Trading time for money

If you go 1099 in the government contracting world, you will likely bill hourly.

This means for every hour you work, you get paid X amount. You trade time for money.

The downside is, when you're not working, you're doing get paid.

That's why many folks strive for "passive income," or income that is not directly tied to the time you spend working.

The problem is, passive income is mostly a myth, at least, in the way most people interpret it, which is imagining a magic money tree that just gives you thousands of dollars per month without doing anything.

The thing is, to generate any income, you will have to spend your time. It's just a matter of the time delta and the risk premium you're willing to pay.

For example, billing hourly means you get paid immediately for your work (well, net-30, but you get the idea).

There is no gap between your labor and the money.

But let's say you want to build a passive income stream.

One way to do this is to build a business that sells a product or sells a service that other people (employees) can deliver.

You have to spend a lot of time up front to develop a product or build a business around a service before you ever see any money.

You trade time now for money later. It's only passive income later and even then, you'll still spend some time on the business. It's only passive in that there is an intermediate business between your time and the money. Your time, if successful, is leveraged.

The other thing you can do to get money is invest.

If you put money in an index fund or make a private investment, you give your money now, for more money later.

This is truly "passive" in the sense that someone else is responsible for making you money.

BUT, you take on more risk. The investments can go bad, in which case, you would have passive NEGATIVE income.

Plus, how do you get the money to invest? By trading your time for money.

Unless you won the lottery or come from a rich family for something, which is not a viable strategy for most.

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As a 1099, if you want to get out of the "time for money" game and build passive income, I recommend "buying your time" as a first step.

If you do it right, you'll have extra money. Use that to take Friday's off or comfortable take a few months off in between projects,

Then spend time developing a "passive income" source i.e. build a business.

Alternatively, just use the extra money to invest in index funds. Your money will grow passively and then you can eventually retire.

Once you get the idea of passive income out of your head, you can make real progress towards freeing up your time to do what you want.

Want the full playbook? Check out Going 1099.