Financial Freedom - Make money whilst you sleep

We all dream of being financially free. Escaping the proverbial "rat race", no longer living from paycheck to paycheck, and doing a job that makes us dread Mondays. However, most people don't know how.

Key terms:

Cash flow: The flow of money into and out of a business.

Passive income: Where work is done up front, and cash flow is continually earned there after. Earner does not actively participate in gaining the money after the initial source is set up.

Invest: Put (money) into financial schemes, shares, property, or a commercial venture with the expectation of achieving a profit.

Return On Investment (ROI): Ratio between net profit and cost of investment.

Outsource: Obtain (goods or a service) by contract from an outside supplier.

Crowdfunding: The practice of funding a project or venture by raising money from a large number of people who each contribute a relatively small amount, typically via the Internet.

Financial freedom: Where you passively earn income that is greater than your expenses, allowing you to live life without actively working.

The harder you work at the beginning, and the more "seeds" you plant, the greater the reward you shall reap later on.

So how do you get started?

At a fundamental level, the best sources of passive income come from creating something that provides value to others and that we are passionate about. For example: products of interest, educational resources, services for convenience, entertainment, etc.. the possibilities are endless.

It's recommended that you focus on developing one source at a time, as to have the best chances of creating a successful and profitable stream of income. So choose one and get started.

You either invest your time or your money. Starting out with no capital will require a large investment of your time to gain a substantial source of revenue.

Removing high-interest debt, such as credit-card debt, should be your first priority. This has the greatest Return On Investment (ROI), and will give you greater stability and increase in income compared to investing.

Passive Income ideas:

1. Real estate
2. Dividend stocks
3. Writing books
4. Teaching online courses
5. Affiliate marketing
6. YouTube
7. Writing articles
8. Social media influencer
9. Drop-shipping

1. Real estate

Real estate is one of the best investments you can make, although it requires lots of capital to purchase. You will be required to pay a down-payment (typically 20% of the total cost of the property) and pay off the mortgage in monthly instalments.

Investing in real estate guarantees you a steady stream of money, as long as your tenants pay their rent. Personally managing the properties will require an active engagement, although this can be outsourced by hiring a property manager. You want to look for properties where the reasonable rent you could charge would cover the mortgage cost and other upkeep costs.

Crowdfunded real-estate allows for a monthly income proportional to amount invested. Fundrise is a website which enables you to do this over the internet.

2. Dividend Stocks

Dividend stocks are stocks that pay you for owning them. Companies pay out dividends by distributing earnings back to shareholders. You get paid a portion of the company's earnings for owning the stock. So the more you own, the greater your reward.

These are usually well-established companies with a long-standing history of being reliable and making profits year after year.

3. Writing Books

Writing a book is a good way of leaving a legacy, teachers others, and sharing something with the world.

A how-to or self-help book is an easier genre to grow an audience than fiction. Sharing experiences and teaching lessons through your writing is a good way of getting out there and starting. Set aside at least half an hour a day to sit down and write in a space that will leave you undisturbed so that you can solely focus on writing. Consistent daily work will add up and give you the best results, building yourself a book over time. If you have a deadline, workout how many pages you need to write each day to meet that deadlines, and dedicate yourself enough time to achieve that goal.

Once you have a written book, recommended around 300 pages (80,000 words), you need to decide between traditional publishing, which will cost you around £2,500, or self-publishing through a service such as Amazon Kindle Direct Publishing (KDP), which are often much cheaper or free. Keep in mind that Amazon KDP require exclusive distribution rights and restrict your ability to market your own work.

With your book published, you will begin earning royalties from the sales. As an author, you receive a percentage of the sale, depending on how you published it. This is where you should weigh up your options and decide whether working with a publishing company or self-publishing works best for you.

4. Teaching online courses

Teaching is a great example of providing value for others. And making this passive by recording videos that students can watch at any time, gives you a valuable source of passive income.

Sites such as Skillshare and Udemy give you the opportunity to become a teacher and upload your own courses, which can begin earning you passive income.

Skillshare premium is a subscription service where students pay $10 (£8) per month to get access to all the courses on the platform. A teacher's pool of revenue is made with the profit after upkeep costs are taken by Skillshare, and these are split among the teachers proportionate to the percentage of total premium minutes watched on the platform your courses had.

Udemy allows you to price your own courses, and they are purchased individually by students. After processing fees, teachers take 50% of the revenue from students who found the course "organically" on Udemy. If shared through a promotion, teachers take 97% of the commission.

5. Affiliate marketing

Blogging and Social Media marketing can be leveraged to make money by using affiliate marketing.

Affiliate marketing is where a service such as Amazon Associates provides you with a unique link to a product or service, which will usually give the customer a discount, and give you a cut of the profit. On Amazon Associates this commission is up to 10%.

