For those of you who don’t know, back in May 2011 I decided that I wanted to quit my job. In June of the same year I set a target to do exactly that by May 23rd 2012.
My plan was to establish one or more semi-passive income streams, most likely in the form of niche and/or authority sites. I spent five months working extremely hard and getting exactly nowhere (the failures of two projects being indicative of my efforts). I was losing money.
But in October, everything changed. I decided to approach my objective from a completely different angle. And three months later, in December 2011, I quit my job — five months ahead of schedule.
I didn’t pull off a miracle — far from it. I just took some very practical and realistic steps in an attempt to achieve my goal. I strongly believe that there is no reason why you can’t do the same, and in this post, I intend to explain how.
The Problem
For the purposes of this post, I am going to imagine that your approach to making money online is very similar to what mine was, going back thirteen months or so. I am making this assumption because it appears to be a very common approach (and one with an extremely high failure rate).
In a nutshell, the reason why you are failing to make a considerable amount of money online is because you are chasing the passive income dream. You’re looking for the big win — a comfortable living with minimal work input. The Four Hour Workweek, or at least something similar.
This dream has been popularized by a number of successful online entrepreneurs such as Pat Flynn and Spencer Hawes. These guys are inspirational, and fill us all with a “we can do it too” attitude. Which is great — but that attitude will only take you so far.
The fact is that building a considerable passive income stream is extremely tough. It requires a lot of patience and persistence. One has to fail great deal on the journey to hitting the winning formula. And it takes time. All of these factors combine to toss most passive income dreamers by the wayside.
I am not saying that passive income is a pipe dream, because it isn’t. After all, I am working on establishing semi-passive income streams with my freelance blogging guide, my authority site project, and this blog. But it takes a lot of time and persistence to get right, and working on passive income projects can be really tough when you have a full time job. It can feel like there aren’t enough hours in the day, and it can be really difficult to see the light at the end of the tunnel (if it actually there).
So what’s the answer?
Sleeping with the Enemy
I was able to quit my job by choosing to trade my time for money — the mortal enemy of passive income advocates.
More specifically, I started freelance blogging. I quickly discovered that it was a potentially lucrative area in which to work, and made the decision to quit my job pretty soon after starting.
As you can see from my income reports summary, I was able to develop a relatively substantial income within a few months, and I have made more than $4,000 from freelance writing in each of the last three months. After tax, that’s about the same as I was paid in my previous job.
And here’s the kicker — I have reached that milestone by working less than half the amount of hours that I did when I was in my job. I spend around 3-4 hours per day working for my freelance clients. That leaves me free and clear to dedicate however many hours I please to my passive income projects.
But It’s Still a Job…Right?
Some people will tell you that freelancing is still like having a job — you’re still working for a “wage”. Well, it’s like no job I’ve ever had. For instance, here are four attributes of freelancing that you can’t typically get from a job:
- No boss
- Flexible hours
- Pick and choose your work
- Pick and choose your working location
- You’re in control of your earnings
I’m not trying to pull the wool over your eyes — freelancing isn’t passive income. Quite the opposite. But it is, in my humble opinion, a far superior alternative to a full time job — not only is your earning potential increased dramatically, but you can afford yourself more time to concentrate on your passive income projects. I don’t know where I would be right now if it weren’t for me finding freelance writing, but I’m extremely happy that I did.
Implementation
You may feel like you don’t have the necessary attributes with which to start freelancing, but let me tell you something — either your boss has got you all wrong, or you can make it work.
Here’s my logic, as first published in Why You Can Quit Your Job Today:
Let’s consider an assessment of your worth. Ultimately, you are employed because your employer profits from you. He assesses your skills and worth, and is happy that the income generated will exceed the cost of employing you. That cost is your wage, taxes, overheads, training, and so on. Why can’t you cut out the middle man and extract that income direct from source?
