Why “passive Income” Is a Myth

Too often, what is considered passive income is more wrong than financial gurus would have you believe . In fact, many of the endeavors that are described as passive, such as real estate, book royalties, or online sales, require a lot more work and consistent effort than the word “passive” suggests. Here’s what you need to know about how passive income works and why the idea of ​​making money while you sleep is more fiction than fact.

What is passive income really

To get some definitions out of the way, theoretically passive income is what it sounds like: money that flows into your back account with little or no ongoing effort on your part. Compared to working actively at your main job, the idea of ​​passive income is to build a system that automatically earns you money. However, the time, effort, and money required to build such a system is not a passive exercise. What’s more, most of the examples given as passive income could be more accurately described as “side jobs” as they usually require some sort of fuss to get them off the ground and keep them running.

It depends on how you define “passive”

No business works on its own. Most money making endeavors require research, experience, time and money to make them worthwhile. Take one of the most common examples of passive income: real estate. However, when you own a rental property, you are responsible for ongoing repairs and maintenance, not to mention a large initial investment in the purchase of the property.

What is considered passive varies from person to person. Artists or authors who receive royalties must engage in self-promotion to ensure that their work is relevant and attracts public attention. Selling old clothes online, posting online courses, building an app, even playing the stock market – sure, these forms of income may not be as active as a minimum wage day job, but they’re far from getting your legs up and running. watching the money roll.

It helps to be rich in the first place

There may indeed be passive income, but it really only applies to how the rich keep accumulating wealth, not how you can get rich in your sleep. Here is how Forbes describes the main ways to earn passive income:

  • Investments. When you invest, you use the money you already have to make more money.
  • Creation of assets. This means acquiring an asset that passively earns money over time.
  • Sharing assets. Sharing in this sense means selling or leasing assets that you already own.

Money comes in much easier if you already have it. Otherwise, it will take a lot of work to get other forms of passive income (real estate, content creation, resale of goods) from scratch.

Most cases of truly passive income are only possible if you have enough money and assets to build on in the first place. The most reliable example of affordable passive income is a little underwhelming, but worth a try: earning interest on your savings account . This is a real way to invest the original asset – in this case, money – and then earn more from it without any active labor. Otherwise, most forms of so-called “passive” income require active maintenance. Don’t believe the gurus’ myths about how to get rich quick with no effort. Many of these side job ideas are great, but they’ll just be a hassle.

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