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Passive Income Lies: Not Everything is "Passive"

Updated: Aug 27, 2023

It seems impossible to go a day without reading a tweet about passive income.


The subject generates a lot of buzz and clickbait. There are even entire accounts dedicated to the topic! Before we go any further, let me very clearly say that I LOVE passive income; however, I hate the countless passive income strategies that require WORK! A great example is this click bait article titled “This 39-year-old makes $160,000 a month in passive income: ‘3 businesses you can start today for $0.’” Spoiler alert: the “passive income” comes from consulting, offering professional services, and starting a creator business. None of which are actually passive!

Now that I have that off my chest, let’s review the three types of income:

  • Active: This is income from your regular hourly, salaried, or freelance position. It’s a job!

  • Semi-passive: This is income that is either front loaded with work (e.g., writing a book, creating an online course) or requires periodic work or reinvestment (e.g., rental property). Yes, you read that correctly. Being a landlord does NOT produce passive income! If you don’t want to believe me, then believe Bard, Google’s AI competitor to ChatGPT.

Bard explanation of passive income
  • Passive: This is income that requires NO additional effort. The only types of passive income that exist are stock dividends, interest (bonds, high-yield savings account, etc.), crypto staking, royalties, and revenue sharing from crowdfunded investments (e.g., AcreTrader, Fundrise).

Summary


I earn all three types of income above and nothing is better than actual passive income because it requires NO additional effort, but don’t be fooled by the clickbait headlines citing every income stream as passive!


Passive income folder

Disclaimer: The information in this post is provided for your convenience only and is not intended to be treated as financial, investment, tax, or other advice. The information is intended to be educational and is not tailored to the investment needs of any specific individual.  It is also not intended to be relied upon as a forecast and is not an offer or solicitation to buy or sell any securities or to adopt any investment strategy.  The opinions expressed are those of the author.  Reliance upon the guidance and information in this presentation is at the sole discretion of the individual.

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