Let’s look at a simple example. Your basic wage is $25,000 per annum. The employer has to pay additional taxes of $2,500 to the government every year. It will cost $5,000 in total to train you up, which amortized over 5 years employment (which is the company’s average employment period) equals $1,000 p.a. It costs an additional $5,000 p.a. in overheads to simply sit you in your chair. And on top of that, they are in business, so they want to make a profit from your services! So let’s add a 15% profit margin onto the total.
( $25,000 + $2,500 + $1,000 + $5,000 ) * 1.15 = $38,525
I’ve kept this real simple – I haven’t even mentioned health insurance or any other potential perks. Notwithstanding that, your employer hopes to generate an income of $38,525 p.a. with your skills whilst they pay you just $25,000 p.a.
You can draw one of two conclusions from this:
- Your employer is an idiot, and you are not worth the cost
- Your employer is making money out of you that you could ultimately be making for yourself
Everyone has expertise. You probably massively undervalue your own abilities — I know I did. Right up until the point I was making a healthy full time income from freelance writing, I didn’t really believe that I could do so. It just seemed too good to be true.
The key is to find people who are in search of your assets. It can be anything — writing, graphic design, bookkeeping, administration, photography, web design — the list goes on and on. These people will pay you much more than your boss did, because they don’t have to worry about any of the overheads mentioned above (nor a permanent commitment to employ you).
If you are paralyzed by the idea of actually making this happen, start off simple with a freelance broker site like Elance or oDesk (if appropriate). You probably won’t find great paying jobs with your limited experience, but if nothing else it can demonstrate to you that your services are actually worth something.
And as soon as you can, establish a quality online brand (i.e. a blog and social media profiles). In my opinion, this is by far the best way to market yourself.
The Time is Now
In a nutshell, just get yourself out there, and don’t be afraid to start from the bottom and work your way up! For 90% of the passive income dreamers reading this, you can probably be earning more from freelancing within a couple of weeks than you are right now from your passive income projects.
So if you’re in a job that you hate, what is holding you back from dedicating say two (or more) hours per day to building a side income from freelancing work? Because as I have demonstrated, that’s all you need in order to make a genuine attempt to open up a completely new opportunity in life.
From nowhere to quitting your job in 90 days — I have proven that it is possible. I am sure that some of you can easily exceed my achievements too. All it takes is a change of approach and a concerted and practical effort. Why wouldn’t you try this?
Creative Commons image courtesy of snofla
Hi Tom,
What about the strategy of engineering your layoff so you can walk away with a large severance package? I did that and managed to negotiate roughly six years worth of living expenses. It has helped me during the startup phase and really pick and choose what I want because there is no financial pressure. On the other hand, I need to be careful not to be too lazy!
Have you calculated the value of your lost benefits e.g. retirement, healthcare, paid leave, etc? It’s kinda tough once they add up, but it’s all for the price of freedom right?
Best,
Sam
It’s unlikely anyone earning only $25k/year would receive a severance of any kind unless they lost a limb.
Was that a deliberate pun Shawn? 😉
Think about it in terms of percentage of salary. The absolute dollar amount is almost irrelevant to your living expenses. If you live off $25,000 a year, then the denominator is living expense/time.
I encountered so many people who do NOT know their rights as employees. They don’t know, so they can’t negotiate. They also don’t think they are worthy. Know that you are!
Hi Sam,
That’s a great strategy if you can pull it off, but I don’t think that it’s a viable option for a lot of people (nor something that I have any experience in). How on earth you managed to negotiate six years worth of living expenses is beyond me — congratulations!
I didn’t have much in the way of benefits to lose, but anything I did lose pales in comparison to the freedom, as you point out. That’s not to mention the fact that I fully intend to make a great deal more from my current and future endeavors than I ever did in my job 🙂
Cheers
Tom
I like the attitude!
The basic framework is knowing your rights as an employee (everyone has them), building relationships with key personnel, understanding what the firm fears, and making the situation a win for them.
Never quit, get laid!
My friends in France and Holland get 70% of their last years paycheck indefinitely if they engineer their layoff. How’s it like in the UK?
Sam
No idea — I have absolutely no experience in engineering a layoff 😉
Great post Tom, and I agree with what you said about earnings, you control them.
