How to generate a sustainable stream of location independent income is by far the most frequent question I get asked. In this article I analyse the best ways, their pros and cons and explain how to get started.
Actively investing your money is a great way to generate location independent income but it isn’t for the faint-hearted.
– Trading your own money means equals not having to deal with clients, suppliers etc. This is great for those who seek self-reliance.
– Sky is the limit. You can make an awful lot of money, if you are good.
– You can trade from anywhere in the world. This is the real deal as far as location independence goes.
– Trading will motivate you to stay up to date on what’s happening in the world. It will allow you to gain a better understanding of how things work.
– If you are properly structured, you can wipe the word “tax” off your vocabulary.
– The size of your trading account will grow over time. You will have nearly instant access to that capital. This will help you take advantage of time-sensitive investment opportunities.
– You can scale relatively easily by taking in clients money.
– Investing is risky, you could lose a significant portion of your capital.
– There aren’t a lot of location independent investors out there, it can feel lonely out there.
How to get started
You should start by familiarizing yourself with the world of finance. Sites like Investopedia and Seeking Alpha are great places to get started. Try to focus on one asset class, stocks or currencies for example. I also recommend opening a demo account and using it for a few months to gain experience before using real money. Interactive Brokers offers free demo accounts and so does IG. Once you feel confident in your abilities, open a real account and fund it with an amount that you can afford to lose. After a few months you will know if you’ve got what it takes to succeed as a trader.
If you already have some investable capital, it could make sense to take the passive income route. You could invest in existing businesses, become an angel investor, buy high yield bonds, buy an annuity, build a Buy-to-Let portfolio, lend on peer-to-peer lending sites, put your money in savings accounts, invest in a dividend-earning stock portfolio, buy investment grade land, stockpile resources etc.
– Having a stable, passive income stream allows you to focus on doing what you really want to do. You do not have to focus on making money.
– Not having to work is great if you don’t actually like working.
– If you are building a business, your passive income stream will remove most worries about failure or running out of money. You also won’t be in a hurry to put your product out there, that usually means that you won’t have to release a half-baked product.
– Passive income can be a life saver if you fall ill and can’t work for an extended period of time.
– Passive income can smooth out the experience of raising a family. You can spend all the time you want with your kids.
– It’s not because your investments are paying well now that they will continue paying well indefinitely. You have to plan for a financial crisis, your broker’s bankruptcy, the default of a major borrower, fluctuations in currency valuations etc.
– Use it or lose it. I understand that the validity of this point is debatable but I personally believe that not working for an extended period of time can make someone lose their “edge”.
Keep your job, work remotely
Depending on what you currently do and who you work for, it may be possible to keep your job and work remotely. It is a very popular option as it allows a smoother transition into the nomadic lifestyle. It also allows for a painless return home should you wish to. That being said, I do not recommend this as a long-term option. The reason for this is that at the end of the day, your employer is the one calling the shots. Do it for a year, find out if you like this lifestyle and if you do, start your own business.
– If your boss is cool with it, you could leave tomorrow and become location independent.
– Keeping your job allows you to give the location independent lifestyle a try without taking any risk.
– Some work remotely for a few hours every day to support themselves while they build their own products. I have to warm you though, if your remote work is very taxing mentally, it could use most of your “daily creative hours” and leave you unable to focus on your own business.
– You aren’t the one calling the shots. Isn’t having control over your own life one of the main reasons to become location independent?
– You will probably have to continue paying taxes in your home country. Do not assume that because you travel, your tax burden will magically go away.
– Your work obligations might restrict your freedom of movement. That is especially true for those who need to be online at specific times. In such cases you might need to stay close to your home time zone.
– Problems with your internet connection can severely affect your productivity.
With the rise of sites like Fiverr, freelancing has become easy and a viable source of location independent income. As a matter of fact, most nomads currently earn some or all of their income through freelancing. Personally I hate the idea of freelancing. I believe that if you have a marketable skill, you should start your own business. That doing so is a much better time investment. It sure is easier to find work on the freelancing sites than it is to start a business but a business can be scaled, tax optimized, sold, most of the work can be outsourced etc.
