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From Side Hustle to Passive Income – What You Need to Know

From Side Hustle to Passive Income – What You Need to Know

If you’re interested in the world of passive income, you’ve probably noticed that there are many, many different ideas out there about how you could be earning passive income. But if you look a little closer, you’ll find that more than a few of these so-called passive income streams aren’t actually passive income at all.

Instead, they fall into that special category known as the side hustle, which essentially involves using your skills and experience to earn extra money in addition to the income you receive from your regular job.

For many people, having a side hustle is an important step along the road to financial independence, but the fact is that a side hustle is not the same thing as a true passive income stream. However, with a little know-how and effort, it’s absolutely possible to transform your side hustle into a source of passive income, and therefore to reap some of the longer-term rewards that passive income can offer.

Read on to learn more about the difference between side hustles and passive income, and how to move from one to the other.

Side hustle vs. passive income: what’s the difference?

The basic definition of a side hustle is an activity that you do to earn money that is separate from, in addition to, or sometimes instead of a traditional job. The concept of the side hustle has been around for a long time, but it’s more popular in our current era, with its rapidly rising cost of living and growing gig economy. It’s common now for people to have one or more side hustles going in order to save for the future, or simply to make ends meet in the present.

Given this broad definition, it’s easy to see how just about any activity you can think of can be considered a side hustle. Taking photos at friends’ weddings for a fee, making jam to sell at a local farmer’s market, driving for Uber on the weekends, or tutoring college students in your spare time are all examples of common side hustles that are a great way to bring in some extra cash.

But here’s the big difference between a side hustle and a passive income source: even though a side hustle is not a regular 9-to-5 job, it still requires you to directly trade your time for money. This means that there’s going to be an upper limit on how much you can earn through your side hustle because, eventually, you’re going to run out of spare time. As soon as you can’t put any more hours into your hustle, you can’t get any more money out of it.

A passive income stream, on the other hand, doesn’t involve this direct exchange of time for money. It can certainly take work and effort to set up a passive income stream, but eventually, a well-established source of passive income will continue to bring in money independently without necessarily requiring more time from you. When this happens, you’ve removed that upper limit on your earning potential, which is a central goal of passive income.

The key to turning your side hustle into a passive income source

You may have noticed that in the examples described earlier, the side hustles in question are all services. Photo-taking, Uber-driving, and tutoring all involve you leveraging your skills and experience to perform a service for someone else. Even with jam-making, although you do end up with jars of jam to sell, you still have to spend your time making and selling the jam.

To turn your side hustle into a passive income source, therefore, what you need to figure out is a way to turn the service you are offering into a product. Some passive income experts refer to this process as “productizing your knowledge.” A service will always be directly linked with your time, but a product is something that people can buy and use on their own time without your direct involvement. By productizing your knowledge, you eliminate the direct exchange of time for money, and your side hustle becomes a passive income stream.

Examples of side hustles turned into passive income

To see how this idea of “productizing your knowledge” works in practice, let’s take a peek at what some of the previous side hustle examples look like when they’ve been turned into passive income sources.

Photography—To turn your photography skills into a passive income stream, consider taking some high-quality photos of different scenes and situations and uploading them to stock photo websites.

Jam-making—Rather than spending your time making jam to sell, you can spend that time fine-tuning recipes and creating a jam recipe book. Once published, your main work is done, but you can continue to earn income with every new sale.

Tutoring—You only have so many hours to devote to one-on-one tutoring. Instead, create an e-book or an online course on your chosen subject. People can then buy this product to “self-tutor” without any further effort from you.

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