If you decide to work an hour more, you will earn more money online, if you decide to take a rest and automate the process you still can earn a lot, which is not a case with full time job.
thanks for sharing 🙂
No problem James 🙂
Your article is very inspiring and it really makes you do something about working for yourself.
You said you do or did freelancing writing. What advice would you give someone that is not native English speaker (like myself)? Is there a chance people like me to succeed?
ANYONE can succeed. The only limitation is their ambition.
Consider translation services, if appropriate — many MNC’s require multiple copies of their content, hand-translated to be appropriately inflected for their target audience’s language.
Another option is to write travel guides for wherever you’re from. If you can own a location-based niche online you can target local or regional advertisements that can be a very lucrative revenue generator.
Two simple examples, of which there are many more. I think people really find it tough to appreciate the value in services though. Cheers Shawn!
Hi Zimbrul,
Absolutely. Check out Onibalusi over at YoungPrePro — a young Nigerian guy who’s doing very well out of freelance writing.
As far as I am concerned, it is your writing ability that is up to scrutiny — not your nationality. Whilst there are no doubt some people who would prefer a native speaker, I think most bloggers are practically minded. If you’re good, you’re good!
Cheers,
Tom
Hi Tom.
Very inspiring article, as usually. I might give it a shot at your ebook about Freelance Writing, maybe that could be a good way to “escape” from my 9 to 5 job and THEN start to work on some passive income projects.
I am not English speaker though, and i have the same thoughts than Zimbrul here… is it that easy to have a freelance online career without being native English speaker?
Regards,
Nicolas.
Hi Nicolas,
I’d offer the same comments to you as I did to Zimbrul — if you’re a good writer, I don’t think it matters a great deal if you’re a non-native speaker or not. Ability dictates value.
Cheers,
Tom
One thing I would add here Tom to the “not a native English speaker” topic is that writing work doesn’t always have to go from original writer directly to the client.
I have a few writers I work with to do the research and original writing, then I edit and provide the final product to the client.
Here’s how it works in more detail:
1. I send the writer the topic with notes of what I want to include or not include
2. The writer researches the topic, writes the original article and sends to me
3. I edit the article to make sure it’s grammatically correct, make sure it flows well, highlight certain words or phrases etc.
4. I post the article to the clients site and link that article to other relevant articles on the site or external sites etc.
Zimbrul and Nicolas, from the comments you made it looks to me like you write very well.
Do you have your own blogs? If not you might want to start one and write on topics you enjoy. That way you have something to show if you apply for a writing gig.
Or you could post your articles to one of the thousands of article directors like Ezinearticles to showcase your work?
Or you could write a guest post of a website you enjoy reading, contact the site owner and ask if they’d be interested in using your article?
The list goes on and on.
There is ALWAYS a way and ALWAYS a need to be filled.
You just have to get after it!
Good stuff Tim — definitely adding a bit of entrepreneurial flair to the world of freelance writing! It’s not something I would personally do (having to rely on other people is something I try to avoid), but I am sure it can be a pretty profitable model when you get it right.
I personally feel that just being your own boss is worth still exchanging time for money because you are in control. If you want to work your @$$ off and make some extra money, you can! On the contrary if your boss makes you work 60 hours for a few weeks because of a big project, you will still get that same salary (assuming you are salary) and he will probably reap all of the benefits.
-Chris
Quite right Chris!
I think passive income can exist for a time. It did for me for a while. But unless you are very lucky/talented it will come to an end.
I put the hours in for months and months then didn’t work for months and months and my sites kept making money. But when the Google updates happened I’d taken my eye off the ball for too long and hadn’t made hay while the sun shined and my passive income was over.
Now I’m trying to start again but also looking to diversify by doing content writing after following your success on this blog.
I’m finding it hard to get going though as finding work isn’t as easy as it sounds!
Hi Joe,
True passive income for a prolonged period simply does not exist. Not even if your purchase property and outsource the management company — you still have to keep tabs on the management company. Even if you purchase stocks and sit on them, you still have to administrate the financial side of things.
