Passive income is hard work!

Photo by David Clode on Unsplash

Or the lure of easy money.

“Five ways to earn $3,000 in passive income while you sleep…”

“How passive income turned me into a millionaire…”

Tempting, isn’t it?

I must admit that the first time I saw articles or posts on how to earn passive income, I was intrigued. I clicked on the bait with some fear that this may have been a phishing attempt…

Seriously, I was interesting in finding out what this really meant. If there is some way to have an additional revenue stream without too much effort, why not?

Good grief… was I in for disappointment. It turns out that all of the suggested ways of earning passing income actually involved doing some work. If I am working for it, I am not really earning income while I sleep…

Here are a few examples:

Start a YouTube channel

Ah… the idealistic lifestyle of a YouTuber. Film your life traveling the world and earn money from it.

True. Once you post a video on your channel, you earn (little) money from the ads that YouTube plays before your video starts. Yes that’s passive income, if you don’t count all the work that you have put in filming and editing your videos. I am pretty convinced that a 10 minute clip probably takes more than 20 hours to make. And you earn income only if there are actually (many, many) people that are watching your videos and that are interested enough to your work to subscribe to your channel.

I follow a few YouTube channels on a consistent manner (Sailing Uma and Sailing SV Delos and a few others on sailing). Judging from the quality of their videos (content and cinematography), I know that they spend tens of hours in scripting, filming and editing to produce 20 minutes of video. They also worked pretty hard to grow a subscriber base of hundreds of thousands. Passive income? Really?

Affiliate Marketing

Affiliate marketing is how to earn a commission while promoting someone else’s product. Like putting a link to a product on Amazon in this post that gives me a commission if someone actually buys the product via that link (by the way this post is 100% affiliate links free). Again, that commission is passive but people have to be aware of your post/page or whatever the medium you chose to have the affiliate link in. And that page/post required work to be published in the first place with all the necessary search engine referral tweaks for people to find it.

Create online courses

Similar to the YouTube channel techique, you create a course and you sell it on a platform like Udemy. If the content is relevant and interesting, you will earn income from it. But then again, you still have to create the course content, film and edit the video, if it’s a video training course. According to this article “How Long Does It Take to Develop Training? New Question, New Answers“, it takes an average of 10 hours to produce 6 minutes of microlearning content (like a video). So for a one-hour long course, that’s 100 hours of work.

By the way, I need to rant a little about all the videos out there that are supposed to teach you stuff. There is nothing that I hate more, when googling a solution to a problem, than finding an answer that is in the form a video on YouTube. I am not going to watch you for 20 minutes (after watching ads) while you demonstrate how to navigate the Excel menu to find the tool that I need to format a Pivot Table. Just write in down “click here, do that”. I know you are earning passive income from YouTube but not from me…

Create a microservice

This one is my all time favorite. No kidding, I did see this one once.

For those of you who do not know, a microservice is a Web service that applications (like a web site or mobile application) can call to get data or get something done. Something like a button on a website to convert 10 euros into dollars would call a microservice to do the conversion.

Easy enough, right?. You only need to find a service that people developing an application would be ready to pay to use. In other words, provide a solution to a real problem. Then you need to build the microservice itself and there are many (paying) cloud-based platform that you can use to do that. This may need a team of people to develop. Then you need to find customers, i.e. sell the microservice, and finally provide support for your service to your customers. True, each additional customer will generate more income at a close to zero marginal cost.

I don’t know about you, but that looks like a lot of work up front not counting the risks that it may not worked at all.

Maybe it’s all about semantics

Maybe it is the word “passive income” which creates confusion in my mind here. When I read “passive”, I read the opposite of “active”.

Active income is simpler to understand: you work one hour, you earn one hour worth of income, usually in the form of salary. Passive income would then be income you earn which is not the direct result of labor. That does not imply that there was no indirect work or labor done to generate it. Another word for passive income is “return on invesment”. You invest time, effort and money into producing something that will generate income on its own in the future. That future income will be passive but, good grief, did you work hard to build something that generates it.

There are other forms of passive income like interest or dividends on invested money, income from a retirement plan, capital gain from selling your house, etc. But no none can claim that it did not need work to get that passive income created.

So are there sources of income out there for which you do not need to work to earn it?

Very little. Here are a few, but still…

  • Win the lottery. But minimally, you still have to spend the money and time to buy a ticket. And the odds to generating income are against you…
  • Living off a trust fund or inherit someone’s fortune. But that’s living off someone else’s hard work…
  • Get an allowance from your parents. I use to give an allowance to my son when he was a kid, but I also expected that he would help with chores around the house…

And I will not venture into all the criminal ways to earn money but then again, one can argue that this would still require some level of work…

So do you need passive income?

Do not take me wrong. Passive imcome is still important and, in fact, it is key to achieving financial independence. There are many books that were written on how to become rich or on how to earn more while doing less, and they often revolve around one truth: get capital to work for you. However, creating the initial capital that will work for you will require hard work. Not too many ways to avoid it.

Thank you for reading this. You just contibuted to my (very small) passive income…

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