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Make Money While You Sleep - An Intro To Passive Income

8/20/2018

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Most people only earn money doing their 9-5 Monday to Friday jobs. This approach works, it pays the bills, it puts food in your mouth, however, it will not make you rich or wealthy. In life there is only one thing that money doesn't buy you, and that is time.  When you are trading time for money, you can only make so much of it.

As an example, let's take a barista at Starbucks, who makes $12 per hour and works 40 hours a week.

Employer: Starbucks
Hourly Rate: $12
Hours Per Week: 40
Pretax income: $480
Taxes paid (30%): $144
Take home: $336
Actual hourly rate: $8.40

This employee is essentially selling one hour of their lives for $8.40, and while that may be necessary to pay the bills, let's look at another option. This person has an etsy shop, they sell art prints. On average, they sell 10 a month at $40 a piece, this is all art they created for fun any number of months ago.

Employer: Self Employed
Cost of print: $40
Sales per month: 10
Total Sales: $400
Taxes (30%): $120
Take Home: $280
Hours spent on creation: 2
Actual Hourly rate: $140

In this example does the person selling art online make enough to pay the bills? Probably not, however, this is essentially passive income generated from something they do for fun, and can continue to make money each month even if no time is spent to develop new content. Not bad for doing something you enjoy.

Over the next few posts, I will be taking a look at some popular side streams of income. Do you have any that you love that generates income while you sleep that we can look at?


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    Sean

    I am just a regular guy who does far to much research on financial independence and early retirement (FI/RE). I look forward to sharing my journey with you all.

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