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#passiveincome #incomestream #investing
These are just 5 ways to make some passive income. Make sure to do your own research before investing.
Welcome to "The 5" where we share 5 interesting things in black culture and society in every episode.
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0:00
If you have an extra thousand dollars, or maybe you just got an extra stimmy check
0:06
what should you do with it so it actually makes you more money? You might have heard the term passive income, but have you ever practiced it
0:13
Passive income is the process of making money with very little or no direct effort
0:19
Even though there is no such thing as purely passive income, some things are definitely more passive than getting paid directly for your work
0:27
be it hourly or salary. On this episode of The Five, we're going to look at some ways that you can make passive income with $1,000 or less
0:42
Hi, my name is Jared, and welcome to The Five, where we share five interesting things in black culture and society in every episode
0:48
Don't forget to subscribe and hit that bell so you can get notified when we release new videos
0:58
Before we get started, I just want to make it clear that I am not a financial advisor
1:04
and everyone should make sure to do their own research before investing. I'm just sharing some ideas that I think will be helpful to you
1:11
Remember that investing is a long-term commitment, and if you need this money in the next year or two
1:17
maybe you should think about saving first and then coming back to investing later
1:21
Okay, so let's jump right into it with one of my favorites, index funds
1:26
The stock market has long been a way to make some passive income
1:31
In 2019, only 33.5% of black households own stocks, according to data released recently by the Federal Reserve
1:40
In white households, however, the ownership rate is at nearly 61%. This gap is also seen amongst even wealthier black and white families
1:48
Research shows wealthier black households are much less likely to own stocks than their white counterparts
1:56
One of the reasons for this gap in stock market investing is that Black and Hispanic workers
2:01
are less likely to have employers that offer 401ks, according to research
2:07
One way to counter this is by opening up your own Roth account through an investment firm
2:12
such as TD Ameritrade, Fidelity, or Schwab. You can do it online and shouldn't take you that much time
2:18
A Roth IRA is an individual retirement account that provides tax-free growth
2:24
for money invested through the account. The annual limit for how much you can put into a Roth IRA is or if you 50 or older Since these types of investment accounts are meant to be for retirement there are penalties
2:41
for withdrawing money that was made through the account before you turned 60. However
2:46
you can withdraw gains without penalty for first-time home purchases and or college expenses
2:52
Remember, you can always take out money you put in without penalty. You just get penalized
2:57
on the gains. Now once you deposit money into these accounts you have to invest it into many
3:04
different investment options. One of them being my favorite index funds. An index fund is a
3:09
collection of individual stocks grouped together so you can own a little bit of each company
3:16
instead of investing directly in just one company. Buying stocks of just one company can be risky
3:23
as the company might fail or the stock value might drop. So buying an index fund protects your money
3:29
in case one of the company's stocks perform horribly because another one will perform great
3:35
Some popular index funds include VOO and SPY. These index funds include companies
3:42
such as Disney, Apple, Amazon, Google, and a lot of other top American companies
3:49
that you use every day. You can use the extra $1,000 you have invested in one of these index funds and let it continually make passive income
3:58
And remember, that's 8% every year. So your $1,000 will grow 8% and then that money will grow 8% and then that money will grow 8%
4:09
Creating compound interest. This definitely beats letting your money sit in a savings account that might give you a 1% or less return annually
4:18
annually. Number two, dividend paying stocks. Did you know that by buying stocks like Disney
4:27
or Coca-Cola, you get paid just for owning them? Dividend stocks are companies that pay out on a
4:33
regular basis a small amount of money per the number of shares you own. These companies are
4:39
usually well-established companies with stable earnings and have a long history of distributing
4:44
some of their earnings back to their shareholders. You can get dividends in the form of cash or more stocks
4:52
Even though most dividends are paid out quarterly, some companies even make payments every month
4:58
Although the amount of dividends paid out is very small it can start to add up the more you invest For example as of creating this video the price of one Coca share is and the company pays for every share you own every
