My First 4 Years of Passive Income Growth
How You Can Get Started Too
Getting Started making sustainable passive income is both exciting and addicting, but figuring out where to start can be a little scary and confusing. There’s the fear of losing your hard earned money on a bad investment or putting your money into something and being unable to withdraw when you need it.
Should you invest for equity growth or the greatest immediate return? You probably hear terms like “diversification”, “portfolio” and “income streams” and if your like me when I was getting started you may be thinking “Just tell me what to do!!!” Unfortunately I can’t do that in one article, there’s always the option of hiring a financial advisor, but that can get very expensive and make turning a profit all the more difficult in the short term so carefully weigh your options. What I can do is share my journey and hope it helps you.
A Brief Overview
It took a lot of research and personal consideration to decide how I wanted to structure my portfolio, but what I settled on was to structure first for equity growth and then for income generation, so I made my Robinhood the foundation of my investments. I like this app because its free and offers commission free trading so it makes generating a profit much easier (assuming you know what your doing). Not only that, but if you share your link (or click mine) and someone signs up you will get a free share of stock and so will they - but lets be real, at this point if you don't have it you don't want it. This made up about 50% of my total investment portfolio with the remaining split between Lendingclub and now Driverloan.
Getting Started With Passive Income
I first started my investing with $5 on Stash because I clicked a link somebody sent me and thought "its just $5"- and I got a free $5 for signing up so why not? I remember watching excitedly as my $5 appreciated to something like $5.10 and thinking how cool it was to see my money grow without any effort from myself, but then it happened.. I looked down at my phone and saw the notification that I had received $0.01 in the form of dividends on my $5.
I looked a little deeper and realized that this was going to be a monthly occurrence and not just a yearly thing. I get it, that probably doesn’t excite most people but for me it was a game changer, because I realized that my $5 would continue to grow and so would that $0.01, and for every additional $5 I put in I would get a little bit bigger of payout each month. The fire was lit and I was ready to fan it.
I didn’t have a lot of disposable income to put into this (although I did have an extra $0.01 per month thanks to dividends), so I put back the $5 per week that I could and found ways to cut down my expenses to free up as much as I could to throw at Stash.
I had determined that my first goal was to make $1,000 per month from passive income. As much as cutting back did help, I learned pretty quickly that getting to any sizable income this way was going be be a slow and painful process so I started looking for any and every opportunity to make money that I could invest. I tried a few gig apps like Task Rabbit and Gigwalk, but they ended up being more of a time drain than anything.
Where I really found what I was looking for was when I started driving for Uber and Lyft. I was fortunate enough to live in an area where the customer base was fairly large, so I would turn on the apps on my way home from work and usually have a ride request before I made it home. After work rides and weekends combined I was bringing in an average of about $400 per month extra that I could put toward building passive income.
My Setbacks In Passive Income Creation
Here is where I made my first mistake. While I was looking for extra work I was also digging into article after article on how to build passive income and I wanted it fast. I was hooked and like a drug addict I was looking for my next hit. That’s when I found Shopify. I found countless examples of online dropshipping stores generating thousands every month and decided to try my hand… it did not go well.. I found a good US supplier in a niche market and built a decent social media following but still wasn’t getting any sales.
So when my Ride-sharing income began coming in I began putting about 80% of it into marketing for my shop. I got countless visitors but never made more than about 10 sales before I closed shop. Disclaimer here, the problem wasn't Shopify or dropshipping, you can actually earn a great deal of income from that. The issue was that I went into it blind, with no idea what I was doing, what SEO was, the impact themes have on conversion, the impact a connection with your audience has, and a slew of other important factors that I now understand.
Making Progress and Residual Income
In total I was putting back about $100 per month after I cut down my expenses, began Uber/Lyft and blew a large chunk on my dropshipping site. By now I had found Lending Club (a peer to peer lending platform) and had decided to put $50 per month into that (at the time the minimum to start was just $25) and $50 in dividend stock.
This is when my momentum started to shift. Lending Club has a very interesting structure which I’ll talk more about later, but for now it more or less meant that from my contributions every month my passive income increased about $0.20, but with Stash my income was actually still a negative because my free period was up and they were charging $1 per month. That’s when I found Robinhood and made the switch. They didn’t offer fractional shares, but I no longer needed them, I could afford whole shares (oh yeah, ballin' now). So once I switched to Robinhood I found a pretty safe Dividend ETF and my income was adding about another $0.10 per month in income every month ( I did branch out on single stocks later).
A Moment to Review
So at this point in my story I was about 6 months in and making about $1.00 per month total. I had just had a baby so my Uber and Lyft time is gone, but thankfully I had a raise so I was still contributing about $50 per month total to my investments. I had about $200 in Lending club and about $350 in stock through investments and value appreciation. $1 was pretty great to me, but still $999 short of my goal. So that just some quick math here, but that told me that I needed 999 times the investment I currently held. That would work out to a little over $500 thousand. Not going to get there any time soon on $50 per month.
The Good New and Bad about Financial Freedom
The good news is, while it would take 915 years to accumulate $500 thousand at $50 per month, stock tends to appreciate at about 8% per year compounded annually (your interest is earning interest), and Lending club had something of a doubling cycle that helps compound pretty fast as well (that’s an explanation for another post). Not only that but my investments were now paying me a dollar per month and that was growing every month. The bad news was that I still wasn’t going to reach my goal any time soon. I needed to keep pushing forward.
