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How to Generate Passive Income so that You Can Achieve Financial Freedom


August 19, 2020

Harsha Moole, M.D., MBBS


“Time is more valuable than money. You can get more money, but you cannot get more time.” –Jim Rohn

 

Passive Income Streams

Introduction | How to Generate Passive Income Outside of Your Physician Job and Why it’s so Important

How to Generate Passive Income so that You Can Achieve Financial Freedom. If you are here right now reading this blog post, then it should be safe to surmise that you have woken up from the woes of your physician job and are in the midst of pursuing the desire to manifest your ideal life. While the job definitely has its highs, being a physician sure has its lows. It is an industry-known fact that every physician has experienced being burnt out at least once in their career. Dr. Frank John Ninivaggi, MD, a physician at Yale New Haven Hospital and author of Learned Mindfulness: Physician Engagement and MD Wellness, shares, “The percentage of physicians feeling burnt out remains fairly consistent [through the years]. The leading cause is administrative burden, as driven by the workplace and organizational culture.”

This is a sad reality experienced by physicians across all specialties and age groups. Medscape’s National Physician Burnout Report 2020 reveals that 49% of physicians in all generations would accept less money in exchange for more free time. A large chunk of physician respondents in the Millennial (36%) and Generation X (34%) division would willingly give up $10,001-$20,000 of their annual pay just so they’d have 20% fewer work hours. Moreover, physicians from the Boomer generation are willing to give up even more, up to $20,001-$50,000 of their annual salary, to work less hours. A powerful revelation is exposed by said report: doctors are clearly yearning for more time outside of their physician profession.

In the business of financial freedom, time is the currency of wealth. The earlier you build your wealth, the younger (and longer) you get to enjoy your abundance. That being said, there is no time to waste. Much of this physician struggle is rooted upon the belief that there is no other solid financial path other than your 9-5 job – that couldn’t be any less wrong. More and more physicians are turning to other creative means on how to generate passive income and grow their wealth, and it’s time you should too.

By determining ways on how to generate passive income, you rid yourself of higher probabilities of physician burnout. This is because you are detaching yourself from your clinic shifts, not letting your financial security be dependent on your salary alone. Moreover, when you’re not bent over backwards using your job as a physician to make ends meet, it’s much easier to reconnect with your sense of duty and passion towards the profession. Many doctors can attest to this: there truly is a strong correlation between happier doctors and healthier patients.

 

Active Income vs. Passive Income

Learning How to Generate Passive Income | The Difference Between Active Income vs. Passive Income

Financial freedom can definitely be achieved by having multiple streams of income. Experts say it’s important to have at least 7 streams of income, and we discuss all of them in this separate blog. These 7 streams of income are, most often, a mix of passive and active income. As physicians, the goal of many of us is to be able to treat medicine as a hobby and to do more of what we love outside of our jobs. It’s important to have a clear grasp of your investment options in order to see how your active and passive income streams can complement each other.

Before you are able to do that, you must be able to differentiate among your 7 streams of income which ones are active and which ones are passive. Naturally, active income is when money is earned in exchange for a skill or product. These are income streams which require much time, effort, and attention from your end. Some examples include your 9-5 job as a physician, businesses which you may have, or anything that entails wages, salaries, commission, or tips.

Active income is a crucial facet of building long-term wealth because it affords you the provisions to invest in passive income streams. Without bounteous investment capital, you may not be able to sustain, or even begin, your passive income streams. Active income allows you to earn quickly and consistently, given that the turnover from service to earnings happens in a shorter period of time. Once you have built your investment capital fund, the next step on how to generate passive income is to channel your hard-earned salary into income-generating assets.

This is where mastering how to generate passive income comes in. From interest earnings to rental income, passive income streams are those which do not require much effort from your end – or at least that’s what everyone says. Here’s a major myth-buster we’d like to impart: passive income streams still require preliminary work from your end but the jackpot lies in the fact that these streams can generate income for years. Passive income streams require patience and discipline, as they usually take years to fully take off. Although once they do, you’re pretty much set for life.

Once you determine the 7 streams of income which work best for you, you arrive at a sweet financial spot where you are able to enjoy your well-deserved wealth. Ever heard of not putting all your eggs in one basket? This is a benefit of having 7 streams of income. For physicians like Dr. Pranay Parikh, an important facet on how to generate passive income is that it merits you the security to afford your ideal life, without having to double down on your clinic shifts or to worry about unforeseen circumstances and expenses. In an interview with PhysicianEstate, he shares, “I diversified my life and it made me a better doctor because I was able to draw from my skills elsewhere into medicine. Similarly, I wanted to diversify my income streams as well. As we are seeing now, medicine isn’t as financially secure as we thought. I thought as a patient who would I want to be treated by? The doctor that is financially secure and is practicing medicine on his terms or one that is burdened by a ton of debt and working extra hours/days due to necessity?”

 

From a Physician’s Perspective | Tried and Tested Ways on How to Generate Passive Income

For the purpose of this blog, we will zoom in on specific passive income streams which you can explore so that you get to diversify your options outside of your physician job.

