One of the cornerstones of building financial stability is having multiple income sources, which can often be active and passive incomes. Having more income sources will generally result in more money being generated. When you consider that 65% of self-made millionaires have at least three streams of income, there’s no reason why self-made solopreneurs shouldn’t be implementing this practice as well.
As freelancers, we may have clients that come and go. Having multiple income sources will help provide financial security to keep you afloat during dry spells or times when work is scarce like the holidays. Even if a major client were to request a decrease in hours or monthly retainer, you will still be left with other viable sources of income.
But how do we go about securing these types of income streams?
First, it is important to identify the two main types of income streams to focus on: active and passive income. Active income is the income that you bring in through the performance of services. On the other hand, passive income is the money you bring in through endeavors you are not actively involved in. In other words, passive income is often a one-time investment of time and energy and continues making money thereafter. When establishing ourselves as successful freelancers, it’s important to have both active and passive income.
This is the big one for freelancers providing services. This is the type of income generated through performing services and general work. Meaning, all jobs we get hired to do. It’s also likely the most significant chunk of your monies. That’s why it’s imperative to know how much and when you’ll be seeing the money from your active income. Understanding precisely when to expect your active income will help create healthy cash flow. That also means having a clear picture of your actual balance in real-time, which is easy to do on the Lance app. If you haven’t done so recently, review your pricing to make sure you are paying yourself enough. If you need a little nudge, check out these 3 reasons you should set higher rates as a freelancer.
Setting realistic active income goals is a matter of truly knowing how you’re doing financially. This refers to knowing on a day to day basis, in addition to anticipating the future. Once you’re able to identify a stall in future active income, it is time to take action. This is when you venture out and get new clients, and start creating passive income.
What is passive income and how do I get it?
This is where your creativity as a hustler truly pays off. This income can really be anything that is not set salaries, wages, or tips. Passive income is also known as recurring income. Do you have a service you can provide on a monthly subscription basis? A skill you can teach through an online course? The possibilities are boundless, but navigating your way through the world of passive income can be tricky. Where does one even start? These are the first two steps to take.
Start Slow and Experiment
Starting a new passive income is not something you just jump into. If you want long term success in your passive income, you must ease yourself into it. The obvious first step is to come up with an idea for a possible way to generate it.
Get creative. Are you a photographer? Consider recording a webinar about lighting and uploading it to your website. You’ll have to set out time and energy to record it once, but after it’s out on the world wide web, that income you’ll receive from selling it is passive. Are you a writer with a blog that has traction? Consider selling ad-space on your blog to see that money rolling in.
Once the idea is put into practice, your focus should turn to the reaction that it receives. This is where experimentation comes in. Observe how its success changes under certain adaptations. If you went made a video tutorial, post it on different platforms, change the title of it, alter the description; anything that can influence the amount of traffic it receives. This initial source of passive income should serve as a learning experience more than anything. The development of a passive income stream should be performed methodically to maximize its effectiveness.
Alter the product based on experimentation
As you continue to experiment and develop this new source of income, it becomes more useful to look at the source stream from an analytical perspective. Analyze and observe the feedback that your product is receiving. This income stream should be treated as a business: if it is not achieving the level of success that makes it worthwhile it might be right to abandon this iteration of it. If this is the case, though, it should not be taken as a failure but rather a learning experience for your next endeavor. On the other hand, if your source has been successful, you should look into expanding more time and resources into it. Going back to the example of the video tutorials, if your traffic has increased, you could look into promoting it to gather even more attention, or consider turning your videos into an educational series. The main thing here is to pay attention to the feedback you are receiving for your product and to adjust your time and resource expenditure accordingly.
The goals that you set for your passive income should fluctuate symbiotically with your allocated energy for the product. Start with small goals that have milestones to create a benchmark for success. If your passive income is growing, you can set the larger goals with long term plans towards higher success. Passive income streams take great observance and patience: keep this in mind if you want to turn this stream into a river.