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Personal Finance and Passive Income for Minimalists

Personal Finance and Passive Income for Minimalists

Welcome! This is the first post is a series about personal finance for minimalists, with main focus on generating passive income. Today we’re looking into 3 of the most popular ways how you can start earning passive income and thinking about quitting your day job.
Read part 2 here – generating passive income using Shopify.

Passive income

Our relationship with work and jobs is not straightforward. While at times it may seem that working is the most evil concept on the planet, we still get most of our social interactions at work and depending on what kind of job you have, it can leave you with a sense of fulfilment and joy. In case you’re a marine biologist, nuclear physicist or a professor in a university, then you’re providing real value and it would a shame if you just stopped.

On the other end of the spectrum are the more common jobs – people working at factories, truck drivers, office workers. In a lot of cases these are the jobs that are not taken up because people love doing them and provide social good, but just for the reason that they need to earn their salaries somehow. These are the kinds of jobs that would be good candidates for replacing (or at least supplementing) with passive income. So let’s see what options we have.

Disclaimer: I’m not a financial adviser and this is not financial advice. I’m just documenting what has worked for me so far.

 

Investing

This is probably the most well known and most traditional of the three options. These days investing can generally be split into two categories. One is stocks and ETF’s (Exchange Traded Funds), the other is cryptocurrencies.

 

Stocks and ETFs

In my opinion buying single stocks is not a good long or short term option for a regular person. The reason being they are generally quite stable, so in short term the gains are far from amazing, but you still have to keep an eye on the news and developments regarding the companies whose stocks you’re holding. This is not ideal.
A better solution are ETFs – essentially a bunch of stocks grouped together. Most famous ETF being S&P500, which tracks the 500 biggest companies in the US. This has an advantage of you not worrying how a single company is doing, and SP500 ETFs are widely considered on of the safest and highest return traditional investments you can have. Only thing to look out for is not getting overcharged on fees. I’ve heard Vanguard is one of the smartest places for starting to invest into ETFs (I have no affiliation with them).

The downside is that regardless of if you choose stocks or ETFs, this is a very long term investment and compounding starts to work its magic only after quite a long time. So this is not the solution to set you free from your day job, but it’s a very good option for being prepared for your 50s and 60s.

stocks and ETFs

 

Cryptocurrencies (like Bitcoin)

This is still a controversial subject and it has every reason to be. Why do some people frown upon crypto and call it a scam/pyramid scheme or think of it as a currency only used for shady deals? There’s two answers to this – the history of crypto and the fact that the underlying mechanism (blockchain) is not easy to understand.

Bitcoin has been around for around 10 years now and in it’s early days it has been used to launder money, buy illicit good from marketplaces such as Silk Road etc, this is true. But recently as cryptocurrencies have been regulated, these problems have mostly ceased to exist.

Scams are another issue – by now there are more than 1,000 different cryptocurrencies, and I would say about half of them are scams or add no value. However, there are really solid cryptos, which not only hold value, but solve real world problems (which in turn increases their value even more). The trick here is to do your research, there are no good shortcuts. A good place to start is a Youtube channel called DataDash, who has extremely good content on the technology and specific currencies.

My current favourites (other than Bitcoin itself) are for example Ripple (XRP) and Stellar Lumen (XLM), which allow for instant and free money transfers between accounts and Substratum (SUB) which allows to use Internet anonymously and bypass content filters such as “The Great Firewall of China”. I think it has huge potential and currently it’s only the 100th biggest currency.
And then there’s Ethereum (ETH), which has Smart Contracts built into it allowing developers build custom solutions to run on the Ethereum network.

binanceAll of these that I listed above are definitely not scams, and there are hundreds more like these. Your job is to do the research.
For buying crypto my own favourite currently is Coinbase, which has a good record of never getting hacked, have a usable user interface and reasonable fees.
For smaller currencies I use Binance, which also has a good security track record and is recommended by many people I trust. It’s user interface is not the prettiest, but everything works.

Buy Bitcoin from Coinbase

Although when Bitcoin peaked at around 20 000 USD around December 2017 and then had a correction, a lot of people thought this is the end of the rally and now you can only lose. I think this couldn’t be further from the truth. The fundamentals of Bitcoin and other larger cryptos are still solid, there’s more regulation coming in to avoid scams and huge institutions are still yet to come in. I think we will see the price of Bitcoin and other cryptocurrencies skyrocket in the coming few years. So in case you are more risk tolerant and stocks seem boring, then crypto could be a good option for you.

 

Affiliate marketing

Affiliate marketing might now have the best reputation in the world and to an extent this is justified. Affiliate marketers are in simple terms just salesmen, but a modern version of them. As an affiliate marketer you will be advertising someone else’s product to customers and earning a commission on every lead or sale. The most well known platforms for getting affiliate offers are Amazon and Clickbank.

Amazon has an amazing line of products, so you can choose to market almost anything you can think of. Their commission rates are generally 5 to 10%, which isn’t amazing, but there’s one nice catch to the Amazon affiliate program. Let’s say your customer clicks on your affiliate link for a radio. Then she leaves Amazon and comes back the next day and buys a 5000 USD sauna, then you get 500 USD commission even though the customer didn’t buy the product you were advertising. This exact example with 5000USD sauna happened to us, so it’s not science fiction.

Clickback has been around for ages and they are an affiliate offers marketplace. So you can go there, browse around and pick the products or services that you’d like to promote and then it’s up to you how you’ll be directing interested buyers to the offer. Mainly this is done by putting an ad to Facebook and targeting people who you think might be interested in this specific product.

In both of these cases the best option would be to own a website or a blog where you can review the products and then (affiliate) link to the offer pages. At that point you don’t need to worry about anything anymore, sellers handles all transactions, shipping, customer support etc.

Having a website or a blog might sound scary if you’ve never had one before, but these days building a website is basically just dragging and dropping elements around and solutions such as WordPress really make it accessible to pretty much anyone.

 

Dropshipping

We left the best for last. As a lot of minimalist people tend to be creative (at least this has been my experience), then dropshipping is a great way to put your creations work for you with minimal effort. We have tried this ourself and it’s actually very easy to get started.

There are many way how to approach this. One common way is to find a cheap but interesting product from Alibaba and then set up your own shop selling this product to customers in US or Europe. In this case again it makes sense to set up Facebook Ads and target people who might be interested in the products you are selling and direct them to your Shopify store.

Alternative solution that we have used is that if you’re a designer, painter, photographer, then you could sell your creations using Shopify and not worry about the manufacturing or shipping. The winning combination for this is usually Shopify + Printful.

How it works is this – you upload your designs for mugs, t-shirts, posters or whatever you can think of to Shopify, create a storefront and then sign up to Printful, which is a fulfilment service. This means that if an order comes in, it goes from Shopify directly to Printful for manufacturing, and they will also ship it for you to the customer.

It’s a really good hands-off approach where you can concentrate on what you do well, and leave the heavy lifting to Shopify and Printful.

Shopify offers a 14-day Free trial (no credit card required) and considering how powerful their platform is, the prices are very reasonable. When picking a plan, I’d mainly recommend the Regular Shopify plan, not the basic one based on some issues we ran into when creating our own store. The regular plan allows you to offer cheaper shipping (this increases your profit margins) and you can select between several shipping zones and options. This is important when you intent to ship to several countries. Another two things we missed when using the Basic plan were Gift Card support and Abandoned Cart Recovery. Both of these can make a hug difference.

 

With this said, we will leave you to consider your options how you can escape the rat race and start earning passive income. There will be a follow-up article in this passive income for minimalists series focusing on how to set up your Shopify store and how to get it working nicely with Printful service.

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