Passive Income Retire Early
Updated August 09, 2022

How Jesse Used Passive Income to Retire Early at 42

Other Passive Income Ideas

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At the age of 34, after twelve years with one company, I knew I needed a change.  Burned out and sick of trying to manage the agendas of multiple bosses, it was time to plan an escape from corporate America.  I was certain that finding a new job wasn’t the answer.  I needed a plan – a plan to generate enough passive income investments to escape the corporate world and live the life I always dreamed of.

Like most people, I had a dream of being rich.  But I realized something one day.  It was just a dream.  I needed a solid goal to make it happen.  The process of finding my goal led me to an entirely new way of thinking.

Finding My Goal

What is rich anyways?  Defining a goal requires several pieces, one of which is being specific. Rich is hardly specific.  It had never occurred to me that I didn’t have a good definition of rich.  Maybe it was a number…$1 million?  $2 million?  $5? And yet, this seemed to be lacking something.

In the area I live there is what is known as “land rich, cash poor.”  This refers to people who own large ranches, worth millions of dollars, yet struggle to scratch out a living.  I could see that having a high net worth wasn’t the answer that I wanted.

The idea of having a large amount of cash and slowly spending it down to nothing has always troubled me.  Financial advisors often talk about a 4% rule. This rule says that you can (probably) spend 4% of your savings every year until you die without running out of money.  But I knew there had to be better way!

So what did I want out of life?

I made a list of what was important to me:

  1. Living a healthy life, going to the gym every day, eating healthy, improving myself daily
  2. Spending time with friends and family
  3. Saving money to grow my net worth and not letting it all go to paying the bills
  4. Not having to go to work in a corporate job anymore
  5. Being able to do what I wanted when I wanted

Looking through my list, the answer became so clear to me.  I didn’t need a million dollars to live the life I wanted!  I just needed to generate more cash than I was spending!  This was such a refreshing idea.

Saving a few million dollars seemed like a daunting task.  On the other hand, finding ways to generate $50,000 or $100,000 seemed rather attainable.  It seemed even more attainable when broken down into a monthly or weekly figure.

I set a goal of generating enough passive income sources to be able to escape my corporate job in 10 years.  I wasn’t sure if it was possible.  All my calculations showed it would be close.

All my naysaying friends and family insisted that I absolutely had to have a job.  “You can’t make money without a job,” they said.

I set my mind to find out what I was capable of and resolved that nobody could tell me what I can or can’t do.

When I first set my goal, I knew of only two ways to create passive income: dividend stocks and rental property.  This is where I focused my initial efforts.  At the time these took a lot of capital (or so I thought).  Today there are ways to get started in both with very little money invested.

Using Dividend Stocks for Truly Passive Income

The first step was to take what stock investments I owned and switch them all to dividend paying stocks.  There are companies out there that pay you just for owning the stock.  Many of these companies even give regular raises to their stockholders.

Companies that raise dividends regularly are called dividend growth companies.  Some of these companies have been increasing the dividends they pay for over 60 years!  The amounts may start off small, but they grow consistently grow over time.  Imagine getting a 10% raise annually!  Not bad for just owning shares in a great company.

Today, there are simple ways to start investing in dividend stocks without needing a lot of money or being an expert at stocks.  One such way is Ally Invest.

Boosting Returns with Real Estate

The second phase in my passive income plan was getting into real estate rentals.  Buying a rental property was something I had considered in the past but dismissed.  So many people in my life were negative about the idea that I never pulled the trigger.  Once I had a clear goal of creating passive income the choice was easy.  How I wish I had started earlier!

Real estate has proved to be one of the best streams of passive income that I have.  There are three real drawbacks:

  1. It does take some time if you manage rentals yourself
  2. It can take a lot of money to get started
  3. Dealing with tenants can be challenging

There are ways to minimize the money issue.  House hacking is a common one.  This involves using an FHA loan to buy a three or 4-plex with only 3.5% down and living in one of the units for at least a year.

This still takes a lump of cash, and not everyone wants to live this way.

Fortunately, crowd funding has come to real estate investing, so today it’s quite possible to invest in real estate with very little money.

Platforms like Fundrise give the average investor access to deals across the country.  Instead of having all your money tied up in one property or city, you can spread it out to reduce risk.

Here are some of the advantages of crowd funding vs. buying outright:

  1. Ability to invest with as little as $500
  2. Instant diversification across different states and properties
  3. No tenants, maintenance, or property management issues
  4. Investment in larger properties than you could by yourself
  5. High-quality, institutional-grade deals underwritten by professionals

Explore Private Lending

With the two ways of creating passive income that I was familiar with under control, I quickly began searching for other ways to make money.  Peer to peer lending platforms like Prosper caught my attention.   One of the best things that about these sites is that I would get to help fund someone’s dream while making a good return for myself.

