Passive Income: The Key to Self-Employed Financial Freedom

Renee Johnson
passive income

When you’re new to the world of self-employment, one of the major factors that appeals to you is that you’re essentially the master of your own destiny. The more you work, the more money you make, and there’s absolutely nobody who can stand in your way. Then, you participate in the grind for a few years, and you start to realize that you don’t necessarily want to work quite so hard any longer. You’d love to be able to pull back without taking your ability to earn a living along with it. That, in essence, is how the passive income trend was born.

Over the last few years, in particular, passive income has become increasingly appealing to self-employed people seeking financial freedom and flexibility. This has only been exacerbated by the rising interest in entrepreneurship in almost every industry you can think of. Many people are turning to income streams that require minimal ongoing effort not to necessarily “make ends meet” but to finally enjoy the lifestyle they feel they were promised when they decided to become self-employed.

If you find yourself on this journey, don’t worry – all hope is not lost. Passive income is the key to self-employed financial freedom, and it’s a lot easier to achieve than you might think. You need to keep a few key things in mind along the way.

The Rise of Passive Income: In the Beginning

One example of passive income that has existed for literally centuries takes the form of the stock market.

For example, the New York Stock Exchange started in 1792 and has always operated on a similar premise. Investors purchase stock in a company and are then rewarded based on the performance of that company.

The “passivity” comes into play when normal investors turn over the management of their larger strategy and portfolio to a professional. They sit back, collect income, and focus on other matters.

Of course, the stock market itself is nothing if not volatile – as the events of 1929 went a long way towards proving. In theory, anything that has the ability to appreciate in value can earn passive income for whoever owns it. In practice, something is only worth what one is willing to pay for it. The value of anything can go down, and proactivity is required to protect those investments.

Thankfully, passive income has evolved over the years in a number of interesting ways. None of them are a self-employed person’s key to passively becoming a millionaire. But together, they represent a great way to generate income without putting much in the way of additional effort out into the world.

The Different Types of Passive Income Opportunities Available: Real Estate and More

One of the biggest forms of passive investment available to most people is real estate investing – an industry that operates quite a bit differently behind-the-scenes than most people realize.

When people think about real estate, they don’t necessarily associate it with the term “passive” in any way. It takes a great deal of time and effort to locate a property, purchase it, fix it, rent it out, and maintain it over the long-term.

But now, thanks to modern technology, even all these goals can be dramatically streamlined.

Skip tracing, for example, can be used to quickly find a property that meets your investment goals – even if it is currently off the market. Skip tracing technologies can pull together information from public data sources, court records, social media profiles, and more. This can allow savvy investors to reach out to a homeowner and make an offer before any competitors need to.

But what happens once you own the property? Renting it out and maintaining it can also be streamlined thanks to artificial intelligence and similar tools. AI platforms can help with everything from resource optimization (cutting down on utility costs to preserve profit margins) to suggestions about proactive maintenance or how to market a property to make it more competitive.

Once the initial process of getting the property rented is satisfied, at that point much of the “effort” has been accounted for. This can be a great way to provide long-term financial stability for an investor so that they can focus on building their primary business or achieving other personal goals.

The Power of Stocks

Investing in dividend-paying stocks is another great way for a self-employed person to earn passive income. Many don’t realize that dividends are usually paid on a quarterly basis. This means that self-employed people will have a reliable income stream a few times per year without needing to sell the original stock or asset. This is an excellent, long-term investment that can create a stable income flow and augment other tactics you may employ.

Digital Products and Services

Finally, one interesting way to earn a passive income that has emerged over the last few years has to do with digital products. Take e-books, for example. All you need to do is write the book once, make it readily available, and market it. People can then purchase that book indefinitely, creating long-term passive income along the way.

Is selling digital products quite as stable as other avenues? No, because something like an e-book can be popular one day and forgotten the next. However, the larger point is clear: once you create the product, it can be sold repeatedly without any additional effort. You never need to figure out how to take that book “back to press” in a cost-effective way.

Other examples include software for computers or apps and even online courses. If you record an online course one time, people can take it again and again indefinitely so long as the information remains relevant.

Real estate rentals. Digital products. Dividend investments. These are just a few of the many examples of passive income in action.

The beauty is that, in most cases, you don’t necessarily need to be an “expert” to capitalize on a particular revenue stream. You don’t need to be a seasoned real estate professional to start renting out properties. You just need the right location, approach, and tools to optimize the process.

Conclusion

In the end, self-employment is hard work, regardless of what it is you’re doing. On the one hand, you get to immediately enjoy a sense of autonomy that most people don’t in their careers. There’s nobody to tell you what to do and when to do it – every decision is yours to make. But at the same time, you quickly begin to realize what a grind it is. If you decide to take the day off, you don’t make money that day – end of story.

Unless you’ve taken steps towards securing your own financial freedom through passive income, in which case you will be making money that day. And every other day thereafter, for that matter.

But passive income doesn’t mean that you should just stop working. It means that you have low-maintenance ways to supplement the work you’re currently doing. Every time you add a passive income stream, you can work less hard for the foreseeable future. At a certain point, you can eliminate that active work entirely and just focus on the passive streams you’ve created. That’s the type of financial flexibility that most people won’t get to enjoy, which is a very exciting position for any self-employed individual to be in.

Photo by Austin Distel on Unsplash

Renee us the editor-in-chief of SelfEmployed. She has a BS in Business, Management, and Finance at UC Berkley. She leads the editorial team fo SelfEmployed with almost a decade in working in the online media industry. You can reach her at [email protected]