What You Need To Know About Passive Income As A Freelancer

If there’s one thing the pandemic has taught us, it is that every freelancer should probably take steps to diversify and build passive income streams.

Things can change in an instant, and having money coming in from a few different sources can make a huge difference to how risky freelancing is.

Knowing that you’re not solely reliant on generating consistent client work – and still have money coming in from other sources – can be a real weight off your shoulders.

However, many freelancers prioritise client work over everything else to the point that they think of other income streams when they get desperate.

In this article, we want to inspire you to start building some other income streams straight away. So you can enjoy the many benefits!

Table of contents:

  1. What is passive income?
  2. How to get started
  3. Final thoughts
  4. Related articles
  5. The Freelance Roadmap

What is passive income?

What could be better than earning money while you sleep?

The idea of passive income is intoxicating – you make something once, and then sit back as the money rolls in.

Of course, the reality isn’t quite that simple.

But if you get it right, passive income can really help you build a stable business, and earn some extra money to complement your client work as a freelancer.

Think of passive income as investing time and energy upfront to reap the rewards later on. By putting in the hard work now it’s possible to create resources that will generate ongoing income for you for many years to come.

The difference between active and passive income

Active income is, simply, the income you earn by performing services for clients. When you don’t have any client work, you don’t have any active income.

Passive income can come from different sources and can be whirring away in the background at all times. Selling an online course is a perfect example of a passive income stream. 

You need to create a course first – so you need to put some time and work into it. Once you finish it, you can publish it on course platforms like Udemy or Skillshare.

Once it’s out there, you start receiving monthly royalties from the platforms.

In theory, you have done the hard work. In reality, you will often need to actively promote and market the product that you have created.

But in theory, the course is passively generating income for you in the background, while you are focusing on generating active income through your client work.

Passive income myths busted

Passive income is often overhyped or dismissed as a get-rich-quick scheme. But with a little thought and a solid strategy behind it, it can be a great way to shore up your business and your earnings. 

So let’s address some of the most common confusions about passive income.

Build it and they will come

This is the first mistake. People tend to create something, set it all up, and then let it sit there, expecting it to start bringing millions overnight.

To sell things like digital products you need to first make sure there is demand for what you’re creating – an audience who wants it.

You then need to put the time and effort into creating something of value.

And then it’s all about spreading the word so your product reaches the people who want it.

If you want to start with affiliate marketing (promoting external products for a cut of the sale), for example, you can’t just create an Amazon Affiliate profile, post loads of links and wait for money to come in.

You have to invest time into building your online presence and establishing yourself as an expert that people trust. So when you recommend something, they trust you and buy it.

You don’t just start a passive income stream – you build or create something.

And then you keep it growing until it starts to generate money for you. Only then you can start relaxing while the cash keeps coming in.

It’s a little like keeping a houseplant alive. You’ll need to take care of it, and water it regularly to keep your passive income stream alive and healthy.

Passive income comes overnight

The biggest mistake most freelancers make is they create something before building up an audience for it.

To sell something effectively, you need to put some consistent time and effort into building an audience who are interested in it.

For example, our main source of passive income is GBM Music, a Nottingham-based record label that we founded four years ago. We generate income by licensing music and also through affiliate marketing.

But it took us months of hard work to create unique music and build a useful blog until money started to trickle in. And then another two-three months to establish it as a stable passive income stream.

Obviously, there are exceptions to this rule and it can take less to build different types of passive income streams. But the bottom line is not to give up too soon on it – it’s not supposed to happen overnight.

This is a long-term project, to run alongside your freelance services.

I need to invest a lot of money

It’s completely up to you how much money you will invest in this. For example, you might want to use paid ads to promote your digital products. But that’s all optional and not necessary – we’ve built our passive income streams without really using ads.

While you can pay other people to create products for you, or to market your products, you can do most of it for free or with limited costs associated.

As a freelancer, you probably already have a website you can use, and you may even have a social media following or email list to who you can sell to.

Fortunately, it’s cheaper and easier than ever to create, store and distribute digital content than ever before – and there’s a real market for it, which is only growing.

Now is a great time to get started in creating a passive income stream, especially if you are a freelancer, because the technology to create and share content is more open and accessible than it has ever been.

How to get started

First, you need to think about what kind of passive income streams you would like to create. It makes sense to make something that is relevant to your core freelance services.

You can then start to build a foundation for it.

For example, if you are planning to do affiliate marketing, you will most likely want to build a solid blog, YouTube channel, or social media account that not only attracts visitors but converts them into buyers as well.

You need to position yourself as an expert and gain readers’ trust.

So when you do recommend something – they trust you and want to buy from you. They know that you are genuinely endorsing that product rather than simply pushing it to make a profit. 

Or if you are planning to write an ebook, you will need to build an audience first that sees you as an expert in the field.

So when you publish it, they will be ready to buy it from you, because they trust you.

A great way to build an engaged audience is via email marketing – so if you haven’t started building an email list, I highly recommend doing that before investing any time into creating products that you want to sell.

