The brutal truth is you are never going to make it to early retirement if your only investment is a company retirement fund and social security (and its debatable if social security will even be around in another 10-20 years).
Its on you to fund your lifestyle. This is where passive income comes in.
What is Passive Income?
Passive Income is any money that comes your way without actively working for it. Its a kind of set it and (almost) forget it mindset. I say “almost”, because it does require some effort. Passive income is a key component to any successful early retirement goal.
To secure financial independence, you need to secure 3-5 streams of passive income. This approach works especially well if the streams are diversified. This way when one stream is hit with hard times you still have others that can cover you.
What is Active Income?
On the flip side, active income producing jobs are things like your 9-5 or a small/side business that requires you to be present. Active income streams definitely have its place when working to achieve financial independence. Once you have achieved financial independence, you now have options.
Do you want to continue at your 9-5 or move on to something else? That is what passive income can give you that active income cannot.
Other types of active income producing side businesses could be: a virtual assistant on Upwork.com, Social Media Consultant, Influencer, and Web Site Developer, etc.
The pros to having your own side business are a) setting up your own hours and b) picking our own clientele. The pros to having a 9-5 are a) health benefits and b) steady paycheck. But as with any active income, the moment you stop working, so the money stops too.
How do I get Passive Income?
There are literally hundreds of ways to generate passive income. Below is a short list to inspire you to Get Your Slice of financial independence and in many cases, have some serious fun doing it.
Here are just a few ways to start generating Passive Income:
1. Get Your Slice of Cash Investments:
a. Pre-tax cash investments:
1. Invest in your company 401k.
2. Invest in a Roth IRA.
b. After Tax cash investments:
1. Invest in an Index Fund.
2. Purchase dividend stocks.
3. Invest in a Money Market (Make this your Emergency Fund).
4. Pay off Your Credit Cards. save that interest and penalty payments. Get 1 cash back credit card.
2. Get Your Slice of Real Estate.
a. Bricks and Mortar:
1. Purchase properties to flip.
2. Purchase properties to rent.
3. Rent out a room on Airbnb.com
b. Real Estate Cash Investments:
1. Invest in a REIT.
2. Look into RealtyMogul.com: where investors meet equity investment opportunities. Good for all skill levels.
3. Clear the Clutter.
5. Sell. Sell. Sell.
Physical product to sell? Try Shopify.
6. Start a Blog. Have something interesting to say or want to teach others, this is a great way to showcase that talent.
7. Write a book or e-book or audio book. Publish the same book 3 different ways. Give your audience options to suit their lifestyle.
And so much more…. but I think you get the picture.
Where do I start?
No question, it can be overwhelming with all the choices. I would recommend starting with the basics.
1. Max out your 401k (or at least get the company match).
2. Max out a Roth IRA. The younger you are the better this is because of compound interest.
3. Pay off your credit cards. This does come under passive income because it frees up additional cash that is not going to credit card penalties and interest.
4. Build that Emergency fund with a Money Market account.
5. Get rid of the clutter either though selling or renting, or just giving it away to someone who CAN use it. Giving stuff away may not add to your bottom line but it does give you back time and feel good brownie points (and who wouldn't want those?)
6. Pick your next passive income venture. What will yours be? Write it in the comments below.