Building the mountain.
ASTORIA, NYC- Passive income saved me over the past year. This is not ideal — living off of passive income shouldn’t be by design until you’re old enough to throw in the towel — but it works.
Last year, I pulled in $25,000 from VagabondJourney.com. My earnings from everything else? $12,000.
This is a dramatic drop from previous years, where my active to passive income ratio is a little closer to 2:1. I’d make $25,000 from writing articles, working on film projects, and giving talks and a cool ten grand from VBJ. But now it’s swung two-to-one in the opposite direction.
The reason for this? I spent much of last year working on a book and some personal film endeavors — projects that demand a lot of time for no pay. There were also reasons related to my domestic setup: the first half of the year I was based in Prague, where I was taking care of my kids while my wife went to school, then we moved to NYC where a full two months were wiped out while finding an apartment and settling in. When the dust settled, I only had three months where I could freely travel and do my work …
My active income for last year was shot. $12,000. $1,000 per month. I was once able to travel on $12,000 a year — I would work for three months and travel free the rest of the time — but now things have changed. I’m more focused on the P/L of travel: How much money can each trip make? How profitable is each project? The act of moving around the world has become a business model of sorts. This is a very different way of viewing travel.
I was able to remain financially solvent last year because of passive income — work that I performed in the past that continues paying me today. In simpler terms, my kid project saved the day.
That’s humbling in a way.
In another way it shows me the value of passive income — the value of doing work or making investments that will pay you in perpetuity.
This differs from active income, which is work or an investment that’s one and done: you put in the labor or lay down the cash, get paid, and get out.
The ideal travel finance strategy should be 50/50 active and passive income. You work and make money wherever you can to pay for living expense … and any extra you invest into passive income streams.
Ideally, I wouldn’t touch my passive income — I would just keep re-investing it and watch it compound. In this way it becomes kind of a game: each day you add a little more to it and watch it grow. You hand right back whatever it gives you. Each blog post, each dividend stock, each book adds a little more to what will ultimately become a mountain … that you can one day sit upon and not have to do anything all day.