Over the next two years I was able to continue putting back money on my investments, I got raises and promotions and upped my contributions. I put a pause on Lending club at $1,000 and let it basically fund itself for a while and put all my extra income into Robinhood Stock. I had taken advantage of their Gold package that lets you borrow at a super low interest to invest because I was and still am averaging about 30%+ appreciation (I was actively trading but I have several core stock picks I buy and hold for dividends). On active trading I make about $150 per month (day trading isn’t for everyone, I’m an accountant and live for this stuff) which isn’t passive income, but definitely helps me get closer to my goal. At this point in the story I’m now making about $80 per month on my total investments and that’s growing by about $1 per month. So $80 this month, $81 next, ect.
Adding Income Streams
As I kept going I never stopped looking for ways to add some passive, or at least semi-passive income to my income streams. I found something called PPOC Club, this is product testing sight that pays you to try out the products of various e-commerce stores on amazon and give them constructive feedback. So how this works is I buy the product, get reimbursed tax and all, give my feedback and get about $2–3.50 per product. So I stack this with my Amazon card which gets me 5% cash back and this usually generates about $100 per month and some interesting products for me. Which means more money to invest, as is always the case.
Researching Income Sources & Passive Income
At this point I had probably logged more hours researching passive income than I put into my whole undergrad degree, but I did find some things that worked for me and I found a lot of "easy income" or "discount" types of apps and programs to get some extra income to help me reach my goals faster.
For example, I had tried a lot of survey apps and apparently I don’t qualify for any survey that has ever been or ever will be developed (although this is only determined after I’ve completed about 98%… convenient), but I was stubborn so I kept wasting my life trying and eventually downloaded Swagbucks again after I had tried it several years prior and discovered that they seriously upped their game. I still don’t use their surveys very often- I like Premise for those, but they have some free offers that I’ve taken advantage of and continue to find and try out, which averaged me about $5 or so per month income. Not groundbreaking but its not too shabby either.
Cash Back as an Investment Source
So what I really like about Swagbucks is the cash back. Cash back is truly the unsung hero of early retirement. So here is how I look at it. On average a person spends upwards of $16,000 per year on retail or eating out. Its wild to think about I know, but if you're like most people (hopefully you're not though) you can think about how much money you earn per year, subtract general living expenses and your left wondering "where did all my money go"?
My point is, 1% cash back can potentially get you $160 dollars per year. If you shop around you can probably find a credit card that can earn you 2% or more and that is stackable with Swagbucks offers which are sometimes as high as 5% cash back, now take that a step further. There’s a new app I’ve quickly grown to love called Fluz that you can stack on top of those for 0.5% on up to 20%. Let me break that down, if you managed to get stack the three for just half of your retail or food purchases at a 2% card, 1% on Swagbucks and 0.5% on Fluz then you would get $280 per year back.
So even though $280 isn’t a fortune, I was and am doing this because I can make that $280 work for me and keep earning. Granted this isn't passive income in its self, but its money saved which can be repurposed for investing in passive income generation.
Trying New Sources of Income
Now toward the end of the fourth year I suffered another failure. I had a friend who had recently bought a house but still had a lease on his apartment. He thought that rather than break the lease it would be better to list it on Airbnb and wanted myself and a couple of other friends to join him. After he, myself and a real estate friend of ours had looked over the lease we decided to go along with his plan as there was nothing in the lease prohibiting subleasing, let alone Airbnb specifically.
So we each poured in about $700 on furniture and spent our free time working on the listing and making sure everything was nice and tidy for pictures we had our first guest. Week one and we had already earned about $200 or $50 each. Week 2 came and went with guests and so on for about a month until finally we had earned about $700 each which had us break even.
Then the party guest came… Long story short they disrupted the neighbors who complained and upon finding out what we were doing (not that we were hiding it) we were forced to break the lease which ate up all of the “profit” which essentially meant we had lost $700 each and a lot of time. Having seen the potential of the business model I was not going to just walk away from the idea, but I did end up going in a different direction thanks to a coworker turning me back on to a prospect I had considered years ago and since forgotten, car rentals.
So after a painful amount of research I took a leap of faith and bought a cheap BMW so that I could test the waters. I decided I would rent out both my main vehicle and the BMW. I thought “whichever is rented, I’ll drive the other”. That couldn’t possibly have gone better. I quickly found myself driving my wife's minivan because both cars were in high demand and within 2 months I had to add a vehicle so that I have something to drive to work. Within just a couple of months these vehicles were generating about $1,200 per month in income for me.
My Passive Income
So what my passive or semi-passive earnings looked like at the end of year 4 monthly basis:
Lending Club: $15 (no longer accepting investors)
Cash Back: $30
I've learned a lot about passive income and how to research over the years and since starting I have found a greater passion for business, got my MBA and began working on my DBA. I've since turned my focus more on A & N Accounting which exploded around 2020, Midnight Supplies, and Da Pet Treats. I reinvest all of their earnings back into each respective business, and let the passive income largely fund itself.
My passive income portfolio has changed a lot over time to add some sources and remove others, but the point of this writing is to show you that it is possible to break free from a job being your only source of income.
About the author
I've dealt with depression for a good portion of my life. I've tried a lot of things to help, but the one that seems to have the greatest long term impact is writing. I'm hoping some of my work can somehow help someone else too.