Passive income ideas come in all shapes and sizes. I like the ones that really are passive and do not not need me to spend lots of money upfront. That is why one of my favourites is the dividends I can get from shares I buy.
Here is how I would aim to do that by putting aside £30 once a week.
Regular saving on an affordable scale
The central part of my plan is buying dividend shares and to do that I will need money. It is okay that I have none when I start, but I will need to save some over time.
I could aim high and try to put hundreds or even thousands of pounds each month into shares. But I think I need to make my plan realistic so that it does not collapse when reality bites. That is why I would consider a weekly saving goal of £30. If I had more spare money in future, I could always decide to increase my regular contribution.
£30 is a level I would find affordable but, over time, it can add up. I could end the first year of my plan with over £1,500 in cash and investments. If I invested that amount at an average dividend yield of 5%, I would hopefully have annual passive income streams of over £75 after just one year.
I would put the money into a share-dealing account, even if I was not yet ready to start buying shares. That way, when I found some I wanted to purchase, I would be ready to take action immediately.
Dividends as passive income streams
How exactly would this plan work in practice? Some companies pay out part or all of their profits to shareholders in the form of dividends. These are never guaranteed, which is one reason I would invest in a range of shares rather than concentrate on just a single company.
I would look for companies I thought could make big future profits. To do that, I think a firm needs to operate in a field that is likely to see substantial customer demand. I also look for businesses that can set themselves apart from competitors. For example, maybe they have a unique product patent or exclusive access to some materials. That could help them compete commercially without just aiming to be the cheapest operator.
As an example, consider consumer goods maker Unilever. I own its shares because I expect ongoing demand from customers for products like soap and shampoo – and Unilever’s family of brands help differentiate it from rivals.
Rinse and repeat
Like shampoo, this passive income plan can benefit from its own version of rinsing and repeating. I would keep saving £30 every week and continue finding dividend shares in which to invest it.
Over time, that ought to help me benefit from growing passive income streams. I could use them as extra cash to supplement my income, or I could reinvest them alongside my weekly £30 and hope my income keeps growing – for no effort.
The post How I’d build passive income streams starting with £30 a week appeared first on The Motley Fool UK.
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C Ruane has positions in Unilever. The Motley Fool UK has recommended Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.