Ah yes, the beauty of passive income, the freedom of sitting on your couch in your underwear as streams of cash flow into your bank accounts and portfolio, covering up all your expenses. Of course, anyone would want to reach this status of life, who wouldn’t want to be free from financial obligations? But before you go and set off on a financial adventure, let us give you fair warning that the journey is more complicated than people make it seem.
In recent years, and especially now with more people scramming to keep their finances in check, the prospect of passive income is growing ever so popular. The current world situation has exposed weaknesses in many industries and made hundreds of thousands of people realize that their “job security” wasn’t as secure as they hoped.
More than ever, people are looking toward rental properties, dividend investing, and many other strategies to turn their finances around. However, the vast majority of people fail to notice that the concept of passive income is told from the perspective of winners.
It’s Not Entirely Passive
Truth be told, passive income isn’t as passive as the many success stories make it out. Behind all those brand-new cars, beautiful houses, and inspiring quotes spread across books – there’s more to it working in the background. And, frankly speaking, it’s the type of work that’s not going to keep you excited.
#1 You’re Still Going To Put In Effort
Number one, there’s no escape from putting in a lot of hard work and effort. These are just naturally crucial to attaining any success. And in the case of passive income, you’re going to be more active than you’d expect.
You don’t magically find the perfect investment property that will double its value, located at a prime location, and get offers left and right, in under a year. Even the greatest of real estate investors and tycoons will occasionally have their losses and breakevens.
Furthermore, the same concept of occasional bumps also applies to the many forms of income-generating activities like blogs, videos, and trading. Watching a video or reading a book about passive income won’t instantly make you capable. Instead, all it does is sell you the idea.
So if you’re going into passive income with the expectation that you’ll be free from work and hassles in due time, then we advise you to think again. This type of mindset is destructive because it convinces you to hold on to very optimistic goals. And when you don’t hit these targets, you’re left feeling disappointed.
#2 It Takes Time And Money
Number two, we can’t forget the age-old adage that it takes money to make money, and this statement can never be more accurate in the case of passive income. It’s a basic understanding that the amount of capital you invest in a venture will ultimately determine how much you can get back in return. And if you don’t have a lot, to begin with, don’t expect much to come back as ROI.
- Real Estate: If you glance at the prices of homes, you’ll immediately understand that values go in the 6-digit ranges. And even with a great credit score, you’ll still need cash on hand to meet those downpayment requirements. So if you’re already strapped for cash, getting into real estate investing and rental properties isn’t really much of an option. It’ll take a lot of time to save up, and that money could be better spent elsewhere.
- Investment Portfolio: Many passive income loyalists will stand by their investment portfolios, saying that their dividends allow them to live financially free lives. However, building a portfolio doesn’t happen overnight; it takes years to understand the market, research companies, and actually have money to invest. And even with the stock market in prime investing time, getting a loan to buy shares is not economical and lousy advice.
- High-Interest Savings Account: A staple in passive income advice is to save and set aside money into a high-interest savings account. The idea is that this account will serve as a cushion for potential setbacks and also for money to grow over time. As you can expect, high-interest savings accounts grow on an annual basis, which means this won’t be turning you into a millionaire.
Learn to Live a Little
So are we all cursed to work tirelessly until the day we retire and succumb to old age?
Well, not necessarily. As we see it, people are too attached to the grandeur idea of success that they forget the simple things that make life worth living. Sure, if you didn’t need to worry about expenses, that would be a Godsend, but what exactly are you going to do with all the extra money?
Our advice is that you learn to live a little. Perhaps it’s time you stop overanalyzing income sources and get yourself a long-deserved break and realize that you don’t need much to live a fulfilling life. Grab that Obermeyer skiwear and enjoy the snow when you can or even plan a backyard barbecue session with all your closest friends!
Happiness isn’t always achieved with more time and money, and while they do help in some cases, in most cases, there’s plenty available right in front of you that you’re just not noticing.