But semi-passive income — the concept of not directly trading time for money — does of course exist.
Sounds like you learned an incredibly valuable lesson which will benefit you massively in the future!
Cheers,
Tom
What about royalties on a song? 😉
Your agent probably takes a slice of them 😉
Thanks Tom!
I’m going to start looking around Elance, I used them for a logo, but I didn’t know you could get writing gigs (I had only heard of using them for design and programming).
Love it!
Cheers
Hi Joe,
I would also recommend People Per Hour, and of course the ProBlogger Job Board (where I found my first clients).
Cheers,
Tom
Very practical advice.
Even though I have being living off the income from niche websites for over 10 years, I agree that for many people freelancing is a great way to go get out of the cubicle.
It is also awesome that you are continuing your efforts to build passive income. I have got no doubt the income from these will soon eclipse your freelance income (even if that grows). Keep up the good stuff!
Quinn
Cheers Quinn!
Tom,
I earn how you earn and can tell you that this is way more practical than how most look at the internet in terms of making money. Kill it and bring it home to eat. That’s what we do. People who are looking for something that doesn’t entail working may not understand the benefits of this but then again, most of those critics are still punching a time clock for someone else.
Hi Leo,
You’re right. A lot of people get sucked into the dream, and whilst semi-passive income is possible, it takes a lot of persistence and ability. That’s often too much for most people.
Cheers,
Tom
Great post and some people should think very carefully about what they want to do.
I personally believe that most people would benefit from freelancing, even if it’s just to make money through services if something starts to go wrong.
I was like you and quite my job a few months after I started writing for someone else. I still have the passive income dream, but I’d rather do it from the tropics than my old job back home.
Sounds good to me 🙂
Great point Jamie.
I think it’s most important to think about what you enjoy doing – writing, design, cold calling, researching etc.
Start there and then spend some time discovering how you can make $$ doing those things as a freelancer.
If things take off and you want to quit the day job, then quit.
If things don’t take off – maybe you make a little extra money or learn a new skill or discover what you reeeally enjoy doing.
Lots of benefits to just getting out there and doing something.
Thanks, this post could not have been more timely for me!
My employers are great, but working their hours, at their salary often has me feeling out of control of my career…and destiny.
This blog post might be the kick I need. Looking at the income you’ve made is really encouraging to me. Right now I make $30k doing SEO copywriting for websites, blogs and social media. Now that I have more than one year of experience under my belt, I wonder if I can make the same amount or even more freelancing.
It sounds like you should certainly be thinking about it long and hard Lisa! I didn’t have any such experience when starting out, so you should have a jumpstart!
Thanks Tom! Your blog has encouraged me so much. 🙂
I have been following your posts from sometime now. Every post gives me more confidence and now I am at a stage where I can take action on it. Thanks Tom!
My pleasure Vishnu 🙂
Another excellent post. Very inspirational, it’s awesome to see that you are living what you preach.
Glad you liked it Jonathan 🙂
So the key should be to market yourself and learn to sell yourself to the public.
After that, you should pick your customers carefully to fill the budget and get enough time to work in passive income (and it doesn’t necessarily means web passive income).
Good post.
Sounds about right to me Nando! 🙂
Great article, Tom!
I did the same thing a few years ago and you’re absolutely right. There are so many things we do that we take for granted. Now…the toughie: migrating from using addition to using multiplication. I find people like us are go-getters, willing to work hard to achieve a result. The transition to personal wealth, though – as reported to me by a very wealthy guy – is to stop using addition [work so many hours at such and such a wage] and begin using multiplication [do once and benefit many times]. For me it’s identifying that 20% of the things I do in my freelance design business to which I can apply a multiplying effect. Something that seems easier than it actually is – at least for me.
As always, you’re right on track. Thanks for your great insights. I learn something from you every time I read a post.
Hey Kathi,
Thanks for the comment. Your friend is referring to what a lot of people would call a scalable business model, and it is definitely the right business model to shoot for! It is typically more difficult to make such a model work when compared to freelancing, but freelancing can offer a fantastic base from which to operate.
