Passive income is awesome. 💸
It’s one of the keys to being wealthy and reaching financial freedom. And the good news is you can start earning passive income as soon as you’re ready: in university. The student’s life is honestly the best time to start planting some passive income seeds.
What do I mean exactly by passive income? Put simply, passive income is putting in a lot of effort into something to reap the benefits later on. It’s creating an asset which will generate income for future months/years, without much additional work (so not starting a business). By generating passive income, you stop trading time for money. By building income sources now, you will have several passive income streams in your 30s, 40s and later on. You achieve many people’s dream: earning money while sleeping.
I’ve compiled a list of the top ways a student can start building income streams most of them personally tried out by me (therefore doable).
1. Start a side hustle
Yes, it won’t be passive when you start in university, but if you can scale it and keep going for a few years, you’ll have passive income in your 30s and beyond! A great example is my friend Benjamin, who started working as a freelancer building websites and doing digital marketing for clients. He learnt how to interact with clients and built the right skills. As his business grew he hired employees to do his work, as he managed and watched them. Now he spends 1-2 hours per day managing his business, and he’s 24! If he can do it, so can you. 😉
If you’re interested in starting a side hustle to turn it into passive income, here’s a simple 3 step method to find ideas on what you could do. On one piece of paper (or online) make three columns with the following titles:
|My Skills||What I Enjoy||My Network|
Complete the columns below with all the skills, things you enjoy and networks you can think of. Once that is completed, look for an item that could combine the three and make money. Then, apply the Lean Startup methodology to figure out whether your idea will work. In other words, keep making experiments, testing whether your side hustle will work and validating customers before jumping in. Here’s an example:
|My Skills||What I Enjoy||My Network|
|Translating to Spanish||Listening to podcasts||Online blogger community|
I literally did the 3 step process above, and I realised that I can write, I enjoy listening to podcasts and I have the online blogger community to work with. My side hustle: writing podcast show notes for fellow bloggers who have podcasts! And I still do it!
Try it yourself and start working on your side hustle. As your side hustle grows learn the essentials of outsourcing, managing people and automation, so you can turn the side hustle into an income stream. For more info on how Benjamin did it, check out my interview with him.
2. Sell online products
Meta skills such as writing, marketing, designing and social media management can be very useful when building passive income. If those are skills that you have or that you’re interested in building, online products can be very lucrative. 🤑 Online products range from online courses, selling an e-book, to selling a software or plugins. Even if you feel you can’t teach much online, it’s more about how you teach it rather than the content itself. For this reason, you can simply learn about a certain activity yourself and then try to teach it to others through a video course. As a student, this is very helpful as you can simply teach what you’re learning about in university – win win win. 🔥
3. Build an online business
Setting up a business isn’t as complicated as it seems. The hard part is figuring out a good service or product that actually solves people’s problems.
You can figure out what you want your business to be on following the 3 step method above, or you can start by going freelance. Start working freelance and doing the work yourself, exchanging time for money. Once you’ve built the client base and the skills, hire other freelancers to do the work while you supervise and manage (and keep a percentage, of course 😎).
If you do this well and scale the business to gain more clients, you effectively have an online business. And if you’re only doing the managing, that could take up 1 hour a day to manage, which means… passive income 🔥. As you build it up, you set up a system where the business is able to work without you, and you stop exchanging time for money! Eventually, you can have assistants do your work allowing you to receive the stage of earning while you sleep. 😴 The key here is knowing how to set up systems and how to manage people, which is always easier said than done. I recommend reading The E-Myth and How to Win Friends and Influence People to learn how to get started
4. Selling on Etsy
Etsy is a shop that allows you to sell digital products online, and can a very sweet source of passive income.
The key, once again, is selling a product that can sell and meets high demand. You also want to be selling a product that isn’t high maintenance. You may need some design or photography skills, but no need to go pro. Start off using the online version of Adobe Photoshop for $10 a month or even other software such as Canva and Snappa. And get some nice fonts!
Make sure your listing is detailed, make sure that it’s clear that your product is a downloadable product and not a physical product.
For ideas and price ranges, go on Etsy yourself and see what people are selling and whether you could find a niche. Look for a product that people are already selling – meaning people will buy – but isn’t oversaturated with sellers – meaning you still have a chance.
If done cleverly, selling on Etsy can give you a comfortable monthly return 🔥
Passive income through investing can be done through capital gain sales or dividends. It’s also a type of passive income that takes time and effort and that you must be in for the long term.
Capital gains sales is passive income that you will enjoy close to retirement, or if you’re financially independent. Meaning you keep investing when you’re young, you use the magic of compound interest and have a decent sized nest egg to take your money out from.
You can start now by following the 15% rule and investing 15% of your income every month into cheap global index funds. Just by investing £100 per month in your twenties, you end up with £247,154.26 in your 60s. 😎
Dividend growth investing will allow you to see the benefits immediately, however it takes quite a lot of capital to build a large passive income stream. For £1,000 a month in passive income, you’ll need about £100,000 of capital invested. But it’s not as risky as it seems; if you invest in dividend aristocrats (companies who have been paying increasing dividends for 25 years) you’re almost certain to get your dividends coming in every month. We’re talking huge companies such as McDonald’s, Coca Cola and AT&T. As usual, always do your research 😉.
Earning passive income is not as difficult as it seems, especially as a student with extra time and energy. It takes a lot of initial effort and there’s a certain risk factor: what if I put all this effort and nothing comes out of it? It’s a fear we all have, but necessary if you ever want to try anything new or risky in life.
I’ve presented you with 5 possible ideas to build passive income. Personally I’m still at the skill building and client building stage as a freelancer, with the goal of eventually building an online business where all I have to do is manage. I’m also continuously investing for retirement, which is passive income I’ll enjoy when I’m much older. I recommend to focus on one, and do it well, instead of trying to do all of them and never managing to make money. As well as passive income you can build income streams – and if you build those early on (hem hem university!), you’ll be enjoying the passive income in your later years (when you’re much more likely to need it!).