One of the beliefs of people who retire early is that most people will need much less money than they imagine if they retire young. One because there are many ways to cut on expenses, and two because when you have lots of free time in your thirties or forties, you are bound to actually still have some “work related” activity on the side, that will end up making you money.
I’d say it is dangerous to rely on this money being a reliable source of income (the goal of being financially independent, after all, is not to quit your 9/5 job just so you can go and become tied to another job), but most early retirees consider it as a nice way of guaranteeing even more that their egg nest will not deplete prematurely.
In my case, I own a relatively popular blog talking about videogames. That blog shows advertising, for which I get paid. I put sweat, blood and tears into that one specific website, and it doesn’t pay much given the amount of work it has represented so far (it’s more or less a second full-time job at this point), but it is a work of passion, and I would instantly switch to that as my “job” if it was financially realistic.
But it’s not. That being said, that one blog pays me more than minimum wage, for doing something that I truly enjoy. Now, it has seen lots of variations in revenue, and in my own interest for blogging, so I cannot “count” on it as a fixed revenue stream. But my personal experience confirms to me what others have been advocating; it is reasonably easy nowadays to make money on the side, be paid more than minimum wage, for something you can do at your pace, whenever you want.
$5’000 a year is not much for example, unless you realize it’s just your “safety margin” in addition to your “normal” income that comes from something more constant (investments, most likely)