This post is part of a 30-day series called the 30 Steps Program to Financial Independence. Yesterday, we discussed having multiple sources of income. You might take on freelancing jobs, register on platforms like Elance, or sell crafts on Etsy. However, you’re still working in all these cases.
To me, financial independence means reaching a point where you have enough passive income to cover your basic needs—like housing and food—whether you work or not.
So, what is passive income? It’s money you earn without actively working for it. Think of interest paid into your savings account or rent from properties you own. While you might need to maintain the property and manage tenants, it’s still mostly passive.
The day your passive income exceeds your living expenses is the day you achieve financial independence. At that point, you can sustain your lifestyle without needing to work.
There are many ways to generate passive income. For instance:
– Earning interest from savings accounts, though returns are currently low
– Investing in bonds, shares, and stocks
– Creating something and securing intellectual property rights
– Starting a company, though it requires significant effort before it becomes a passive source of income
– Investing in real estate; as long as your property generates positive cash flow, it counts as passive income
– Launching a blog with ads and affiliate sales
Having multiple sources of passive income reduces your vulnerability to any one source drying up. If a tenant moves out, you might cash in some stocks instead.
I also consider passive income to be something you enjoy so much that it doesn’t feel like work, such as playing the guitar and getting paid for it or selling your art. However, if you get sick and can no longer perform or create art, that income would disappear.