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

Did you earn enough money this year – or would it be better if you had more, but without working longer hours? I would definitely love to increase my own passive income stream in 2023.

Today is a good day to think about how I can do it, because I can be ready to start the year the way I want to.

One of my favorite passive income ideas is to use my daily cash to buy dividend stocks. Here’s how I can do it in 2023 and beyond, to set up an income stream 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 stocks is that I don’t need savings up front.

But of course, I still need money to start buying stocks. I will get that through regular savings.

If I put in just £3 a day – an amount I think is realistic – then by the end of the year I’ll have saved over £1,000. Investing with an average dividend yield of 5%, for example, should earn me almost £55 a year in passive income. If I stick to my saving habits beyond 2022, I can continue to buy new stocks and hopefully make a profit on the stocks I already own.

If I invest conservatively in a diverse portfolio of blue-chip stocks, hopefully some will continue to pay for decades. That’s why I can set up a passive income stream for life.

The money itself though will not earn dividends. My plan is to use it to buy stocks. To do this I set up a stock trading account, or Stocks and Shares ISA.

Choose stocks to buy

How do you know what stocks to buy? My goal is passive income, so I will look for companies that I feel have a strong business model that should generate excess profits going forward, so that they can pay dividends.

But just because a company has paid dividends in the past doesn’t mean they will keep raising them in the future. So I look for markets with resilient demand. I then search for businesses that I know have a competitive advantage in. That can give price power, enable profit.

Build a passive income stream

If the shares trade at an attractive price, I will consider buying them for my portfolio. With passive income as my goal, I will focus on stocks that meet these criteria and also provide good returns.

For example, this year I have increased stocks such as Dunelm and apart to my portfolio because I think it fits the criteria.

But all stocks have risks. That’s why I focus on building a diversified portfolio. I will continue to do so in 2023 – and hopefully build a passive income stream!