Building Passive Income In The UK:
An Interview with Sonia from Money For The Modern Girl
Welcome to this interview series focusing on UK-based passive income builders. We are now on my fourth interview of the series. I’ve heard from people using familiar ways of making passive income and people using methods I’d never considered before.
I hope you find this series enlightening and encouraging, opening your eyes to the multitude of ways you can reach your financial goals. Talking to passive income entrepreneurs has definitely inspired me.
Today, we’re talking to Sonia from Money For The Modern Girl.
Please introduce yourself
My name is Sonia. I grew up on the continent but have chosen London as my new home, my husband and our young daughter love it here!
I have been blogging about personal finance and financial independence since February 2018 - and thinking about it a lot longer.
I am on the FI path because I want the flexibility of working less, not working or working something different if I chose to do so. Examples: If my new boss is a nightmare, I want to know that I don't have to put up with it. If I want to spend more time with my daughter, I want to know that I can do so.
What Does Passive Income Mean To You?
Passive income is a form of income that is generated not by trading time (as in a regular job) but is automated to a varying degree. Passive income is never completely passive, you have to put in some time to create the system, but you choose how much time to put in.
What passive income sources do you have?
I have a blog that I launched in 2011 and brings is a small but regular earnings of advertising income and small and varying earnings in translation work. I have spent a lot of time at the beginning to make sure this blog has great content and can be found organically on Google. In the last couple of years I have worked only a little on it and it is still generating income for me.
I also invest in my ISA with Funding Circle, a peer-to-peer platform that currently pays 7.4% interest.
Through my company (I'm a contractor) I also invest all the funds I will pay for corporation tax and VAT, generating additional, passive earnings for my company before the tax deadline.
How does your passive income compare to your active income and your expenses?
My passive income would not be enough to live on, it is about 10% of my monthly expenses. I am constantly looking at ways of increasing it and what I make I re-invest so that my investments keep growing.
What is your long term goal with passive income?
My long term goal is to create enough passive income that I will not depend on my day job's salary to make a living. I want the flexibility to work less or not at all, or work for less, if I chose to.
What are your most passive and most active income sources?
I work full time as an independent contractor, which is my most active income sources.
My passive streams of income, as described above, are my blog, my ISA and my company investments. ISA and company investments hardly take any of my time (normally it's just me checking the value rather than real work), while my blog takes some of my time.
What is your favourite passive income source and why?
My investments. They are almost on auto-pilot.
When I was younger and didn't have as many savings it was easier to generate income by investing my time into a blog. Now that I earn more I prefer to put money into investments and save my time for my family and hobbies.
I think that by focusing mainly on my blog, when I was younger I didn't research traditional investment opportunities as much.
Which passive income source has been the most challenging to build? And did you expect this when you started building it?
I thought I would be able to monetize my blog better, but some niches have a limited monetization potential. I still run it as I think I provide valuable information to my visitors.
Do you think your passive income sources will provide consistent income over the long term?
Yes, but it will take time to grow them to the point of my salary.
What passive income sources would you like to have in the future? Do you see any areas of growth?
I would like to buy a flat in an interesting part of London and create a high-end Airbnb style of rental. I grew up in an area in Italy that is very popular with tourists, and I understand what people want, so I could target people who want to experience London in a different way.
Do you plan to pass on these income streams to your beneficiaries?
Yes, all the ones I can.
I have been investing in a JISA and junior pension for my young daughter to provider her with a starting money pot for university or whatever else she is interested in doing.
Has passive income-building changed how you save, spend and invest? If so, how?
I have become a lot more focused when I started seeing the earnings from traditional investments. When you see the numbers, the results, you are so much more engaged and focused. This means I am also more focused on saving.
Having a child and getting hit by the childcare costs, especially for people who grew up on the continent where childcare is heavily subsidised and almost free, is also a huge motivator to be savvy with your money.
What are the main advantages and disadvantages to being UK-based when building passive income?
In the past I thought about investing in property in Germany, but Brexit made it crystal clear I don't want a mortgage in a different currency, because of exchange rate changes that are out of my control. Germany has very attractive subsidies if you restore old or abandoned real estate in East Germany. The other reason I haven't done it is that as a UK tax payer I wouldn't get the tax benefits that Germany tax payers do.
There are plenty of interesting, EU-subsidised opportunities for investment, but it is now too late for us to take advantage of them.
What advice would you give to someone looking to build passive income in the UK?
1) Decide whether you want to invest your time (e.g. for a blog, online shop. etc.) or your money (e.g. ISA, stock market, etc.)
2) Save more. We can all save more, just analyse critically all your expenses and decided which purchases really make a difference in your life. The more you save, the more you can invest.
3) Explore ways to get a pay rise, a bigger bonus and better benefits. Consider becoming a contractor in order to take advantage of the tax benefits. The more you earn, the more you can save.
4) Learn how to pay less taxes, e.g redundancy pay, sell the property you are living in, explore options with your pension, ISAs, etc.
5) Don't forget about cash flow! If you buy a property, your money is locked away and inaccessible. If you invest in a cash ISA you can still access the funds.
Thank you for the interview. Would you like to add anything else?
Don't go it alone. Join Financial Independence groups on Facebook or go to FI meetups. Find out if any of your friends share your interest in Financial Independence. The community will keep you motivated, give you ideas about others do it, and grow your confidence in what you can achieve.
And finally, where can people find you?
I am starting to see a pattern in passive income builders. And that pattern is rooted in the goal of having multiple streams of income. Why have one when you can have two and what’s stopping you at two?
Sonia is taking her active income and investing it in income-producing assets. Investments, peer-to-peer lending, a blog. But she is also doing something that is just as important. Tax planning. Employment income is one of the highest taxed income sources out there but it is also the source most people rely on.
Sonia is already taking advantage of the tax benefits of contracting and she is taking into account her tax burden when it comes to current and future investments. I wish her all the success in the future.
What do you think of Sonia’s passive income story? If you liked this discussion, smash that like button and leave your comments down below.