Is Passive Income All That It’s Cracked Up to Be?
Passive income ideas are all the rage right now. But is passive income all it’s cracked up to be? I would say yes, with some caveats.
For one thing, many of the things that are sometimes touted as passive income are not the least bit passive. They’re actually more like part time (or sometimes full time) jobs in and of themselves. Take blogging, for example. Unless you’ve hired people to write all of your posts for you, set up and manage your site, and promote your articles, you’re actually doing quite a bit of work in order to (hopefully) bring in some income. That’s not passive at all.
Very few things actually meet the IRS’ definition of passive income, and most of the people talking about that aren’t referring to those things. Owning rental property would be one exception, but as a former landlord I can tell you that is also not completely passive. (Even if you hire a property management company, you’ll still get calls and have to make decisions. And believe me, you need to stay informed about what’s going on.)
What’s really involved
You’ve got to understand what you’re really getting into when you try to do the typical “earn money while you sleep” thing. You can wake up to money in your bank account that you literally did nothing to earn while you slept, but you’ve sure done something to earn it while you were awake. There is no money for nothing, unless you’re talking about Dire Straits.
What we’re really talking about, for the most part, are income sources that are mostly-passive or that are really more like a side business.
You definitely can create projects that will earn you money mostly-passively, later — but you have to put in the up-front time (and the regular maintenance time too, unless you’re satisfied with just a small trickle of income.)
My Pay Off Debt iPhone app is an example of that. I’ve put in a massive amount of work on that, but it comes in spurts. I’ll work on an update for months, spending hours each night on it, and then have a few months where I get a bit of a breather.
The reality is that if you’re looking for money to just magically appear in your bank account while not doing any work whatsoever, you’d better stick to investing regularly. (Even, unless you’ve won the lottery or gotten an inheritance, you had to do some work to get that money in the first place.)
But if you’re looking for good, alternative streams of income that can help you to build wealth, spending some carefully-considered time on passive income projects is a great way to go.