As many of you know, passive income is the core strategy of my early retirement plan. Currently, we have about $1,400/month of passive income. Of course, it would be better to have more passive income, but even $1,400/month took a very long time to build. Some readers were wondering how I got started so I wanted to write a bit more about the beginning stages. We took the long slow road to passive income. I’m sure there are faster and easier ways to do this and I’m searching for that elusive golden goose too.
Start Making Passive Income
1. Spend less than you earn and save some money in the bank. This is the first step to passive income and I’m sure many of you are already doing this. Your savings account pays interest and that’s the first passive income most people see. The interest rate is so low now so you won’t see much income, but you have to walk before you can run.
2. Invest in equities. I invested in mutual funds and growth stocks soon after I started working. I kept investing through the down cycles and was able to build up a modest after-tax stock account. Over the last 2 years, I have been moving these investments toward dividend paying stocks to generate passive income. The building process took a long time for me because the stock market was so volatile since 1999. If you are just starting out, you can invest in a low cost index fund/ETF such as VTSMX and eventually switch over to a dividend portfolio. I think that is probably the easiest way to go for someone just starting out.
3. Rental home. We purchased a home in 2000 and lived there until 2007. When we moved, we rented the house out instead of selling it. I think many landlords started out this way. The rental home worked out well for us so that gave us the incentive to acquire a 4-plex. The 4-plex is cash flow positive so far in 2012 and it should get even better in 4-5 years.
4. Crowdfunding – Here is something new – I’m going give real estate crowdfunding a try this year. I just opened an account at Realty Shares. There is a 30 day cooling off period before you invest. The SEC recommends this to allow investors to become more familiar with the investment platform and the different types of investments available. During this period, investors can view the offerings available, but they can’t invest until the waiting period is over.
Fortunately, you can get this waiting period waived by filling out your investor profile and scheduling a follow-up call with Realty Shares. The follow-up call only took 5 minutes and they went over the different types of investments that are available. I got my cooling off period removed and I’m ready to invest! Currently, there are 11 open investments available. The minimum investment for each project is from $2,000 to $25,000. I’ll need go over the listing in detail and see if there is something I like. I’m planning to start with $5,000 and go up to $10,000 by the end of 2017.
5. Blogging – Okay, this one is not quite passive. Blogging can be a lot of work, but it can lead to huge opportunities down the road. Many bloggers left their day job to pursue full-time self employment and they are doing very well. Some elite bloggers are making a lot more income than they ever made working for someone else.I encourage everyone to start a blog. The great thing about blogging is that you don’t need to know how to do all the technical stuff. You don’t even need to be a great writer. I was always better at STEM subjects when I was in school and I never thought I could write for a wide audience. My early articles weren’t great, but I improved a lot since then. Like anything, the more you practice, the better you get. Seriously, if I can write a blog, anyone can.
Here is my tutorial on How to Start a Blog and Why You Should. Eventually, it could become very passive. Some bloggers update their blog once per month and still generate a very respectable passive income. I hope to get there someday.
So you see, it’s not difficult to start your passive income rolling, but it does take a lot of time. Your interest payment from the bank maybe $3-4/month now, but if you keep working on it you can get to $5,000/month in time.
Readers, do you have any plan to make passive income? You can see how I’m doing at my Passive Income page.
Joe left his engineering career behind to become a stay-at-home dad/blogger at 38. Today, he blogs about financial independence, early retirement, investing, and living a frugal lifestyle. See how he generates Passive Income here.
Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help DIY investors analyze their portfolio and plan for retirement.
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