Starting my FIRE journey to become financially independent really meant that I had to find ways to generate income streams besides relying solely on my tech job in Silicon Valley. My job is like running inside a wheel for a rat race except there is never going to be a winner no matter how hard I work. By not creating separate income streams outside my job left me vulnerable when faced with the challenges of a struggling economy. Learning from the subprime mortgage crisis in 2009, my income streams have left me better prepared to weather the storm from the 2020 Coronavirus pandemic. Unemployment will rise in 2020 to unprecedented highs since employers looking to cut cost will continue to layoff for cheaper and younger workers. My career in Silicon Valley is like a ticking time bomb as I continue to age yet watch my colleagues become younger all around me. Now is the time to take action and create new income streams that are easy to start.
This post will list out income streams that are easy to start for anyone. Every journey has a beginning so why not make it today to start creating new income streams for yourself. Even I am guilty of procrastinating with some of these income stream opportunities. For example, I only started writing for Rent the Mortgage in 2019 but I have always been a Top Rated Seller on eBay since 1999 with my lifetime sales totaling $21,561. In addition to Rent the Mortgage, I started to write for Quora and Medium which provide me with additional channels to help my readers start their FIRE journey.
I will go into some detail about how each of these income streams work for me. I have tried all of them in some form and will continue to build each one for the foreseeable future. Before we begin, we need to understand what type each of these income streams classify as for tax purposes.
What are the types of income streams?
There are three different types of income streams to understand: Active, Passive, and Portfolio. It is important to understand the difference because there are tax implications related to all of these income streams. For example, the IRS does not allow you to use passive losses to offset your active earned income or portfolio unearned income. Say what? Keep reading below and I will explain.
Active Income Stream
- money received for services, labor, trade, commission, tips
- income from goods sold
- royalty payment for publication
- self-employment income
Active income is earned income that is commonly associated with your job. It is related to money received for services, labor, trade, commission, tips, or income from goods sold. Selling your time for money is basically your job description to perform the tasks related to running the business. For myself, I help create software that is sold to customers in exchange for a salary from my employer in the form of a W2 employee. I could also drive for Uber or Lyft to make money giving rides to passengers in the form of a 1099-K contractor. Royalty payment made to an author for a publication is earned self-employment income.
Passive Income Stream
- Rental income
- Business earnings as a silent investor
Passive income is popularly understood as money being earned without actively participating to receive it. Most come to assume Portfolio income as part of Passive income but the IRS only considers two types of activities as Passive income.
How the IRS defines Passive Income
For tax purposes, the IRS defines only two activities as officially Passive income: Rental income and Business co-owner as a silent investor.
Rental income is defined as passive income. Although in my honest opinion (IMHO), owning a property is really not passive but hard work. The IRS allows me to subtract maintenance costs for my properties from the rental income so it is important to understand rental cash flow. Property owners with modified adjusted gross incomes of $100,000 or less may deduct up to $25,000 in rental real estate losses per year if they “actively participate” in the rental activity. To “actively participate” means you are involved in management decisions regarding the rental property and own 10% or more of the property.
The IRS also considers the earnings from co-owning a business as a silent investor as passive income. You will need a willing partner who performs all the business operations but provides you a percentage of the earnings as part of the angel investment to start the business. The IRS allows up to $25,000 in passive activity loss each year for a business owner.
Portfolio Income Stream
- interest
- dividends
- capital gains
- patent licensing
Portfolio income is considered unearned income. Unearned income is money received in the form of investments, such as dividends, interest, or capital gains. However, capital gains or losses from sold stock or property are counted against your Adjusted Gross Income which includes your Active income stream. Royalties from a patent can be part of your Portfolio income stream as unearned income where a business pays for the licensing right to use your patent.