Cheers,
Tom
Yes. What I really value, though, about his insight is that he was a very wealthy man when he said that so he was walking his talk.
Tom: I am buoyed by your inspiration and attitude. After much research, I discovered there seems to be a great demand for individuals with copywriting skills–I’m halfway through a course in the States that will allow me to embark on my own freelance copywriting career and leave my “9 to 5” life behind forever!!
Diane
Fantastic Diane — best of luck!
You make a great point here Tom! This approach is very similar to what I’m doing recently in regards to app development. Making apps for small business owners (which isn’t passive) so I can fund my other apps which will ideally make me passive income. It’s a faster way of getting to your final goal.
Thomas
There’s no shame at all in working for a living, and if it fuels your ability to produce semi-passive income streams, all the better!
This is great, Tom. Too many people chase the pipe dream (which, as you noted, isn’t totally out of reach or impossible– it’s just that it’s much harder than most people imagine, and I wouldn’t recommend it to most people as a solid plan for quitting one’s job).
It’s really nice to see someone giving a more workable solution that can be successfully implemented by a mide wider array of people.
I’ll be sharing this one for sure.
You rock 🙂
Hey Tom,
I just wrote a post called ‘3 Reasons to Quit Your Job & 10 Reasons Not To’ – which I thought may be a little contradictory to what you wrote here, but actually it isn’t. It is basically along the same lines of being realistic and having a way to test the financial viability of you’re change before making the leap.
I love the way you have used freelance writing for this purpose, yes it’s not complete ‘financial freedom’ but as you say it’s a lot more freedom than the traditional job with fixed employer offers and it opens up more options and flexibility which is what it’s all about allowing you to go further.
take care & best wishes,
Alan
Cheers Alan 🙂
I really appreciate your reality check with these posts, Tom. Folks who got started just 3 years ago gained huge tribes and that was the key to their success. Starting out now, a lot of niches are saturated and it’s much tougher to stand out. Plus, as others have mentioned, SEO and other tactics of building audience have changed so much that you can’t the game the system for success like folks back when could.
I like the idea of taking a hybrid approach with semi-passive income as a viable way to diversify. Freelance writing is one way to get a steady gig. So is freelance site maintenance and “geek behind the curtain” support, which is how I’m branching out. A lot of the big coaches don’t do their own site maintenance or set up sites for others. They hire folks to do that, as well as a good portion of their social media posting. So, there are a lot of freelance support positions too that can provide a steady income.
Hey MaAnna,
You’re totally right — there are a huge number of freelancing possibilities out there. I think that most people have a skill that can be monetized via freelancing — it’s just a case of using your imagination.
Cheers,
Tom
Thanks for the inspiration. I have been at it on two different sites and I am 1/6 of the way there from escaping my cubicle… Its been a slow process but getting there… Its amazing what small, focused steps can do though.. Just takes time.
I sell for a living and make about 5% of my total sells – I make at best 6%. There’s nothing like thinking that the best you can possibly do is give 94% of your sales to your employer. I know the product cost money (we run about a 42 point margin, for those in retail) and that there is overhead and taxes. But my boss has one hell of a house and so do both of his kids…I am def. building someone elses dreams. I need to find a way to rep products to sell and cut out the middle MAN!
Great post, informative and very inspiring!
In my previous job I was so desperate to leave and had been eyeing on online freelancing. That plan took another route as I found a 8-4 job that I am happy and paid almost well. I cannot complain.
Even though I am still exploring the opportunities to work online because I know that it can always be my fallback. We never know. There is no such thing as secured jobs nowadays, right?
Anyway, I am glad I found your site..
Cheers
Tom,
This post was written in October but it was a reason I found it today. I have been chasing the passive income dream for two years and I’m tried. I am stuck in a job that I don’t like, working long hours waiting for it to pay off. When writing is my passion and my background.
Freelance is still work but it is not the typical 9 to 5 so as of today I will stop chasing passive income and FOCUS on other options.
Thanks,
No problem Yaisa — best of luck!