My plan for powerful passive income in 2024

Of all forms of earnings, my favourite is passive income. This doesn’t come from paid work, so it feels like ‘free’ money.

It can be hard work

With a cost-of-living crisis hitting UK households since 2022, many of us are keen to boost our financial security. Fortunately, there are dozens of different kinds of unearned income, some of which are easier to access than others.

In my area, I’ve seen advertising for renting out rooms, parking spaces or driveways for extra cash. Other local ads offer extra earnings though a second job or side hustle. But these options involve time and effort that I’d rather avoid.

How I’ll make my money work harder

I’ve been doing this job — first as a staffer at The Motley Fool, then as a freelancer — for exactly 21 years. Before that, I worked in UK financial services for 15 years. So I have decades of experience in personal finance.

Therefore, I aim to generate extra passive income this year by making my money work more efficiently. And by making more dough, I can siphon off some gains to offset my hefty household bills.

Here’s how I plan to generate extra income in 2024:

Polish my pensions

Having worked since 1987, I have a mixed bag of employer and personal pensions built up over 37 years. Two of these are valuable defined-benefit/final-salary schemes that pay guaranteed sums. Also, I have personal pensions spread across various providers.

My goal in 2024 is to simplify this ragtag collection into as few pots as possible. By doing so, I aim to reduce my ongoing admin expenses and other charges. I’m also going to choose a new fund that I hope will produce higher income than the funds I’m currently stuck with.

Tap billions in cash

By far my favourite form of unearned income is share dividends, the cash payouts made by some companies to their shareholders/owners. Alas, history has taught me that collecting ‘free’ cash from dividends isn’t as easy as it seems.

The first problem is that not all public companies pay out cash to shareholders. In fact, the vast majority don’t, usually because they’re loss-making or choose to reinvest profits to boost future growth.

The second problem is that share dividends aren’t guaranteed, so they can be cut or cancelled without notice. Sometimes, even the biggest FTSE 100 companies are forced to lower or withdraw these payouts — as happened in the Covid-19 crisis of 2020-21.

Take delightful dividends

Despite these risks, my wife and I collect thousands of pounds of dividends every month. Indeed, one estimate is that total FTSE 100 dividends reached £78.7bn in 2023. Then again, most of this tidal wave of cash — almost three-fifths — goes to foreign investors.

What’s more, FTSE 100 dividends are forecast to rise to £83.7bn in 2024, nearing the record high of £85.2bn in 2018. My wife and I are very keen to grab even more of this passive income. Therefore, we’ll keep buying high-yielding shares this year and beyond.

For example, at least 10 Footsie stocks offer cash yields of between 7% a 11% a year. In addition, company share buybacks are shrinking their registers, boosting future returns for patient investors. And that’s why I love pocketing passive income from share dividends!