Passive income: Good or Bad?

Passive income: Good or Bad?

As its name suggests, passive income is generated by passive activity. Some examples of passive income are property income, earnings from a business that does not require direct involvement from the owner, rent from property, interest from a bank and earnings from internet advertisement on websites. Many people think that passive income is easy to earn since it doesn’t need much activity. But in reality, generating passive income is not easy and it takes a lot of hard work.

The idea of not having to work for earning money is great but there is actually no such thing as 100% passive income. Passive income doesn’t mean getting something for nothing. It actually needs more work than the other traditional jobs at the first few weeks, or maybe even months. Overnight success doesn’t exist. If you want to have a steady source of passive income, you have to offer some sort of value for your audience. Making money shouldn’t be your number 1 motivation, because it will have a negative impact on the quality of your product or service. If you invest your time and cash into your passion and create value for people, the money will atomically come as a result.

The road to passive income is long and slow. If you’re thinking about going down this road, you should know how it will affect your life:

Good:

  • Steady source of income: This is probably the most important benefit of passive income. And the good news is, after you’ve established your business you don’t have to work too much to earn money.
  • Financial freedom: Passive income will help you reduce stress. You won’t have to worry too much about the bills and you can focus on more important things in your life.
  • Retirement plan: A great way of increasing your income is to create a passive source of income which will help you save more money each month. If you save a fraction of that income monthly, you’ll have no financial problems when you decide to retire from your main job.
  • Free time for setting up more passive income: The good thing about passive income is, after reaching the point where your service or product is generating good amount of money for you, you’ll have more free time to generate even more sources of passive income.
  • No limit for your success: Unlike traditional jobs, there is no limit for the amount of money you’ll receive each month. If you work hard enough and invest in the right business, the sky is the limit for you.

 

Bad:

  • Time-consuming: In order for your business or product to start generate passive income, you need to put a lot of work and effort at the start. Sometimes up to 60 to 100 hours per week. Also depending on the type of value you’re creating, it takes about a year before you see any sort of profit.
  • Lot of attention: Some businesses need a lot of attention to maintain them. A great example is rental properties. It may seem like an easy job to most people, but not only does it take a lot of money but also it needs a lot of attention and care to fix up a house and find the right tenant.
  • A lot of capital to start: If you have enough money you can invest it in high yield savings, stock or even real estate, each having a higher potential return. However, there’s a big downside to these businesses as a passive source of income which is you need a lot of capital to start.
  • High risk: There is no guarantee if you’re business will succeed. For completely relying on a passive source of income, it’s better to first work on a regular job to make sure your bills are taken care of.
  • You might lose money: As mentioned before, it takes a lot of time for your efforts to start generate positive cash flow. It is possible for you to lose some money in the process.

 

 

(Image source: PicJumbo)

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