and it's not fast. It requires significant capital or significant work upfront. But once you've built it, waking up to money you didn't work for is genuinely life-changing. Start small, invest consistently, give it time.

Cheers to getting 1% better each week! 🥂

We’d love to hear about them, and your experience could help someone else make a decision of their own!
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Thanks for reading,
—Your friends @ Future Funders 🍽️

P.S. Forward this to a friend who’s trying to grow his or her net worth this year! 😤