5 Passive Income Streams That Could Fund Your Early Retirement Dreams
Being able to afford an early retirement isn’t easy, especially if you don’t have the ability to save and invest a large percentage of your income. However, one way to make early retirement more feasible is to develop a passive income stream.
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While passive income streams still tend to require upfront work and sometimes ongoing maintenance, in many cases these provide the opportunity to move beyond trading your time for money.
With active income streams, for example, you might do side hustles such as ridesharing, freelance writing or cleaning homes or offices. But that means you have to work more hours to earn money. If you’re not driving, writing or cleaning, you’re not getting paid.
However, if you develop a passive income stream, once you have the wheels in motion, you can earn money even when you’re not putting in any hours. For example, if you move from actively being a freelance writer who blogs for other businesses to writing a book, that book can earn you money at any point in the future. You don’t have to continue writing to earn.
Of course, earning passive income is easier said than done; but, if you can accomplish this, then you could have a nice supplement to your main income that enables you to save for an early retirement. Plus, a passive income stream could continue to pay out in retirement, which could enable you to retire earlier than if you had to solely live on your retirement savings.
With that in mind, consider the following five passive income streams that could fund your early retirement dreams.
Online Courses
Teaching generally isn’t considered a lucrative area; but, if you set things up the right way online, you could potentially make more money than even a full-time teacher.
“Find something you’re passionate about and turn it into passive income” said Lydia Edward, a certified educator in personal finance and founder of Sproutinue. “For example, if you have expertise in a specific topic, you can create a course that solves your target audience’s pain points and sell it. I often call this method ‘create once, sell forever.'”
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Digital Products
Edward also suggested creating digital products as a passive income stream to fund an early retirement. Technically, online courses are a subset of digital products, but you don’t have to limit yourself to selling your ability to teach.
With digital products, you can create something that others simply want to buy for their own use, not to learn. For example, a photographer could license photos online and earn income every time someone pays the licensing fee. An e-book is another common digital product that you can create once and sell unlimited copies.
If you’re more tech savvy, you could create software products. This could be your own software or a template to use within an existing software platform. For example, some people make money selling Excel or Notion templates.
Affiliate Marketing
A third example of a passive income stream is affiliate marketing, Edward said. In fact, her blog is an Amazon affiliate.
With affiliate marketing, you create content, such as a blog post or social media channels, and you can get paid when you recommend products or services to others. For example, if you create an article on the best types of skiing gear, you might set up affiliate partnerships and earn revenue when someone clicks links on your article to then buy the gear you recommend.
Just be sure to look into legal and ethical considerations, such as around disclosure, so you don’t start doing affiliate marketing in a way that could land you in hot water.
Rental Property
You can also use real estate to fund your early retirement dreams. One option is to rent out a home that you’re not living in, said Ryan Barone, co-founder and CEO of RentRedi. For example, rather than sell your current home, you could rent it out to create a second income stream. Or, you might “purchase properties that have one or more units and rent those out,” Barone said.
But don’t feel limited to houses.
“There are less traditional types of rentals that can generate a good amount of income, such as renting out salon chairs, storage units, student housing and even mailboxes,” Barone said. “However you choose to do it, rental properties can generate a good deal of passive income, which can allow you to retire early, and even help build generational wealth.”
Rent Part of Your Home
Lastly, if you’re not ready to make the leap to full landlord, you can rent out part of your home to still earn some extra income with minimal effort, Barone suggested.
“While this usually involves having renters live in extra bedrooms or a guest house, it doesn’t always involve having someone live in your home,” he said. “You can get creative and rent out spaces in your home — such as a basement, attic, garage or driveway — that can be used for storage or parking vehicles/boats/motor homes.”
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