We all dream of it… the coveted passive income! Picture that income flowing in and no need to work! Truly a dream come true. We’ve all seen the YouTube ads, this one simple trick will allow you to unlock unlimited income! What if I told you passive income is a lie?
There I said it – there is no such thing as passive income. At least not entirely. You can earn some income on the side with low effort. But there is no such thing as completely work-free income.
If anyone promised a completely work-free income it’s a major red flag! They are lying or looking to scam you.
What is Passive Income?
At the end of the day, we are all in the pursuit of carefree income. Therefore holding onto the mirage of passive income is wonderful. It feels dreamy and special. Just like someone playing the lottery we hold out with the hope of a consistent payout.
To figure this out let’s look at the proper definition of passive income: “Passive income has been a relatively loosely used term in recent years. Colloquially, it’s been used to define money being earned regularly with little or no effort on the part of the person receiving it.” Investopedia
I don’t believe a single job out is lucrative with no work. To get behind this we need to understand what it takes to get a profitable and regular passive income. It usually will come from investments, entrepreneurship, or royalties. All of these need varying amounts of work to set up.
So yes passive income might exist but it’s hardly completely hands-off.
What is real passive income?
The idea behind passive income is to build new income streams. The average millionaire having 7 income streams. They will vary in activity level but will all need a level or another of supervision.
Isn’t it exciting the idea to work from home and get money funneled to your account regularly? But all 7 income streams have some kind of maintenance. Even the epitome of passive income: dividend stocks or bonds require maintenance. You need to pick the right portfolio and stay diversified! You can learn more about that in my article “Trading 212 or Vanguard? Which investor are you?”
What are your options?
What do people mistakenly take for passive income? The list is long I will tell you that. Whenever you find an article titled “top 5 passive incomes for 2021” you should probably run. Let’s take the time to list out the commonly touted options and understand why they aren’t so passive after all.
- Airbnb or House hacking
- eBooks and Courses
- Affiliate Marketing
All of the above are often cited as sources of passive income. Ways to become your own boss. Yet what most omit to share is that you need to work extremely hard to set up these income streams. Let’s look into what each of them needs to be set up.
House hacking sounds easy, right? You’ve got a spare room put it on Airbnb and boom regular easy outcome. Sounds great! Easy income from a spare room that would otherwise drain energy.
This is vastly miss understanding Airbnb. The best way to drive consistent bookings and revenue is by being a “Super-Host”. To become one you need to have had 10 guests stay and leave a high star review.
Becoming a “Super-Host” is all but easy. In order to get high reviews, you will need to create an experience. Remember the sensation you feel when your bed is set up in the perfect way. Some soap and shampoo in the bathroom and maybe a guide of the city!
That makes all the difference. But getting your spare room ready multiple times a week to incur “passive income” seems like work to me. What do you think about it?
Just set up a store and find something to flip and sell online. Just pop over to Teespring. Create a viral design and start selling T-shirts. Not only do you need to acquire the skills for basic design and the communication skills to sell your designs.
What about flipping items? Well, let’s say you decide to flip tech items such as vintage consoles. You need to:
- Research Them
- Test and buy them
- Find a buyer
Repeat this for every item and marginal gains. Once more you might be able to set yourself up and get evergreen designs that will sell months after publishing them. These designs will payoff regularly with low effort on your side. This is still disregarding the past work needed.
YouTube, podcast, and blogging
Any of these 3 needs a strong amount of work. They might, in the long run, lead to consistent revenue from your portfolio. Yet setting them up in the first place is insanely difficult.
YouTube keeps you from earning revenue until you reach 1k subscribers and 4,000 hours of watch time. It takes on average 22 months of consistent posting to reach this milestone. Almost 2 years and no income? Doesn’t exactly sound like passive income to me. In the long run, it might return dividends but nothing is guaranteed.
Podcasts take months to earn an income. You need to build a loyal fan base and stand out from the crowd of similar products. You’ll also need to find a way to advertise your product and drive consistent income. There are some fantastic podcasters out there like Yasi at Fast Track Life and seeing her drive I can tell you there is nothing passive about it!
Blogging/Medium with a blog you start at a loss. You have to pay for hosting fees and produce content consistently with the hope of an increase in Domain Authority and on Google’s rankings.
Find your balance and push but more than anything writing is a passion. I wrote on Medium for 6 months before starting Cent by Cent and made $12. 26 articles for $12 and I still loved it. Remember that on Medium only 7% of writers make $100 or more a month.
If anything these creative outlets is a form of passion income more than passive income. Down the road, you might see some regular revenue but right now you do it by passion.
eBooks and Courses
Both of these can become a great and regular passive form of income. The only problem? It takes an immense amount of work ahead of publishing it. Graham Stephan created the YouTuber Academy and he says it took a month of 18hour workdays to be ready to publish it. Even with 1000 newsletter followers and thousands of subscribers, he sold 1 course in the first 24 hours.
Learn more about it in his interview with the Colin and Samir podcast.
Courses can lead to a regular income screen but even with a loyal following, it can be hard to have a regular income. If you want to make income from educational content you will need to build a strong community around you first!
Similarly to courses, you will need to be trusted and build a strong community. Whether you create an affiliate marketing blog or do it via Social Media it won’t be easy. Building an audience can be done in a few months. But we can’t expect a reliable income.
Once you manage to set up your community you will need to consistently market your products. It will always take a certain amount of work.
Not so Passive after all
Whatever angle you look at it… true passive income is a myth. You won’t sign up for a new service and receive money daily for free. It always takes a certain amount of work and dedication to be launched.
Your income-generating assets always need some looking after however small. So if you are thinking about setting up a new income stream. I have one piece of advice that was given to me by Matt the Financial Imagineer. Look for your passion income if you can do it for free the revenue down the line will be a bonus.
So how are you going to set up your passion income to create some passive income?