The Passive Income Escalator (5 income types)

^{Read time - 4 minutes / Disclosure}

 

Making passive income can lead to:

- Working less.

- Earning more.

- Leaving 9-5 life early.

Unfortunately, most schools don't teach passive income.

 

40 Hour Weeks

 

The modern education system teaches people:

- To trade time for money.

- To specialize in 1 thing.

- To do it for 40 years.

Most people follow that path.

Heck it's the path I followed.

But after working in finance.

And watching the different ways people make money.

I noticed some people were playing a different game.

A game that favors passive income.

 

The old American retirement plan:

20s: No plan
30s: No plan
40s: No plan
50s: Panic
60s: Panic
70s: Panic

The new American retirement plan:

20s: Invest a lot
30s: Invest a lot
40s: Invest a lot
50s: Enjoy
60s: Enjoy
70s: Enjoy

— JOHN HENRY (@thejohnhenry_) September 16, 2025

I wanted to become one of these people.

To focus more on investing.

To leave 9-5 life decades early.

To work part time for myself.

To not have to ask a boss for time off.

To not feel like I was wasting my life sitting in a cubicle for 40 years trading time for money.

So I watched what wealthy banking clients did with their money.

What they invested in.

Which income types were the most passive and the least passive.

And I built those habits into my financial life.

 

 

The Passive Income Escalator

 

There's 5 common ways people make money.

Some ways are passive.

And some ways aren't.

For many people it looks like this:

 

 

Here's a breakdown of the 5 ways from least passive to most passive.

Hope it's useful.

Let's dive in:

 

1. The 9-5 Job

 

Most people work a 9-5 into their 60s.

It's the path the school system teaches.

And working different jobs is a great way to learn new skills.

But having a 9-5 means having a boss and trading 40 hours each week for money.

 

 

Making more money often means getting promoted.

And getting promoted means more responsibility.

With often means working 40-55 hour weeks.

 

 

A 9-5 job is the least passive way to make money. Not working often means not getting paid.

 

2. The Small Business

 

Starting a small business requires more skills than a 9-5 job.

But it has more passive income potential.

For example.

Michael runs a pet store.

And he decides to create a social media account about dog training.

He talks about his job at the pet store so people view him as credible.

And he posts dog training tips everyday on his social media channel.

As time goes on his account grows larger and larger.

Sponsors reach out to Michael asking if he'll promote their products to his audience.

And they pay him each time he does.

Michael also decides to create a $75 dog training video course that's 90 minutes long.

 

 

He mentions the course once a week to his audience and adds it to his social media profile.

When someone buys the online course, they receive instant access without any extra effort from Michael.

The internet has become a popular place to make money sharing knowledge.

Your expertise is worth more as content than it is as labor.

— Justin Welsh (@thejustinwelsh) October 21, 2025

 

Small businesses can offer digital products online or use sponsors to make money 24/7.

 

3. The Individual Stocks

 

Stocks can have massive upside.

100% return

1,000% return

10,000% return

But picking the right stocks takes work.

And means researching...

 

 

...of each company you invest in.

Companies listed on the stock market are required to share detailed reports about the company every 3 months.

So if you invest in 10 different stocks.

Reading reports on 10 different companies every 3 months can be time consuming.

But not reading these reports.

And not keeping track of the companies you own and why.

Means not knowing when it's time to sell a stock you own.

Owning individual stocks can have massive upside but takes time keeping track of what you own and why. Owning individual stocks can also have massive downside if you invest in the wrong companies.

 

4. The Real Estate

 

Everyone needs a place to live.

Some people choose to rent.

And some people choose to buy.

Working with a loan officer to get a loan and buy a home means:

- Replacing the carpet when it gets old.

- Replacing the dishwasher when it breaks.

- Replacing the toilet when it stops working.

But it also means..

Owning property.

And according to the U.S. Census Bureau.

Home prices have went up over 300% since 1995.

 

^{Home prices}

Owning a home or rental property takes time and money to keep it up but also means benefitting from rising home prices.

 

5. The Stock Fund

 

I've found owning a stock fund to be the most passive investment.

Instead of researching several companies.

And buying several stocks.

Buying an S&P500 stock fund means automatically owning 500 of the largest companies on the stock market.

For example.

Buying $100 of the Vanguard S&P500 fund VOO (one of the largest stock funds).

Means owning:

- $7.37 of NVDA stock.

- $7.07 of Apple stock.

- $6.24 of Microsoft stock.

- $3.86 of Amazon stock.

- $3.24 of Broadcom stock.

Plus 495 other stocks.

 

 

Buying an S&P500 stock fund means passively owning 500 of the largest companies on the stock market. The S&P500 has doubled in price every 8 years on average since the 1990s.

 

The bottom line

 

Learning the different types of income.

And learning more about passive income.

Helped me decide what to focus on as a beginner investor.

Back when I was starting from scratch and didn't know much.

But I knew a 9-5 job meant trading time for money (forever).

Which motivated me to get better with my money.

To use my 9-5 income to own assets that were more passive.

 

 

And doing that for a decade allowed me to quit my 9-5 finance job in my later 30s.

To have more control of my time.

To start this little online education business.

To do something that feels more like play than work.

It sure wasn't easy.

And came with many hard money lessons.

But it was worth doing.

I hope sharing what I've learned working in finance is useful in some way.

And I hope you had a wonderful holiday with your friends and family.

That's all for today.

See you next Saturday.