Why Passive Income Isn't So Passive
The Internal Revenue Service (IRS) distinguishes as money earned from an entity with which you have no direct involvement but most people these days hear about it from scrolling on their phone.
3 Reasons Why Passive Income Isn't So Passive
These days, it seems like you can’t scroll through social media, listen to a podcast, or catch up with an old college friend without having to hear about why passive income is the smartest money move you can make.
Does it sound pretty sweet to make money while you sleep? Of course it does. But if passive income was all it’s cracked up to be, then we’d all be making it and retiring early. While some people have made a fortune off of “passive” income revenue streams, the truth is that income wasn’t likely all that passive. Here’s why.
Reason #1: It Takes Time to Set Passive Income Up
No matter what type of passive income you want to embrace, it will take time to set it up. Websites that generate ad revenue, digital products that anyone can buy from anywhere, and rental properties, are all popular examples of passive income. They’re also examples of passive income that take a lot of work to set up.
It takes work to make money and you can invest a lot of energy, resources, and funds into creating a passive income stream that may never lead to any revenue. Starting a passive income stream is starting a business and there’s no guarantees in business.
Reason #2: You Have to Maintain Passive Income
Even if you are willing to commit to the effort it takes to start a passive income stream, the work doesn’t stop there. Let’s look at the same three examples of passive income and how they can lead to ongoing work.
Websites that generate ad revenue. If your website crashes, who is going to fix it? If you want to keep SEO traffic coming to the site, who is going to keep creating fresh content? Hint—that’s you.
Digital products. How are people going to find your digital products? You’ll need to promote your products again and again if you want people to find and buy them. Want to run social media ads to keep the customers flowing? Those ads require ongoing maintenance and strategy changes to perform well (not to mention, they cost money).
Rental properties. You’ll either need to hire someone to help you manage the property, find renters, and deal with any of the many maintenance issues that can arise when you own a rental property, or you’ll have to do it on your own.
Reason #3: There’s No Guarantee Passive Income Will Last Forever
Even if you do develop a great stream of passive income, it won’t necessarily last forever. Trends come and go, the market changes, and life happens. A digital product that resonates now may not resonate five years from now. A rental property that can charge a high rent today, may not be able to in the future if the real estate market takes a dip. You can invest a lot of time and energy into creating and maintaining a passive income stream to one day find that it’s tapped out and you have to start from scratch all over again.
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