  • Explore accredited investor qualifications
    • Did you know that simply because of your high-income earnings as a physician, you may qualify as an accredited investor? Being an accredited investor could be an important path to explore in terms of how to generate passive income because it makes you eligible for multiple real estate investments / angel investment opportunities / private placements in investment funds etc. In another blog, we explain why physicians are often qualified as accredited investors by the Securities and Exchanges Commission (SEC) and what benefits are available to you when you are considered as such. To determine whether you meet the requirements of being an accredited investor, click here. A few physicians that have explored multiple accredited opportunities include – Eric Tait, Cherry Chen etc.
  • Start a blog
    • Being part of an industry where we have been groomed to believe that our physician jobs are meant to be the alpha and the omega, more and more physicians are coming out to talk about their personal journeys to financial freedom. This could be something you might be interested to explore. All it takes is to identify an area of expertise you are truly passionate about and build on that. What advocacies do you feel strongly about? Are there important information or inspiration you can share to bring value to an audience? These are some guide questions you can ponder on when starting a blog.
    • In terms of the profitability of a blog, you need not worry – the possibilities are endless. Blogs are able to make money via affiliate marketing (inserting click-through links throughout your blogs where you earn commission depending on how much clicks you’ve accumulated), paid ads (an arrangement where brands or companies pay you for display advertising in your blog), and sponsored content (a brand or company pays you to create content on their behalf via your platform), among others. It is important to note that earning profit out of a blog takes time because you must first flush out an immense amount of valuable content to be able to build an audience. We have multiple role models here in our physician community – The White Coat Investor, Passive Income MD, Physician on Fire etc.
  • Be part of a (profitable) cause or organization you believe in
    • There is much to be learned from physicians like Dr. Parikh. He starts his journey to financial freedom with some very wise decisions, such as being part of partnerships with established brands like Passive Income MD. Not only are you diversifying your areas of income, but you are also giving yourself a chance to ride on important causes which you are passionate about and to learn from other great professionals in the field.
  • Develop a business (or two)
    • There are entrepreneurs in all of us; you just simply have to craft a business project worth taking on. Businesses, or side hustles as many people call it, are an important addition to discovering how to generate passive income because they pose enormous potential rewards. Developing a business is now a lot easier and more profitable than ever, thanks to social media and technology. Online businesses, in particular, are viable options because they don’t require as much overhead costs.
  • Invest in real estate
    • We cannot stress this enough: the world of real estate is a lucrative investment vehicle you should be well-versed in. It is a low-risk yet high-reward type of passive income and many physician investors recommend it for good reason. For newbies, we recommend Real Estate Syndications as it’s the perfect way to feel your way around unfamiliar territory. Real Estate Syndications are passive investment vehicles where you have an experienced Syndicator calling the shots, and you simply operate as part of a group of investors who pool funds for a prospective property believed to be profitable for all who will participate. This investment set-up is great because you get to learn from how seasoned Syndicators make real estate decisions and you are also able to expand your network as you work with other partners.
    • Once you are more comfortable playing around with real estate, other investment vehicles you can get into include rental income and Real Estate Investment Trusts (REIT), among others.
  • Go big on interest or stock earnings
    • Stock dividends and interest earnings are also popular means on how to generate passive income. Many physician investors are earning passive income with significant holdings in high dividend stocks. On the other hand, some investors turn to interest income, where they lend their money out and collect interest periodically. Some examples include real estate crowdfunding or peer “I owe you” (IOU) agreements. Both methods require very minimal effort from your end, especially if you have a broker or accountant to handle your transactions for you. It’s as simple as depositing your money away and watching it grow by itself.
  • Seemingly small things such as your savings accounts matter
    • Where you stow your money also matters. High yield savings accounts are quite normal in this day and age so it only makes sense that you jump on the bandwagon. Instead of keeping your money in low-interest vehicles, look for savings accounts that yield about 3-4%. We reckon those are deals worth pursuing.
  • Earn profit from your hobbies, expertise or hidden talents
    • Are you a good baker? Do you have an eye for photography? These are perfect examples of hobbies and talents which you can make a profit out of. If you’re a baker, you can simply create a Facebook or Instagram page where you can sell your baked goods. If you are a photographer in your down time, you can sell your prints in exchange for a royalty fee to websites such as Shutterstock or iStockphoto.
    • If you also possess relevant skills or knowledge, say, digital marketing or stock investment for physicians, you can turn valuable know-how into online learning courses which people pay thousands of dollars for.

How to Generate Passive Income

Summary

If it has come as a surprise to you how much upfront work passive income streams entail, trust us when we say that it all pays off. Any / all passive income streams require you do some amount of active hard work upfront. More than anything, what makes passive income so attractive to physicians is the promise of financial freedom in the long run. Remember that learning how to generate passive income takes patience and discipline in order to reap all of its financial benefits down the road. As long as you are willing to put in the effort to find the right mix of income streams that work best for you, you could literally make money while you sleep, and, well, we’ve slept a lot better at night knowing that. We know you will, too.

 

Here at PhysicianEstate, we welcome all physician entrepreneurs to learn about commercial real estate investments, rental property investments, and wealth generation. We encourage all physicians to eventually become real estate physician investors. We know a great deal about Who – What – Why – How. 

Stay in touch with us by signing up for our newsletter. The newsletter will keep you up to speed on the current real estate investments we are looking at, provide physicians with investment opportunities, and much more.  

Legal Disclaimer: This is not investment advice. I am not a legal and/or investment advisor. This is my personal blog, and all information found here, including any ideas, opinions, views, predictions, forecasts, commentaries, suggestions, or stock picks, expressed or implied herein, are for informational, entertainment or educational purposes only and should not be construed as personal investment advice. These are my views, it is not a production of my employer, nor is it affiliated with any broker/dealer or registered investment advisor. While the information provided is believed to be accurate, it may include errors or inaccuracies. To the maximum extent permitted by law, PhysicianEstate disclaims any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses. You should consult with an attorney or other professional to determine what may be best for your individual needs. Your use of the information on the website or materials linked from the Web is at your own risk. 

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Authored by Harsha Moole, M.D., MBBS

Hey there! I hope you enjoyed reading this blog. PhysicianEstate is my brain child and passion project. I run this platform to empower entrepreneurially motivated physicians to make financially educated investment decisions and discuss asset protection strategies. Lots of important but free content here and here! If you have any questions or if you are interested in partnering with me, let’s connect! hmoole@physicianestate.com

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