No, Passive Income is Not a Myth

It’s real, and I can prove it

For those of you keeping track, today was the day I was supposed to publish the first entry in the ‘Let’s Grow Together’ series. Unfortunately, I forgot to send $100 to the right bank account on time, so while the story will come eventually, it’ll arrive late. I’m very sorry for my tardiness.

In the meantime, I’d like to talk about passive income, a topic that has become increasingly controversial as the pandemic has dragged on.

More and more people are coming out of the woodwork and speaking about their passive income, because now is the time that many people have lost their active income.

For those of us that have it, our passive income is making a huge impact on our lives and ability to pay our bills.

In spite of how life-saving our passive income sources have been lately, the majority of articles I’ve seen recently are by those that claim passive income is a myth. These articles aren’t being written by people who have found a way to generate passive income, but the sceptics.

I can understand how from the outside it can seem impossible to generate passive income, mostly because it doesn’t feel that passive should even be possible.

So for those who believe that passive really is impossible, let me fill you in on how I calculate the moment when active income becomes passive.

The Calculation

I don’t believe that any income starts as passive income; I believe that people embark on a project and work really hard to set it up.

This could be writing a book or coding an app, or it could be buying a house. Whatever your project is, you’ll work really hard in the short term, and you won’t be paid for that work right away.

Once your project is out in the world, it will (hopefully) start generating revenue, and at the beginning, this revenue is active, even if you’re doing nothing.

I believe this income is active because this initial revenue is paying you back for the time and money you invested into the project.

Let’s use a book as an example. I’ve had a lot of fun self-publishing books over the years, and I’ve never done anything to promote a book after releasing it.

If it’s a proper book (not something erotic), I’ll pay about $80 for editing and $20 for cover design.

A self-published book takes me 20 hours to write, and I would normally charge a client $50 per hour. (So that’s what I’m valuing my time at). This means that the book I’ve written is worth $1,000 in labour costs and $100 in editing and design.

Once the book is online, I believe that all royalties earned up until $1,100 is active income. You put up your time and resources in advance, and you’re being paid back for that effort. However, once that debt has been repaid, everything you earn after that is passive.

Let’s say I choose to spend a few days marketing the book; I would have to add these costs (including labour) on top of the active cost total.

This active work would contribute to the total amount the royalties need to pay back before the income can be considered passive.

Making a passive income writing and self-publishing a book is really difficult, because it’s extremely rare to ever have your costs returned.

This is part of the reason I started writing extremely short books and pumping them out in volume. I can write a short erotic book in two hours; I never have them edited, then spend $5 per book on design. This makes the cost of writing each book a grand total of $105, including labour, which is a much more achievable target to repay.

Web content is even easier. I spend roughly two hours writing an article, then an hour the following day editing it. While many articles will never repay the $150, many of them do, and a special few make a lot more than that.

Any article I write and post online generates passive income for me the day after it has paid me back my $150 investment.

I also have properties that I purchased and rent out to tenants. I put 20% of the value of the property down as a deposit, spend dozens of hours making the purchase happen, then pay the mortgage back every month.

It takes years, but eventually (if your property is positively geared) the money the tenants pay you has paid down the mortgage, paid back your deposit, and is making you genuine passive income.

If you make an investment, and that investment turns into an income stream that needs to be worked in order to continue generating cash, that’s a business.

If you can walk away today and the income stream continues to flow, you’re looking at passive income (once the debt has been repayed).

No More Naysaying

So I don’t believe the naysayers that believe passive income isn’t real.

These people claim that all forms of income need constant attention to keep generating cash flow, but I haven’t had to make any decisions regarding my properties in over two years.

The most recent decision I made was replacing my somewhat competent property manager with a phenomenal one who needs absolutely no input from me whatsoever.

I have books on Amazon slowly earning by themselves, designs on Red Bubble earning money, and written content all over the internet slowly generating royalties every day.

I could choose to properly market my material, and if I did, It would mean choosing to convert passive income into active income.

Why would anyone do that? Theoretically, it could increase the income I generate each month by pulling attention to my material.

While this theory might work, a dollar made passively is worth a lot more to me than $2 made actively.

I already have a “real” job and am perfectly content doing nothing beyond this job except for the things I really want to do, and marketing is not an interest of mine.

Unluckily for me, though, I was furloughed from my job a couple of months ago. Luckily for me, I had my passive income streams keeping all my lights on until my active income was able to return.

So yes, earning a passive income is completely possible; but it’s not easy or fast, so most people will never know it.

If you want to earn a passive income through Amazon, you’ll need to write bucketloads of books. If you want to do it through web content, you’ll need to write and publish hundreds of thousands of words online.

The investment is difficult, and it takes a lot of faith and balls to put up the time and money. But if you invest enough in the right areas, you can see that money paid back.. and then some.

Then when the day comes that you’ve been paid back and the money keeps flowing, you can rightfully say that you’ve turned on the tap to of your very first passive income stream.