Passive Income is the avenue to financial freedom.
I graduated school in May of 2020 and started my first full time job two months later in July. I’ve been fortunate enough that my job compensates me well enough so that I can contribute to my 401k and savings while still having enough money to cover my monthly bills and essentials.
I’ve always been interested in personal finance and investing so I was curious on what I could do to make the most of my extra income aside from contributing to my 401k and savings.
My digging took me to many articles surrounding investing and the idea of passive income. The idea sounded great! Who wouldn’t want to make money with little to no extra effort? Let’s break down the idea of passive income and how I got started earning some.
I like to think of passive income simply as regular income that is from a source other than an employer or contractor that you are not actively involved. Passive income is great as it serves as another avenue for you to expand your earning potential, reach savings goals and learn a lot of great things.
Here’s the one simple way I got started in earning passive income:
Investing with Robinhood
Robinhood is an online investing platform offering commission-free trading on several US-listed investment types. Put simply, Robinhood is an online broker where you can purchase shares (or portions of shares) of stock, ETF’s and more. It’s a great avenue to start investing!
In September of 2020, I opened my Robinhood account and dished in my first $100. I put $50 towards the S&P 500 ETF (SPY) and the other $50 towards two different company stock. Note, the great thing about Robinhood is that you can invest the amount of money that works for you. With some other brokers you can only purchase investments by share. For example, at the time of writing, the S&P 500 ETF (SPY) costs $465.31 per share. So with many brokers you can only invest in SPY if you could purchase an entire share at $465.31 whereas with Robinhood I could purchase a fractional share of SPY worth $50 equating roughly 11% of a share (50/465.31 ~ 0.107). This is great as it gives you the freedom and control to invest however much you can regardless of whether it’s $1,000 or $1.
After watching my $100 for several months I gained confidence that I wouldn’t spontaneously lose my $100 and in January of 2021 I started regularly contributing a portion of my income to my Robinhood account each month. The amount I invested each month was about 13% of my monthly income. Most of my investing has gone towards ETF’s including the S&P 500 ETF (SPY), the Vanguard Information Technology ETF (VGT), and the Vanguard Growth ETF (VUG). ETF’s (Exchange Traded Funds) are great because they offer built in diversification which simplifies the investing process.
As of January 2021, I still make the large majority of my income from my 9–5 job. However, over 12 months of consistent investing my account has grown by about 15% and I’ve seen several thousand dollars worth of returns. This all comes from the 5 minutes it takes me each month to deposit money into my Robinhood account and purchase my investments. Quick tip, I enjoy the doing the process myself, but you can easily automate this entire process by signing up for recurring investments!
As you can see, investing doesn’t have to be scary. I knew next to nothing when I started and one could argue that I still don’t know all that much a year later. However, I’ve found a simple strategy that works for me which has turned in to a passive income stream for myself that will continue to build and take me down the road to financial freedom. The hardest part is to bite the bullet and get started!
Thanks for reading! I’m new to writing so you have tips or suggestions please feel free to leave a comment, I’d greatly appreciate it.
-Cam
