Sam Dogen knows a thing or two about passive income.
By the time he left his investment banking day job in 2012, Dogen, the founder of Financial Samurai and the author of “Buy This, Not That,” had built up about $80,000 in annual income outside the office. Combined with a hefty severance he negotiated for, he determined that was enough money to live on.
It was for a while, but when he and his wife decided to stay in San Francisco and have a couple of kids, the family’s cost of living shot up. By reinvesting his passive income along with money he made through his website and book sales, Dogen was able to boost the family’s income over the years as well.
In 2023, Dogen’s passive income portfolio, which includes stock, bond and real estate investments, among others, generated about $380,000.
If you’re looking to build a similar stream of passive income, you’ll have to start somewhere — and likely without the help of an investment banker’s salary or severance package. According to Dogen, the best way to begin earning passive income is through your brokerage account.
“If you want passive income right now, I think the best option is Treasury bonds at 5%,” he says. “It’s amazing.”
How to use your brokerage account to earn passive income
You can buy Treasury bonds through most major online brokerages, as Dogen points out. Treasurys are considered among the safest possible investments because they are issued and backed by the U.S. government, which has never defaulted on its debt.
And given the recent rise in short-term interest rates, short-dated Treasurys — known as T-bills — look particularly attractive. A 1-year Treasury currently pays an interest rate of 4.73%, with shorter-dated bonds yielding even more.
“Right now, Treasurys are the most attractive, with 1-year Treasury bonds yielding about 5%,” Dogen says. “You can buy a bond for $1,000 tomorrow for 5% guaranteed, and you don’t have to pay state income tax [on the interest income].”
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