List of Income Streams
- Bank Interest
- Stock Dividends
- AirBnB short-term stay
- Rental long-term stay
- eBay selling used stuff
- Amazon arbitrage new stuff
- Shopify
- Writing
- Patent royalty
- Rent your car
Bank Interest
Income Stream: Portfolio
Interest earned from owning a bank account is unearned income and classify as part of Portfolio income stream. Bank savings accounts provide interest rates as high as 1.7% APY. Deposits held in savings accounts at banks are Federal Deposit Insurance Corporation (FDIC) insured up to $250,000 per individual. For joint accounts, where co-owners share one joint account, the FDIC insures each individual up to $250,000 where the joint account now totals $500,000.
| Bank Account | APY | Bank Link |
| American Express Personal Savings | 1.70% APY | American Express |
| Marcus by Goldman Sachs High Yield Online Savings | 1.70% APY | Goldman Sachs Bank USA |
| Barclays Bank Online Savings Account | 1.60% APY | Barclays Bank |
| Capital One 360 Performance Savings | 1.50% APY | Capital One 360 |
| Discover Bank Online Savings | 1.50% APY | Discover Bank |
| Chase Savings Account* | 0.01% APY | Chase referral link |
*Feel free to use my Chase referral link to earn a bonus award up to $500 when opening a Chase bank account. (I get $50 for the referral. Wahoo!)
Stock Dividends
Income Stream: Portfolio
Dividends earned from owning a stock is unearned income and classify as part of Portfolio income stream. Picking stocks that have a dividend payment is mostly how I built up my 401k savings. I look for stocks that have strong brand recognition and consistent quarterly dividends. As a sample, here is a list of stocks and their dividends as of March 27, 2020. Let’s pretend you have $60,000 and you invest $10,000 into each company equally. After 1-year, this portfolio would provide a 2.96% blended dividend yield which translates into $1,774.00 annually.
| Company | Ticker | Quarterly Dividend | Dividend Yield |
| Apple Inc. | NASDAQ: AAPL | $0.77 | 1.24% |
| Coco-Cola Co. | NYSE: KO | $0.41 | 3.83% |
| Costco Wholesale Corp. | NASDAQ: COST | $0.65 | 0.91% |
| McDonald’s Corp. | NYSE: MCD | $1.25 | 3.05% |
| Walmart, Inc. | NYSE: WMT | $0.54 | 1.97% |
| Wells Fargo & Co. | NYSE: WFC | $0.51 | 6.74% |
For my stock investments, I own a Schwab One® account combined with the Schwab Bank High Yield Investor Checking®. The best part of this account is the Schwab High Yield Investor Checking account which provides 0.15% APY with $0 minimum balance and unlimited fee rebates at ATMs worldwide. It is a rare checking account that actually provides an interest payment.
Feel free to use my Schwab referral link to earn a bonus award up to $500 when opening a Schwab account. (I get no referral bonus but I am happy to provide the referral link to give you free money.) Please note to qualify for the bonus that opening both the Schwab One® account must be combined with the Schwab Bank High Yield Investor Checking®.
AirBnB short-term stay
Income Stream: Active
AirBnB would belong to Active income stream as earned income because of the amount of time invested to manage the listing and clean the unit. For those who are not familiar, AirBnB is a website platform that uses network effects to provide short-term housing to travelers looking for alternatives to hotels and hostels. In my post How to Build an ADU unit and List it on AirBnB, I built an ADU primarily to list on AirBnB to try out short-term rentals. My wife and I prefer long-term rentals, however short-term rentals provide flexibility for the traveler but are inconvenient for the host. We actually ended up making more money listing on AirBnB, however my wife and I hated the cleaning aspect. If you do not mind having to clean up your AirBnB after each short-term stay, then this solution could work out very well for you.
Rental long-term stay
Income Stream: Passive
Rental income is defined as passive income by the IRS. You can read about my adventures in owning real estate from my post Owning a Home is Not Passive Income. The IRS allows me to subtract maintenance costs for my properties from the rental income so it is important to understand rental cash flow. Property owners with modified adjusted gross incomes of $100,000 or less may deduct up to $25,000 in rental real estate losses per year if they “actively participate” in the rental activity. To “actively participate” means you are involved in management decisions regarding the rental property and own 10% or more of the property. Below is my current FIRE through real estate portfolio of rentals as of March 2020.
| Property | Mortgage | Rental Income | Cash Flow |
| Peninsula House ADU | $2,806.26 | $2,000 | -$806.26 |
| South Bay House | $4,365.97 | $5,000 (est.) | +$634.03 |
| South Bay Townhome | $1,225.82 | $3,500 | +$2,274.18 |
| Chicago Multi-Unit | $1,589.81 | $2,600 | +$1,010.19 |
| ——– | ——– | ——– | ——– |
| $9,987.86 | $13,600.00 | +$3,112.14 | |
| Total Mortgage | Total Income | Monthly Cash Flow |
eBay selling used stuff
Income Stream: Active
Earned income from selling used stuff on eBay falls under Active portfolio stream. I have been selling things on eBay since 1999 with my lifetime sales totaling $21,561. My kids are used to the idea of me selling their old toys on eBay. You can sell almost anything on eBay including clothing, tools, stationery, or electronics. The best part is the item can be used and sometimes become collectibles over a long enough period of time.
