£9,000 in savings? Here's how I can try to make over £100 a month in passive income

Earning income can be as simple as buying shares in proven blue-chip companies that pay dividends.

By doing that I hope I can build lifelong and growing income streams, so I can invest in one now.

If I had £9,000 to invest, here's what I'd do to try and target over £100 in income every month, on average.

Readiness to invest

My first move would be practical.

I can set up a shares trading account or a Stocks and Shares ISA and put my £9,000 into it. Then I was ready to start investing as soon as I found attractive income shares that I wanted to own.

Choosing a path

If I didn't know about the stock market, I would spend time learning about important concepts like valuation.

The next move would be to decide which path I want to take.

Since passive income is my goal, I won't need to decide whether to focus on growth or stocks. But I will still need to make choices such as which sectors to focus on (I will stick to the areas I know and understand), how many different companies I should buy to keep my portfolio diversified and whether I am willing to invest in companies with low yield and the prospect of high dividend growth rates.

Quality over yield

The amount of returns I might get compared to how much I invest (known as dividend yield) is not really going to be a priority for me.

After all, benefits are never guaranteed. So what a company with a high yield today may avoid its dividends tomorrow, for example due to changing business conditions or having a lot of debt.

So my focus will be on finding attractively valued companies with good business models that I think can generate large amounts of cash flow in the future that can fund dividends.

Finding stocks to buy

As an example, consider one stock that I recently added to my portfolio, mainly because of its income-generating potential: Legal & General (LSE: LGEN).

The financial services provider operates in an industry that I expect to see strong, long-term demand. Yes, there will probably be ups and downs along the way. But retirement planning is big business and likely always will be.

In particular, Legal & General's strong brand, long history and deep customer base all help to give it a competitive advantage which means it has been consistently profitable in recent years.

A decrease in fees may lead to some customers withdrawing funds, which hurts profits. But as a long-term investor I am happy to be a shareholder.

Reinvest now for more profit later

With a dividend yield of 8.9%, Legal & General is an income goldmine for some investors.

However, if I invested £9,000 at a modest (albeit high) 7% yield, that would bring me £630 in dividends per year. Good, but below my target.

So I would reinvest my profits for ten years. That move – known as compounding – should mean that, after ten years of compounding at 7% per annum, I'll be earning an income of around £103 each month.