– Easy to get started.
– If you have a rare skill that is in demand, you can make a living wage.
– You can build strong relationships with your clients and use those when you start your own business.
– Having a well established profile on each of the freelancing sites means you will probably never be out of work.
– If you come from a low income country, freelancing could offer you a significant pay boost.
– Even if you are at the top of your game, there isn’t much money to be made. Enough to live on, sure, but you probably won’t become a millionaire by working as a freelancer.
– You are at the mercy of the freelancing sites. For example, if you get all your work through Upwork and they go bust, you are royally screwed.
– Depending on what you do, you may be able to outsource some tasks but you will most likely have to do all the work yourself.
How to get started
All you need to do is to create a profile on Fiverr, Upwork, Freelancing.com and Toptal. Make sure that your profile is 100% complete, includes references, a comprehensive list of your qualifications and a complete work history. You will most likely have to take a few low paid assignments in order to boost your reputation metrics (feedback score, job satisfaction etc) before you can find decent paying work.
Start a location independent business
This is my favorite option, by far. Dhirudhai Ambani said it best with this quote: If you don’t build your dream, someone else will hire you to build theirs. Not only is building a business incredibly rewarding but it’s also a very good move from a tax, immigration and social perspective.
– As a business owner, you will own your time and control your destiny.
– You can choose the people you will work with, your clients, your suppliers etc.
– The level of risk may be higher but so is the reward.
– You will meet tons of interesting entrepreneurs and they will take you more seriously. As a business owner, you become a member of the “club”.
– You will gain access to many tax optimization strategies that are only available to businesses.
– If you have kids, you could pass on the business to them. Not everyone cares about that but it’s still nice to have the option.
– A business can be sold, sometimes for an awful lot of money. It’s not because you start a business now that you have to continue working on it for the rest of your life.
– Starting a business is risky, especially if you take investors money or debt.
– You will most likely have to work harder for a while. You’ll be hammering at your keyboard while many of your nomad friends will be at the beach.
– The risk of failure is very real.
Piece of advice
Regardless of how you choose to proceed, I recommend not taking debt or investors money in the beginning stages (if possible). Get your product/service out there and validate your business model first. Once you know it’s working you can scale the business using external capital if that is what you want or you can continue bootstrapping your way to success.
Running an established business remotely
If you already own a business, it may be possible to continue running it remotely. It really depends on this: are you the business or is the business a system that others can run? If you are the business, you might be better off freelancing your skills or starting a new location independent business. If the business is a system then all you need to do is to find a trustworthy local manager to run it. To be honest though, I’m not a big fan of the whole idea of running a business remotely. I’ve met people who’ve done it successfully but the level of risk is just not acceptable to me. I also don’t like the idea of not being fully involved in a business I started (and have a strong emotional connection to).
– If done properly, it can provide you with a stable income that is pretty much passive.
– You could decide to go back home any day. You would have a business to return to.
– Running an established business remotely would make sense if you are only leaving home temporarily or giving the location independent lifestyle a try.
– You are fully dependent on your manager. Complete trust is required. If the manager quits, you might need to return home and abandon your plans.
– You will probably have to continue paying income tax.
– If the business fails, you will lose your income stream and may have nothing to go back home to.
Teaching & volunteering
I’ve met many English teachers and volunteers over the years. It’s not really a sustainable way to earn a location independent income but it can be a good way to give the lifestyle a try if you have no business skills, no passive income stream and no marketable skill. I’m not going to do a pros and cons for this option as it doesn’t really compare with the others listed above. Instead I’ll list my favorite volunteering sites. WorkAway.info is by far my favorite, it really is a great way to get into the local culture of a country. Apps like NiceTalk are a great way to teach while on the road. There are also numerous Facebook groups dedicated to English teaching and volunteering opportunities worldwide.