Related: 5 steps to build an email list

Different types of passive income streams all require different strategies and might not be suited for every freelancer – but we will talk more about that in upcoming articles.

But for now, we’ll cover the four most popular types of passive income and how any freelancer can get started with each of them:

Affiliate marketing

This is one of the most popular forms of passive income, and the idea is very simple: you recommend services or products that you endorse in your content, and your audience buys them.

If people buy using your link, you earn a commission from each sale. You see this all the time on YouTube and blogs.

It’s simple to do and set up, but that doesn’t mean it will bring you thousands in income overnight. The real work comes in generating an audience who trusts you enough to click on your links and buy something because you have said it’s worth it.

So to build this type of passive income stream, you have to build meaningful connections and establish trust with your audience.

Neil Patel has a very useful step-by-step guide on affiliate marketing, so to dive deeper into this topic I recommend checking that out.

Sell digital products

If you are a creative freelancer, then the best way to build a passive income stream is to sell digital products. You can do this by setting up a shop on your own website, or by uploading them to established markets and stock sites.

If you sell them directly, you will keep much more of the products, but you will have to do all of the marketing yourself.

Or you can use an external website that may help to market your products – but that’s not guaranteed. Stock websites are full of content that doesn’t ever sell

For graphic designers and illustrators, the most popular websites for publishing design products are Envato and Creative Market. 

Etsy is also a good place to sell things like Lightroom presets, social media templates, and printable items – but have in mind that this is not a stock website.

It’s like Amazon, but for handmade products. So you will need to set up your shop there and put some effort into SEO and marketing so your products there get exposure.

Sites like Redbubble or Printful also allow designers to create items and clothing – and to focus on creating rather than distributing.

Photographers have a wide range of stock websites where they can upload photos – iStock, Shutterstock, Alamy, to name a few.

Of course, you can also find more themed stock websites that align with your niche. For example, if you are a food photographer, then you should consider uploading your photos to sites like Foodiesfeed.

Do the research

Of course, these stock sites are saturated with products, so you want to create high-quality products that have high demand. So before you jump into creating something that nobody will ever see – it’s best to do some research.

First, check what’s trending on the websites where you want to start selling. Trending products mean they have the highest demand at the moment.

See how similar products to what you want to create are performing.

See if they have been selling – there’s usually a number of downloads or purchases put somewhere.

Also, try to find out for how long – you can usually get an idea about this from the date of reviews if there are any.

This can help you to see whether it’s worth investing the time in creating the product or not.

If similar items haven’t been performing well, there’s a high chance yours won’t either.

For more inspiration, look at trending items and read the reviews.

Here customers will tell you what they liked and didn’t like about the product. You can use this info to create a similar product but that fixes the problems.

Share your knowledge and expertise

When you position yourself as an expert in your field, you can start turning your expertise into a passive income stream.

This can be anything from starting a YouTube channel to writing an ebook and creating courses.

Depending on your expertise, you can create online courses and publish them on Skillshare, where you get paid each month based on the watch time your course had, or you can sell it on Udemy.

If you have built an engaged audience already, ready to buy from you, then you might want to host your course more independently on platforms like Teachable or Thinkific.

For freelance writers and journalists, or anyone who enjoys writing and has expertise, writing for Medium as part of a Partner Program, or starting a paid newsletter on Substack can be a good choice.

But, have in mind that for any of these options to work, you need people to trust you and see you as an expert, you need to build an engaged audience.

So it might take some time and effort before you start earning money,  but don’t get discouraged and stay consistent.


Investing in stocks and real estate can be another form of traditional passive income. Real estate might not be very interesting to freelancers nowadays, but stocks and cryptocurrency are a hot topic – and again the gateways to entry have dropped significantly recently.

So, in a nutshell, this refers to income from buying stocks, or cryptocurrency, for a low price, and then selling it for more – assuming their valuation rises.

Cryptocurrencies and NFTs are hot topics at the moment, and people are making a lot of money – so we’re keeping our eye on them.

But, of course, it goes without saying that there is significant risk involved in this and you should only invest money that you can afford to lose.

Final thoughts

I think every freelancer should think about setting up a passive income stream that complements their main services.

It can really take the load off during tough times, and occasionally these projects can really take off.

It’s important to be realistic though. As a freelancer, it’s important you recognise that the work around passive income often only begins when you’ve created the product.

Until next time,


My very first book – The Freelance Roadmap – has hit the digital shelves!

The Freelance Roadmap is a complete guide to building your freelance business and living life on your own terms.

This book will teach you how to develop a clear vision for your business, use storytelling that makes others want to work with you, develop a rock-solid freelance mindset, build the confidence to bring your ambitions to life and more!

The Not-So-Secret Ingredient For Freelance Success In 2023
How to Go Freelance risk-free
How to Register as a Freelancer in the UK

Leave a Reply

Your email address will not be published. Required fields are marked *

Let’s connect on social media!