I remember using the Apple Macintosh in elementary school.
my lifetime earnings on eBay
Amazon arbitrage new stuff
Income Stream: Active
Arbitraging new items on Amazon is counted towards earned income under Active portfolio stream. Amazon allows individuals to arbitrage items online. In other words, buy something from the store and sell it for a reasonable profit margin online. Take for example this Trader Joe’s Bagel Sesame which is offered online at Amazon. This is great way to offer the convenience of online shopping for items that are difficult to find in-store. It also benefits some folks who have no access to such products because Trader Joe’s has limited stores open around the United States.
However, be warned that you need to set a reasonable profit margin. Amazon has recently been cracking down on sellers who are price gauging products due to high demand because of Coronavirus.
Shopify
Income Stream: Active
Shopify stores are great for starting a business and earning income from selling a product or service. The earned income from the business would fall under the Active portfolio. Shopify offers many online tools that let business owners create and manage their online stores quickly. Shopify is so easy that even young adults have been opening up online stores to sell slime.
Writing
Income Stream: Active
Writing would be a service where you could earn a commission from a publisher. The earned income from the written publication would fall under the Active portfolio. I started Rent the Mortgage using Bluehost to help document my financial lessons with the intent of inspiring others to start their FIRE journey through real estate. There are many ways to monetize from a blog that include:
- Ads (Eventually I will have ads but for now I prefer to focus on user growth.)
- Affiliate Marketing (I am sure you have seen Amazon affiliate links on my site. I receive a percentage of the sales if you buy anything using the link. It does not have to be the product advertised just that you clicked the link first.)
- Selling Your Own Products (I have free RTM downloads to help with budget and analyzing costs. I plan to create more sophisticated sheets and put them up for sale.)
- Sponsored Posts (I don’t have one yet but feel free to reach out if you want to promote your brand or service if it is related to my blog topics.)
- Services (I have done some freelancing outside of my 9-to-5 job.)
If you want to start a blog but feel overwhelmed, Fiverr is a great site to hire freelancers who offer their services to create a blog site just for you.
In addition to writing for Rent the Mortgage, I started to write for Quora and Medium which provide me with additional channels to help my readers start their FIRE journey.
Quora does not pay me for writing answers but instead for writing questions. Why is the planet Mars red? Here is my Quora profile if you are curious. I occasionally will copy some of my postings into Quora questions where fit so please upvote if you find them.
Medium only started to recently pay freelance bloggers for their view impressions generated. The topics are open-ended so I only started experimenting with Medium with copying my work taken from what I have blogged here. Here is my Medium profile if you are curious.
Patent royalty
Income Stream: Active or Portfolio
Having a patent means you invented something novel that is worth protecting. Working in tech provided me with such an opportunity to have a patent in my name. Unfortunately, the royalty potential belongs to my employer. The legal fees alone total around $10,000 or more so it would make sense that my employer would keep the royalty potential for paying the fees. I was just happy to have the honor of my name officially being listed as an inventor for creating something. Royalty payments can be earned from writing a book through a publisher who pays as part of an Active income stream. Royalty payments through licensing would be unearned income as part of a Portfolio income stream.
Inventing something takes dedication because you will fail more than a few times before striking gold (if ever). The Super Soaker water gun in 1990’s was one of the most successful toys of all time invented by Lonnie Johnson. He received $73 million from the settlement of a legal dispute over unpaid royalties from Hasbro. You can read about Lonnie Johnson’s inspirational story here.
Rent your car
Income Stream: Active
Actively renting your car is a great way to create income when not using your car. I take public transportation to work so renting my car makes sense. Using a platform called Turo, my car makes money for me when I am at work instead of depreciating in value on my driveway. Another great option I have tried is TravelCar. TravelCar is a car rental platform that will shuttle you to the airport in exchange for renting your car while you are conveniently away.
I would love to hear from you about other income streams that I have not listed here in this post. Let me know in the comments and I can add the to this list.