With affiliate links, you can provide your audience with a reduced offer for a good product or service, and make a profit yourself.

For example: Rich Dad Poor Dad: #1 Best Selling Personal Finance Book

If 100 people purchase a £6 book, at a 10% commission rate, the affiliate partner gets £0.60 per copy, 100 copies equals £60. So with a large audience, and on evergreen content which people will continue to be interested in and visit, you can have yourself a passive stream of income.

6. YouTube

YouTube is a relatively well known option for content creators to begin earning passive income.

As of 2017, the YouTube Partner Program was updated so that content creators could not get their videos monetised until they reached 10,000 lifetime views on their channel. After this point, YouTubers can turn on monetisation, which will begin putting ads on their videos. This will then allow them to start earning income from their videos, approximately $7 per 1,000 views.

To stay relevant and grow a sizeable audience on YouTube, content creators must consistently upload, recommended multiple times a week. YouTube can also be an avenue for Affiliate Marketing, providing links in the description for products relevant to the video. With a large audience, and a reasonable click-through-rate (CTR), this can earn you the majority of your money off of YouTube, even before that critical 10k views mark.

7. Writing articles

Article sites such as Vocal give writers an opportunity to quickly and easily begin getting their work out into the world, providing others with useful information and entertainment, and making some money for themselves.

Vocal works on a demand basis, similar to YouTube, where the more people who view your content, the higher you get paid. The more content you create, and the greater value it is to others, the more successful you shall be.

It's a good idea to promote your articles elsewhere to drive traffic onto your page.

8. Social media influencer

Growing an audience on social media presents you with many opportunities; including sponsored posts, affiliate marketing and linking to a product or service you provide.

Facebook, Instagram, Twitter and YouTube are prime examples of mediums in which you can grow a following in your niche, and begin to monetise it.

Once you have a substantial following, you can reach out to brands and other content creators and offer a sponsored advertising for them. You can promote their product or service for a cost.

As previously mentioned, you can provide affiliate links for your followers to use. Learn more by reading From Nothing: Everything You Need to Profit from Affiliate Marketing

You can also link to products or services you provide to further boost those as passive income streams.

9. Drop-shipping

Drop-shipping is where you become the "middle-man". Customers place an order through your site, and you pass the orders onto the suppliers who then ship directly to the customer. You keep no stock, it is on-demand production.

Sites such as Shopify help you get started with this by making it easy to set up an online shop.

Due to scale of economy, where the more of something that is produced the cheaper it becomes, you can sell products to customers at a higher price than you buy from the manufacturer. For maximised profits, you should negotiate with your supplier to get the lowest price ethically possible.

Comparison

Comparing each of the passive income ideas based on capital needed to get started, time to get it up and running, upkeep required to keep it flowing, reliability on receiving income and short-term income size.

1. Real estate

• Capital: High
• Time: Low
• Upkeep: Medium
• Reliability: High
• Size: High

2. Dividend stocks

• Capital: Medium
• Time: Low
• Upkeep: Low
• Reliability: High
• Size: Medium

3. Writing books

• Capital: Low
• Time: High
• Upkeep: Low
• Reliability: Medium
• Size: Low

4. Teaching online courses

• Capital: Low
• Time: Medium
• Upkeep: Low
• Reliability: Medium
• Size: Low

5. Affiliate marketing

• Capital: Low
• Time: High
• Upkeep: High
• Reliability: Medium
• Size: Low

6. YouTube

• Capital: Low
• Time: High
• Upkeep: High
• Reliability: Medium
• Size: Low

7. Writing articles

• Capital: Low
• Time: Medium
• Upkeep: Medium
• Reliability: Medium
• Size: Low

8. Social media influencer

• Capital: Low
• Time: High
• Upkeep: High
• Reliability: Medium
• Size: Low

9. Drop-shipping

• Capital: Low
• Time: Medium
• Upkeep: Medium
• Reliability: Medium
• Size: Medium

Summary

There are many different ways of making money passively, most available online. The sooner you start, the better. Many of these options can be interconnected and used along with each other. The more sources of income you have, the more financially stable you are. So after you've grown one, revisit this article and consider your next choice to began expanding your passive income portfolio.

You can learn the skills required to begin putting these ideas into practice from educational sites such as Skillshare. Skillshare has thousands of courses taught by experts in their fields, from video-editing to real-estate investment.

Normally costing $10 per month for Skillshare premium, which gives you access to over 26,000 courses on the platform, you can get two months free of Skillshare premium by signing up today using this link: https://www.skillshare.com/r/user/connorlook

Follow me on Instagram @ConnorLookSkillshare

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