(The following is an abbreviated transcription from a video I recorded. Please excuse any typos or errors.)
As someone who has had multiple streams of passive income for the last 10+ years, I am always frustrated at all the passive income articles and videos out there.
Most of them seem to be hiding the truth about passive income. I am not sure if it is intentional or if they just don’t know because they aren’t actually generating any, but here are 4 things about passive income that no one seems to ever want to share.
And if this is a new concept to you, essentially passive income is money that you work for one time and then just keeps coming to you passively.
As someone who’s been into this a lot for the last 10 or 12 years, and who has experienced the good and bad with it I definitely have some thoughts.
For me personally, I have about six or seven streams of passive income at this point, some are smaller, some are bigger, some are more passive than others. But I have another article where I go into all that. So I won’t go into the detail on that now. But in this article like I said, I want to talk about some of these truths that I think are hidden.
Now, these streams of passive income have been amazing for me, I absolutely have loved it. It’s allowed me to take a month off of work every single year for the last seven years, I was also able to once take a year long sabbatical.
And, it’s allowed me to spend more time with my family, it’s given me flexibility. It’s allowed me to not have to exchange hours for dollars and it really is great, there’s no denying it, but there are things that you need to know.
And that’s what we’re going to highlight now.
1. Passive Income Does Not Mean “Easy” Income
Number one is that most people, when they hear passive income, when they think of passive income, they just think of easy income because I just sit on the couch and the money comes to me. But in reality, it’s the opposite.
Requires Money Or Time
Creating a stream of passive income is always going to require one of two things from you. It’s either going to require money that you have already, that you can use to earn you more money, or it’s going to require your time and a big investment of your time in order to build something good enough that you can continue to get paid for it for months or years to come.
And so generally what this looks like for most people is that you’re working and spending a lot of your time without making much money on the front end. So if you’re caught up in this mindset of exchanging hours for dollars and just thinking how much money am I going to make for this hour spent working, it’s not going to be real exciting.
So for example, I started a blog in 2007 and I spent from June through December of that year working probably about five to 10 hours a week of my free time spending, growing this blog to make a total, a total of $100 for that entire year. And if you get a calculator out and kind of calculate how much I was making per hour for that year, it probably was a few cents per hour. Now, granted, it’s a lot easier to make a living from a blog now than it was then, but the fact still remains, I had to put a lot of time and energy into this thing without getting anything out of it before it started generating something passive.
And I’m really glad that I did because just a couple of years later, that same blog was generating enough passive income for me to take an entire month off and step away from it and make just as much money whether I was working on it or not. It’s not going to happen overnight, it is hard work, and you just need to be prepared for that. It is still worth it, but you need to know that this isn’t easy money, you still have to work and in many cases you have to work harder than you do with a typical day job.
2. Just Because It Is Passive Right Now Doesn’t Mean It Always Will Be
Number two, is that something that is passive right now may not always be passive. We all know this, the internet is changing things super fast. And so a business, a turnkey kind of passive business right now, might not be in a couple of years and things can change radically overnight.
So for example, going back to this blog example, which has always been one of my bigger sources of passive income, one of the reasons that it’s been passive in the first place, it’s just that Google would send us traffic. And while that’s great, and I love it, the fact is that, Google changes things a lot. And in a big way, we’ve had days, 24 hour periods, where our traffic would drop more than 50%. And so what this means, if that passive stream of income was generating $6,000 this month, it’s only generating $3,000 the following month. Volatility like that can be pretty challenging.
Another example is that I had a rental property that we had a great tenant and I didn’t have to do anything. And it was just completely passive and then checks just came each month. But anyone who has multiple rental properties or who’s been doing this for a while or any landlord, they will tell you that there are tenants who are anything but passive and kind of the opposite of passive and require a lot of time and energy and attention. And so while it might be really passive today, it might not be as passive tomorrow.
3. Some Forms Of Passive Income Are Easier Than Others
Number three is that some forms of passive income are just a lot easier than others. So for example, you could just buy a dividend paying stock and you instantly have a stream of passive income. Now you need money to buy it, but if you have money to buy it, that’s a really easy stream of income that you can get started now.
And if you compare that to building up a blog in 2008, or starting a YouTube channel or writing a book or selling music, like any of these things, they’re going to require much more work than just going and buying a dividend playing stock. And even within each one of these, some of them are going to be more or less work depending on your own natural giftings and your own skills in the market cycles, and there’s just a whole bunch of variables that kind of play into the ease or difficulty of a different source of income.
4. Daily Work Is A Good Thing
Number four is that daily work is actually a good thing. Now, just because you have some streams of passive income doesn’t mean that you wouldn’t be doing work. I mean, ideally, you’re continuing to do work to build up those passive streams and to make them more passive or to help them to generate more money for you. But in my case, what I found was that, I kind of became lazy. I was so interested in seeing how far I could push this thing and kind of got to the point where it wasn’t really working in it anymore, and that doesn’t leave you feeling very satisfied.
I think the idea of being on vacation all the time is something that’s kind of appealing in the back of our minds. But I think the reality for most of us is that if we’re actually living that, it’s not very satisfying, it’s not very fulfilling. And maybe for a couple of weeks or something, but there’s something hardwired into us that God put in us to desire to work and to need to do something.
I have multiple friends who have sold their businesses for seven or eight figures and it’s been interesting watching each one of them, how they’ve handled it after they sold off their business. And as they kind of stumbled through, all right, now I have a bunch of money, what do I do? And in trying to figure that out, and some of them have handled it really well and of them haven’t, some of them have kind of wandered like lost puppies.
And I think the warning here is that if you get to that point, where you do generate a lot of passive income, make sure that you’re still working, make sure that you still have something for you to do, something to accomplish something, to put your hand to. Because just living a life of sitting on the beach, cashing checks is not all it’s cracked up to.
All the internet marketers want you to believe that that’s the dream and that’s the thing you want, but in reality, it’s not, I believe the highest and best use of passive income is to create some freedom, to allow us to go after and to chase that thing that God has created us to do. It should help us become more active in serving people rather than more focused on self and more focused on how I can make my life comfortable.
So with all that, get out there and start working on building some streams of passive income!
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