What is Passive Income? How to Unlock Financial Freedom

What is Passive Income? How to Unlock Financial Freedom

Estimated Read Time: 6 Minutes. Contains 1182 Words.

Making money while you are sleeping sounds too good to be true, but is it? Discovering and implementing passive income strategies may help you do just that.

In most high schools you are taught to go to college so you can get a secure job. Once you graduate, you are expected to work for someone else for 40 years until you can eventually retire, if you plan accordingly. Sounds kinda shitty, right?

Unfortunately, you probably were not taught about passive income and how it can speed up the retirement process, so I want to show you ways to escape the matrix.

How Does Passive Income Work

Passive income is cash flow that is obtained by doing little to no active work, as opposed to earning income through an actual job, such as a 9-5 sales gig.

Passive income is a wealth building strategy that can drastically change your life. Once you find out a way to create passive cash flow, you won't have to be as hands on and can increase your earning potential.

The goal is to take money from your active income and put it to work in order to create passive income streams. These income streams aren't going to be completely hands off, and they will require some monitoring and oversight, but they will not demand any crucial hours of your personal time once they are up and running.

You can create passive income through investments or businesses that will eventually run themselves after the initial start up funds. Taxes will vary depending on the type of investment you are making, so make sure to keep track of your funds.

This can all sound quite intimidating, which is understandable, but creating passive income is 100% attainable for the average person if they are willing to do some research and put forth some extra effort.

Let's take a look at some of the most common passive income streams.

Passive Income Ideas

Rental Properties

Getting steady cash flow though rental properties is one of the most common passive income strategies. This strategy is one of the oldest established and most proven way to earn passive income.

There are a few different ways to literally get your foot in the door when in comes to real estate. One strategy is known as "house hacking." This is when someones purchases a multi-family home, such as a duplex or quadplex, and they live in one of the units while renting out the others.

The goal is to rent out the units so the total cashflow exceeds the monthly mortgage payment.

Example: Let's say you purchased a quadplex and the mortgage, taxes, and utilities totals to $2200 a month. If you lived in one unit and rented out the other three for $1500 a month per unit, you would total $4500 in monthly revenue. $4500-$2200 would be $2,300 in passive income.

A lot of individuals take advantage of this method using FHA loans and start their investing journey early. The earlier you start, the better.

Keep in mind real estate investing isn't totally passive. If you are a landlord, you are most likely going to have to deal with complaints from your tenets and fix any minor repairs or issues they may have. Along with this, their is always the risk of something happening to the house.

Just make sure you do your research and plan accordingly.

House hacking is one of the more common practices seen today, but you can also look into commercial real estate as well, or Storage Units.

Rental Cars

Yes, you can rent out your vehicle.

Apps, such as Turo, allow you to rent out your car to others and make passive income. Some people make anywhere between $400-$500 a month renting out their vehicle.

This app allows you to set price and rules on your vehicle, such as miles and locations allowed to visit. This is perfect if you have a vehicle you don't use on the weekends, or an extra vehicle sitting in the garage.

Turo has insurance options and provides you with everything you need to know about the rental game.

Vending Machines

Due to social media popularity, vending machine investing as seen a recent uptick in investments.

Those potato chips, coca cola, and chocolate bars can really add up. Think about how many you have bought in your life.

According to Chron, about 5 million vending machines produce an average of $20 billion in sales each year. Crazy!

With that being said, some Vending machines only bring in as low as $5 a week, but a well placed active vending machine can earn over $100 a week, and some a day. Again, Crazy!

The key to being successful in vending is to find a good route. But yes, selling candy can make you money while you sleep. Think about it, if someone is working the graveyard shift in a warehouse while you're sleeping then you literally made money while you were asleep.

Vending machines can run from very low to high in price and quality, so again do your research and invest wisely.

Dividend Stocks

One of the best ways to build a passive income stream is through dividend paying stocks. Certain companies will pay you out a quarterly dividend just for holding shares of their stock.

Investing in the stock market can be intimidating, but investing in these types of stocks should be on your list of investments.

These quarterly payments can be a reliable source of cashflow. Once you're paid out, you can then reinvest those payments and allow them to compound. You are putting your money to work and literally making money while doing nothing.

These investments will continue to grow overtime and allow you to access retirement faster. One of the best places to grow a dividend account is through a ROTH IRA due to the tax incentives.

With that being said, investing in the stock market does come with risks, so be diligent with your research and invest in safer well-established companies.

Selling an Online Product

Another way to create passive income is to sell your knowledge online as a digital product. If you are an expert or have skills in a certain field, then you can possibly make some income using the internet.

You can use your creative skills to develop an e-book or an online course. Then you can give out some basic free information based on your niche using social media outlets, such as Twitter, Instagram, or Facebook.

Example: If you are an accomplished athlete, you can create a course teaching the fundamentals of your sport and offer advanced versions of the course as well.

If you are interested in sells your skills, I recommend picking up a copy of Dominate Twitter by Bryan Sharpe.

How to Start

Passive income is a must if you plan on being financially free. Nobody wants to work forever.

There is tons of free information on Google and Youtube, so do your research and get involved in the passive game.

Don't be afraid to invest in yourself if you think there is a course or book out there that can help you as well.

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