Passive income and financial independence

Passive Income: A Pathway to Financial Independence

Recently there has been talks of “financial independence. What does this mean to you? Most people live in the cycle of active income, which ties their time to their income; the salary you get from the work you do is as a direct result of your efforts at work. Active income can be earned only by investing time and effort directly in return for money; if you don’t work, you don’t earn. Whether you are a teacher, a builder, a banker, a software developer, an athlete, an actor, or a doctor, you have to work to earn a living.

Passive income and financial independence
Passive Income

Financial independence comes when your passive income streams far surpass your expenses.

That is what we must all aim for as with this, you have the freedom of choice and flexibility.

Here are some sources of passive income:

1. Interest Income 

This is one of the most basic form of passive income. Interest earned on savings account balances, fixed deposits, money market funds or bonds is a relatively riskfree source of passive income. However,do note that interest rates hardy keep apace with inflation, so it can be a challenge to earn or grow capital in any significant way.

2. Investment Property

Investing in residential or commercial property for investment purposes is a time-tested way of enjoying passive income alongside capital appreciation. The location and condition of the property are of significant importance for you to realize stable rental income far into the future. Seeking appropriate advice from reputable real estate companies will give you the best chance at success.


3. Dividend-Yielding Stocks

Another effective way of earning passive income is to buy shares in a publicly quoted company that regularly pays dividends to its shareholders. Seek professional guidance; a reputable stockbroking house will select stocks for you. However, it is also important for you to develop your knowledge of investing so that you understand what is being done with your money.

Whilst investing provides one of the most accessible forms of passive income; in discussing its advantages, one cannot afford to overlook the issue of risk, which is an integral part of investing. There is always the very real possibility of loss, as markets can be volatile and prices will go up and down. A diversified portfolio will help to mitigate this.


4. Business Interests

If you are considering investing in an interesting business opportunity, seek professional advice. Some of the greatest sources of passive income have come from people taking a chance on an entrepreneur with a great idea, after doing their due diligence.


5. Rent Out a Room

Do you have an extra room that you don’t need but don’t want a fulltime tenant or flatmate? If you make some effort to make it presentable and functional, you may be able to rent it out through Airbnb or other companies; this is fast becoming a serious option for short-term city dwellers alongside small guesthouses and hotels.


6. Can you Blog?

Is there an area that you are passionate about and knowledgeable about? Is your lifestyle of interest to others? You may find that there is a large audience out there that is interested. As you build traffic and a following, you should be able to monetize the blog by selling advert space.

Starting a blog is one of the most effective side hustles as you can do it in your spare time and wherever you are in the world. However, it takes time and much effort to build content and credibility and to consistently present it in a way that appeals to your readers and adds value to your audience.

7. Stock Photos

Is photography your hobby? Do you take awesome photographs? If so, you can put them up in a gallery of stock photos selling your photos as stock photos. There is now a huge market for stock photography. So, have you been wondering how to launch your photography career, shoot and sell photos, and make perpetual passive income? Then you should consider stock photography.

8. Create an Online Course

Consider creating an online course; this is a wonderful way to share your knowledge with your audience, build a strong following and earn passive income. What is your area of expertise? What are you passionate about? Can you teach it? Are you prepared to put in the time to create valuable content?

What does your audience want to learn about? Creating an online course like other passive income sources requires upfront effort in creating the course and tweaking it from time to time. Initially, your course may be available for free; as you continue to give value over time, and the quality and standard of your content are evident, you can charge for your courses and start creating a passive income stream by making it available online for sale to an audience.


9. Write a Book

Can you write? Do you have a passion for something that you can turn into knowledge for others? Creating a book takes time and sleepless nights but that effort once executed can turn into repeated sales. Once a good book is published, it can continue to generate income far into the future. Get that book that has been in your mind out there in 2020.


10. Deal with your Debt

With the best will possible and all the effort to create multiple sources of income, without dealing with overwhelming debt, attaining financial independence will be a challenge.

Debt is simply a tool and for most people, it is necessary to borrow at some time or another especially if you are purchasing a longterm asset such as a property. However, when your debt begins to control you, it is important to make every effort to regain control of your finances. As far as possible, avoid borrowing to buy depreciating assets and make efforts to pay back the most expensive urgent debt.

Dont ignore or wish away your debt; put in place a disciplined payback schedule, otherwise you are simply creating passive income for lenders.

If you are middleaged, close to retirement and have been living solely on your salary, your goal should be to use your remaining peak earning years to create sources of passive income, which is often the main source of funds in retirement. Your pension will just not be enough.


The prospect of creating and generating passive income can sound glamorous and easy. Do remember that whilst passive income can build that important financial momentum, you must be willing to invest time, and this could be years of putting in the effort to build something viable; it doesn’t just happen. Like any new business, creating passive income requires focus, discipline, commitment and consistency.

Have you tried to envision your life in 2020 and beyond? What do you want to spend your time doing? Where do you want to live? It is rare to find people achieving their financial goals and dreams solely from their salaries and subsequent pensions.

True financial freedom requires alternative sources of income and passive income. Building such sources of income is the foundation for sustained wealth and financial independence.


Nimi Akinkugbe

Nimi Akinkugbe has extensive experience in private wealth management. She seeks to empower people regarding their finances and offers frank, practical insights to create greater awareness and understanding of personal finance.


For more personal finance tips, contact Nimi:

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