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How I’d use £3 a day in 2023 to earn passive income for life

A young woman sitting on a couch looking at a book in a quiet library space.
Image source: Getty Images

Did you earn enough money this year – or would it be good to have some more, but without working longer hours? I would certainly be happy to boost my own passive income streams in 2023.

Today is a great day to think about how I could do that, as I can get ready to start the year as I mean to go on.

One of my own preferred passive income ideas is using a bit of spare money each day to buy dividend shares. Here is how I could do that in 2023 and beyond, to set up income streams for the rest of my life.

New Year’s savings resolution

Some passive income ideas require a lot of money upfront, for example to pay a property deposit. One of the reasons I like investing in income shares is that I do not need savings upfront.

But of course, I will still need some money to start buying shares. I would get that through regular saving.

If I put just £3 aside each day – an amount I think is realistic —  then by the end of the year I would have saved over £1,000. Investing it at an average dividend yield of 5%, for example, I ought to earn almost £55 in passive income annually. If I keep up my saving habit beyond 2022, I could keep buying new shares while hopefully continuing to earn dividends from the ones I already own.

If I invest conservatively in a diversified portfolio of blue-chip shares, hopefully some of them will continue paying out for decades. That is why I could set up passive income streams for life.

Money on its own though will not earn me dividends. My plan is to use it for buying shares. To do that, I would set up a share-dealing account, or Stocks and Shares ISA.

Choosing shares to buy

How would I know what shares to buy? My objective is passive income, so I would look for companies I felt had strong business models that ought to let them generate surplus profits far into the future, allowing them to pay dividends.

But just because a company has paid dividends in the past does not mean it will keep them up in future. So I look for a market with resilient demand. I then search for businesses I understand that have a competitive advantage in it. That can give them pricing power, enabling profits.

Building passive income streams

If the shares trade at an attractive price, I would consider buying them for my portfolio. With passive income as my objective, I would focus on shares that met these criteria and also offered me an attractive yield.

For example, this year I have added shares such as Dunelm and Altria to my portfolio because I felt they matched these criteria.

All shares have risks though. That is why I focus on building a diversified portfolio. I will continue doing that in 2023 — and hopefully building my passive income streams!

The post How I’d use £3 a day in 2023 to earn passive income for life appeared first on The Motley Fool UK.

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C Ruane has positions in Altria Group and Dunelm Group Plc. The Motley Fool UK has no position in any of the shares mentioned. 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.

Motley Fool UK 2023