Lending money seemed like a great idea.  Banks lend money, and everybody knows they make lots of money.  I wanted to be like a bank.  A little research into how these platforms operate, and I was sold.

I chose Prosper as my platform of choice.  The site requires a minimum of $1000 to start funding loans.  You can loan as little as $25 at a time, which means you can diversify across 40 loans with a minimum investment.  Diversifying is important because some loans will go bad.  You can pick an automated strategy, so the platform invests for you, or you can pick and choose which loans you invest in.  It’s even possible to fund entire loans, but this would be risky in case of a default.

One of the things I realized when I started lending is that the returns aren’t tied to the stock market.  Just like my real estate investments, lending operated in its own world.  If a rental burned down or the stock market crashed, I would still collect my monthly checks from Prosper.  I was really starting to see the value in having multiple income streams!

Life Changes Even the Best Plans

Everything was going to plan.  I was still trudging through the daily grind of my day job, but it was survivable knowing that I was using the income to fund my investments into passive income sources.  My income streams were growing nicely, but then one day life through me a curve ball.

Four years in on my plan, I found out I was having a baby girl!  Up until the moment she was born, I had no idea what a profoundly life-changing experience this would be.

Passive Income Early Retirement

Initially, the long hours at the office, the business trips, the late-night calls and emails were business as usual.  A resentment of work taking so much of my life soon set in.  It was time to double down on my efforts to create enough income to escape my job.  I had my “why!”

Often in podcasts and books it is discussed that when your “why” is big enough, you will find a way to make it happen.  I wanted to be home to read every night to my little girl, take her to the park every evening, drop her off and pick her up at school, coach her soccer teams, and basically just be there for my daughter.  Yes, I had found my “why!”  Now, I had to make it happen.

I doubled my efforts looking for passive income.  One thing became clear to me.  I was investing all the capital I could muster, but it was time to find something new…something that didn’t require a lot of money.  I devoured podcasts and articles learning about passive income and non-passive income.  Finally, two ways of generating income jumped out at me as real possibilities.

Diving into the Sharing Economy

The first was finding something to put up for rent in the new sharing economy.  Driving for Lyft wasn’t an option with a full-time job and the desire to spend time with my family.  I considered putting up my snowboards on Spinlister and my truck on Turo.

But then I found the perfect sharing economy endeavor.

I had stayed at an Airbnb once, just to try it out, but I hadn’t given much thought to renting out space through Airbnb myself.

Living in a small town and off the tourist path, my location didn’t seem like a recipe for a great Airbnb business.  But I did have an extra bedroom.  With an interstate highway running through town, maybe the occasional overnight stay might get booked.  Was I ever wrong!

Apparently, there is a constant stream of people looking for short-term rentals, from medical students doing practicals at the hospital to travelling nurse to people who just moved into town.  And this isn’t even to mention the amount of one- or two-day tourists that stop by.  I never would have dreamed Airbnb would be a several hundred dollar a month opportunity in my sleepy little town!

Making Some Cash with the Internet

The second great idea was starting a website.  The more I learned about ways to generate income, the more I recognized online income as a real opportunity.  I knew nothing about creating a website and even less about how to make money with one.  Learning about these became my number one passion.

I listened to countless podcasts and read numerous articles on creating a website.  Sometimes the best way is to just jump in.  I started a little WordPress blog just to get the hang of how it all works but eventually ended up buying a small established site that was already making money.

Buying a site seemed great for me because I was anxious to escape my job.  I was able to learn first hand how the affiliate side of the business worked.  There was one major drawback.  The niche was something I found quite dull and boring.  It’s difficult to stay engaged with something that isn’t interesting.

Eventually I started a new blog.  One that I was interested in and geared towards making income.  It was surprisingly easy.  Focusing on writing about a hobby of mine came naturally, and it wasn’t difficult to find ways to monetize the site.  Soon enough, I had a respectable monthly income stream, all from a hobby!

If you’d like to learn how to start your own money-making blog, sign up for Logan & Caroline’s FREE blogging email course below!

Wrapping It All Up

I’m no longer a slave to my job.  I have multiple income streams, so if something happens to one of them, the others remain.  When I worked at a job, I was always at risk of being laid off and thereby losing my one source of income.  Having multiple streams of diversified income allows me to sleep well at night.

Remember that little goal I told you about?  How I wanted to leave my job in 10 years?  I did it in 8!

Today I get to enjoy my morning breakfast chatting with my daughter before dropping her off at school.  Every day is spent improving myself at the gym, reading a book, or learning something new.  I am living the life I choose, all because I set a goal one day.


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5 years ago

Awesome post! Thanks for all the ideas and congrats on hitting your goal!