Does Passive Income Actually Exist?

Passive income is a controversial topic in the world of personal finance. There are many lies and misconceptions surrounding the concept.

Everyone seems to be chasing it.

Yet, very few ever get to a point where they can live freely off of it.

So, today I’m answering the question…

Does passive income actually exist? Or, like most things, is it too good to be true?

What is Passive Income?

Passive income is a term used to describe money that you earn through little or no effort whatsoever.

It’s typically one of two things:

• You literally earn money by doing no work.

• You do some work (set something up, implement systems etc.) and it then takes care of itself.

It sounds like every living person’s dream.

Earning money, without doing work.

What’s not to love, right?

Well, here’s the thing with passive income.

It’s not what you think it is, or what you think it might be.

To get a better idea, i’ll give you some examples of what might count as passive income ideas, and what doesn’t.

Passive income:

• Dividend investing — buy assets, and earn a recurring income for being a shareholder.

• Rental income — only works if you hire a property manager to manage operations for you. Otherwise, it isn’t passive.

• Royalties — like an artist making an album and being paid passively (once the album is released and all work is done, of course.)

NOT passive income:

• Your 9–5 — an obvious one. Sure, you’re earning money, but you’re also working. This is more commonly known as earned income.

• Trading — You’re still investing your time to work on trades, despite asset prices being something that fluctuates by itself and isn’t in your control.

• 99% of side hustles — if something needs continuous work, like washing cars, or completing graphic design gigs, it isn’t passive income.

Too Good to Be True?

Passive income has become a buzzword in recent years.

It attracts naive minds to a pipe dream that they don’t know anything about.

It fuels dopamine. It fuels curiosity. It fuels desire.

The truth is, in general, passive income is too good to be true.

But, that doesn’t mean it doesn’t exist.

This means it’s no where near as good as many people make it out to be, to get your attention.

Although we all need things to dream of and aspire to, the idea of earning a full time living wage, or “getting rich” via passive income is something very few people will ever experience.

Think about it.

If something as good as this, was as easy as you think, society would be a very different place.

But, that doesn’t mean you shouldn’t aspire to achieve it. It’s possible.

You just need to understand that the reason something, like passive income, sounds so good, is because it’s so hard to obtain.

Do I earn passive income?

Yes.

But, like I said, it’s not as glamorous as you might think.

My One True Passive Income Stream

I’ve been in this space for a long time now.

There’s still only one real, legitimate, sustainable way of earning money passively:

Dividend investing.

Earning a recurring income for being a shareholder in a business.

I’m not saying it doesn’t exist elsewhere.

But, from someone who has tried, and failed, at many things looking for quick wins, dividend investing is the only way to earn money passively from my experience.

Although this may sound great, the numbers suggest that even this method of passive income falls far short of expectations.

Let me explain.

A dividend is a monthly or quarterly payment issued to shareholders by companies as a reward for investing.

It’s advertised as a %, which equates to the amount you’ll receive per share owned, per year.

So, if you own 1 stock worth $100 in a company offering a 3% dividend yield, you’ll earn $3 per year in dividends.

Not great, right?

Let’s say you wanted to earn a full time salary purely from dividends.

Let’s try… $40,000 a year.

To earn $40,000 a year from dividends, at a yield of, say 2%, you need a portfolio of $2,000,000.

That’s not going to appear overnight, is it?

Sure, it’s something to aspire to. But, it’s also worth putting things into perspective.

Although I can say that I earn passive income via dividend stocks, I don’t think it even adds up to over a hundred dollars per month.

And all the dividends get reinvested anyway, to compound my future returns.

So, does passive income really exist?

My answer is yes.

But, the reality is far from what some people will make it out to be.

Next time you see a…

“how to make $5,000 monthly passive income by doing 5 minutes a day of work.”

…title, just know they’re doing it for clicks, not to help you retire.

The amount of work & money you need to put in to make an average salary of passive income, is huge.

In most cases, it’s not worth it, but to say it doesn’t exist at all, would be a lie.

If it’s something you’re keen on chasing, then do it, because earning money by doing nothing, is a pretty cool feeling.

But, don’t get your hopes up too much. It takes work, and a lot of it.

If it was as easy as a lot of people think it was, nobody would have jobs.

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