Thursday (Money) Tip: Passive Income

Have you ever googled the words “passive income”? The search results can be overwhelming. It seems like everyone with a computer is an expert on the subject. Several people claim to be living large off doing very little, while others say that the entire concept is a myth. In a world where resources are finite and true financial stability may determine life or death, we spend a lot of time seeking out money and other material goods. With the rise of internet millionaires (youtubers) and billionaires (tech innovators) many people are attempting to get a slice of the pie. But the question that always gets asked is: Is there such a things as passive income?

I read up on the topic from both sides and I am tempted to agree with those who say there is no such thing. I am not going to completely agree but many of the things marketed as passive income aren’t really all that passive. Let me explain…

Wikipedia, the authority and source of all the world’s knowledge evidently (/snark), defines passive income as:

Passive income is an income received on a regular basis, with little effort required to maintain it. It is closely related to the concept of “unearned income”.

With that definition, I would say a true example of passive income could be a high dividend portfolio that generates a lot of money because the stocks have high dividends per share. It’s passive because once you buy the stock and hold it, you don’t do much else but fill out your tax information at the end of the year. But when I hear things like rental income being called a source of passive income, I have to wonder about the specifics. Do you have a property manager? Because otherwise, it is not passive at all. As someone who has rented out a room in my house and has seen some of my relatives deal with difficult tenants, I can tell you that there’s no “little effort” required to maintain your income.

I travel for work and I’ve gotten calls from my ex-roommate in the past about the most annoying things. Like wanting to be reimbursed for a $6 plunger she bought after SHE clogged the toilet while I was AWAY. I once came back from a work trip to find that she broke my washing machine and didn’t say anything. I had to go to and buy another one 2 days later. I had to constantly “remind” her not to park outside of the driveway in the winter so the plow truck could clean up. I had to threaten to withhold her security deposit so she would stop slamming my doors which were nearly coming off the hinges.

And I’ve had it easy. My aunt rented to a guy who stopped paying rent after 2 or 3 months. It took 4 months to get him evicted and she never got a dime back in addition to what she had to spend in court fees.

But what if you’re a writer with an e-book? Money just flows in right? Well you have to write the book, edit it and market it. That’s after you’ve thoroughly researched your subject to make sure you don’t sound like a total idiot.

A garage sale? Are you kidding me?

Multi level marketing? Lol stop.

With many of the examples you can give me, I can tell you that there’s nothing passive about a lot of it. True passive income sources are far and few in between. Rather, I believe that there are a lot of opportunities for earning location-independent and time-independent income. The idea is that you can earn the money from anywhere at anytime. You don’t have to rely on a business that’s open during particular hours. You don’t have to leave your house regularly.

By having a rental property, you’re not getting up every day to check on your tenants. You’re occasionally dealing with a leaky roof or someone who’s late on their rent but you can draft up your lease, coordinate repairs, set up electronic payments and receive money no matter where you are in the country.

If you’re an author, you can do a lot of your research remotely thanks to technology. Several libraries and publications have allowed access to their archives via the internet. You can also communicate with editors by email and you can conduct interviews on Skype or FaceTime.

You can work from anywhere, you can work at any time, but ultimately you’re still working. You might be working smarter and not harder by doing the bulk of the work upfront while the money is not tied to your subsequent activities, but you still need to invest time to maintain it. Remember there’s no such thing as getting something for nothing.

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