How to Make $379.20 in Passive Income Without Eating Into Savings

It’s difficult to suggest investing if you don’t have much in the way of savings. Today, I’m going to take on the challenge of creating some for you. Don’t suddenly expect a cheque from me in the mail. Instead, we’re going to use the same strategy used with debt payments to create savings. Then you can start investing to create passive income each and every month.

What happens with debt?

If you’re in debt, this will certainly help. And even if you’re not, it could certainly help eventually. Meanwhile, this method I’m going to share is incredibly helpful for those wanting to create savings and put it aside.

The method involves a few steps. But once those steps are complete, you’ll have a plan in place that could last you a lifetime. The first is to look at your budget for the last three months. This will help you decide how your spending habits have changed while inflation and interest rates have been up.

Then you’re going to identify anything you don’t need. I mean that literally. Whether it’s the beer you enjoy after work or eating out for lunch, identify items that could be replaced or nixed all together. Then move on to the next step of creating savings.

Create an emergency fund

Now, this last part is important, because, honestly, no one should be spending like the world will never come to an end. It’s always important to be frugal and only spend what’s necessary. One day, costs will come up. And you’ll want cash set aside for it and a plan in place that doesn’t involve making cuts from your essentials.

The next step is simple: start saving. Once you’ve made cuts from your budget, see what’s left and put the same number aside each and every month. You can do this through automated contributions. And act like it’s a non-negotiable bill payment. Bills are non-negotiable, and you will find the money to make those payments. So, act like this is one of those payments — just only to yourself.

Let’s say you’re able to put aside $500 per month. By the end of the year, that’s $6,000 in savings! You’ll want to keep going until you have about three months of wages set aside. That’s enough for an emergency fund if you get laid off or something. And once that number is achieved, you can move on to creating passive income.

Creating passive income for life

Now that you have cash set aside, you’ll want to meet with a financial advisor to decide how it’s best to invest that money conservatively in case you need it at a moment’s notice. But the cash you bring in after that amount can certainly be used for investments.

One you could consider is First National Financial (TSX:FN). While the dividend stock is down right now, it’s an excellent long-term option for after the downturn. The company operates a mortgage business, which is why it’s not doing well in this high interest rate environment. But when that comes to an end, it will come right back.

Meanwhile, it trades at a valuable 11.68 times earnings, with shares down 7% in the last year, and on par with where shares were in January. You can then bring in a 6.39% dividend yield as of writing, coming to $2.40 per share annually. Here’s what you could end up with after investing $6,000.

That’s $379.20 annually in the first year and $31.60 each month! So, while it may take some time to get there if you’re coming from nothing in terms of savings, it will certainly be worth it in the end.