5:14
quarter. It will take consistent and disciplined investing to make the dividends add up, but they
5:20
will add up, and some people actually retire off of them. That's once you get into investing hundreds
5:25
of thousands of dollars, but you can get started with just a thousand and keep adding to it
5:31
Even if you won't be able to retire off of it, it will be extra passive money you earn
5:37
Dividend earnings are taxed per your tax bracket, so it might be a good idea to put your investments
5:42
in a Roth account. Number three, REITs. REITs stand for Real Estate Investment Trust
5:49
REITs is just one way to invest in housing and commercial real estate market without purchasing
5:55
property outright. REITs are companies that own and manage a collection of real estate properties
6:00
These companies trade on public exchanges just like stocks and you gain the benefit of owning
6:05
real estate without having the large capital that's often required or the headache of managing
6:10
a property. Plus, whenever you're ready to get out of your investments in real estate
6:15
you can sell your shares and be done instead of going through the process of actually selling a
6:21
property if you owned one. Another bonus for investing in REITs is that they are generally
6:27
made up of diverse real estate holdings, so the risk is minimized compared to putting all your
6:33
money into one or a few properties. The dividends you make off of this type of investment will also
6:40
be taxed just like any other income depending on the investor's taxable income and filing status
6:46
It is definitely a good idea to put these types of investments in a Roth account also
6:53
Number four, become a content creator. Have you ever thought of becoming a YouTube star or Instagram or TikTok influencer
7:01
Now might be the time. YouTube is the most consumed entertainment app for African Americans and people watch
7:09
more than a billion hours of video on YouTube every single day
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If you have something you are passionate about or are an expert on, there is no reason
7:19
why you shouldn't have a YouTube channel. Yes, the competition is high, but also is the potential
7:25
People make money off of this platform every day even without being famous or having a large following
7:31
of subscribers The number of channels that earn 10 per year on YouTube grew by 50 over the last year and Black millennials more than doubled their mobile watch time on YouTube in the same period
7:45
There are certain requirements you would have to fulfill first to qualify to even earn money
7:50
on YouTube and that does take some time to build. And maintaining a channel that's active and makes money is not exactly passive, but it
7:58
It is semi-passive, as in you can do the work to post a video and have the video earn you
8:04
money while you're sleeping. With your thousand dollars you can invest in a camera, some lighting, tutorials on using
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the platform, editing software and even promote your channel. Consistency is key to growing your YouTube channel, so if you've ever thought about starting
8:20
one, now is the time. And number five, probably the most important, is pay off your credit card debt
8:27
I know this is one you're not going to want to hear, and that's why we've saved it for last
8:32
The high interest rates credit cards charge is an insane amount of money to be losing every single month
8:38
especially if you have a lot of debt. So if you're looking to make a 10% return on your investment
8:45
you can get that amount of money in your account by simply paying off a credit card that has a 10% or more interest rate
8:52
Sure, you're not getting that money because somebody is paying you. You're getting that money because you're not spending it on interest payments
9:00
Surprisingly or not surprisingly, depending on how you look at it, black households have less debt than white households on average
9:08
That's if you look at total debt, which includes mortgage, credit cards, student loans, and other types of debt
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But 27% of black households are late on paying their bills according to a 2019 research compared to 15% of white households
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Also, black households are more likely to have less access to credit, which makes them
9:29
more susceptible to the likes of payday loans. And when you run behind on paying your credit card bills, not only are you looking at higher
9:38
interest rates, you're also looking at late fees. That's why paying off your debt is so important
9:44
So take that extra thousand dollars you have and pay down your debt
9:50
Let us know which one of these five investing ideas you like the most or maybe you're already doing
9:57
We would love to hear from you in the comments. That's it for this episode of the five
10:00
We'll be back with another episode in Black Culture and Society
#Investing
#Stocks & Bonds
#People & Society
#Funds
#Socially Responsible Investing