Passive Income Is Not As Easy As It Sounds

In practical terms, passive income sounds simple enough but it is far from being easy despite the many lectures from financial gurus who claim that you can earn thousands of dollars a month without lifting a finger.

I think it's one of the nuances of the digital era, there's a heightened disparity between outcomes and processes. And the former is much more glorified over the latter since that's what mostly grabs our attention.

Many financially conscious people love the idea behind passive income. According to Investopedia, passive income is "income that requires minimal effort to obtain[and maintain]". It basically doesn't require an active participation on our part to generate an income.

The most appealing part is the ability to remove ourselves from the equation and stop trading time for money. This gives us more control of our time and by extension our lifestyle.

Then there's the scalability aspect, which is achieved through leverage. We can only do a limited workload in the limited time we have. But with leverage, we can indirectly do more and earn more.

However, not everyone agrees with the idea behind passive income. Some believe it's a sham to trick lazy people that they can skip the work and get paid.

This may have some truth to it, depending on perspective. I view it as a spectrum between active and passive income where the goal is to not to reach the extremes but to fluctuate somewhere around the middle(Ideally more into passive income).

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The Reality Of Passive Income

When we look beyond the outcome and dive into the process, we'll realise that passive income is not a get rich quick scheme or a magic bullet that will solve all our financial problems.

It often falls short of the high expectations that social media creates.

Take the perceived impression that it is effortless, which is arguably the biggest myth about passive income. For me, It came as a rude awakening when I realise that passive income is not effortless.

The truth is that passive income requires a lot of effort, especially in the beginning. We'll need to do a lot of research, planning and implementing to create a successful passive income stream.

This means investing time and/or money upfront, which may not pay off immediately or at all if we happen to pick the wrong one.

Even after we set it up and the stream starts flowing, we still need to monitor and improve it regularly to keep it relevant and profitable.

Of course, this doesn't imply that it is not effortless. Here we're looking at the process which shows us that it takes a respectable amount of time to reach that stage(effortless), usually a sufficient number of months or years.

This leads into the second myth which is that it is quick and guaranteed. For example, dividend stocks may take a long time to appreciate and start paying out dividends.

They could lose value or stop paying dividends if the company happens to perform poorly or even goes bankrupt.

The point is that we have to put into account that the passive income will fluctuate depending on market conditions or consumer demand. This calls for finding ways to mitigate downward fluctuations, especially during a market crash.

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With or without the help of technology making money while we sleep is not easy by any means. It often requires a lot of upfront work, be it through time and/or money, and taking calculated risks to create a successful passive income stream.

Plan Ahead And Be Realistic

Of course, it's seems hard to be realistic in a world that's constantly changing. And it's seemingly hard to plan ahead when what the future holds is becoming more uncertain.

Zoom out and zoom in.

Zoom out: Have a clear vision of what you want to achieve with your passive income. What are your goals, values, and priorities? How much income do you need or want to generate? How will your passive income align with your lifestyle and purpose?

Zoom in: Break down your vision into actionable steps. What are the best passive income sources for you? How will you create, market, and maintain them? What are the costs, risks, and benefits involved? How will you measure your progress and success?

Obviously, the answers will vary from individual to individual. The idea is to create a well thought out plan that scratches deeper than the surface.

Based on experience, the more clarity we bring into these things, the more likelihood of achieving them.

Besides, instead of seeing a piece of the puzzle like a magnifying glass directly placed above an ant's head, we see the whole board, beyond the ant's head and understand things so much better.


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