Passive Income – Top 5 Misconceptions

Photo by Gabby K on

I have been working professionally for over 20 years. And I have also been reading into how to generate extra income while working full-time. Naturally one of the things that we hear quite often is how to generate income passively. With the pandemic paralyzing the world in the second year, getting that extra income has become more important than ever. As we continue to hope for that chance of getting the extra money, sometimes I wonder if “passive income” is a myth. After a few years trying, I think there are 5 misconceptions that all of us should be aware of.

Before getting into the 5 misconceptions, let’s define what is Passive Income. Passive Income is defined as money or income that you are earning without you actually spending the time and effort. Active Income on the other hand requires us to spend time, effort and sometimes money to manage the activity. For example, I have been making money “actively” as a working professional in a bank for over 20 years by physically go to an office and sit in front of a computer.

There are a number of articles and several books touting the success of earning passive income. After reading some of these “success” stories, I’ve decided to dip my toes to test the water. I have tried my hands in several “passive income” ideas over the years. Unfortunately, I can tell that it is not as easy as it is sound. Many authors of these “successful” passive income toot the horns how colorful the rainbow is on the other side – however there are several misconceptions that none of the authors point out. Without further due, let’s address the misconceptions in the order from low to high.

5. Effort Free

To begin earning passively is not as effortless as many have advertised. It requires up front investments and a lot of time. Once you have the ball rolling, if you are lucky, you can have a snow ball effect and the income will keep generating. Notice that I underlined “if you are lucky”? Not everyone can be successful once they start generating the income. There are many factors that can have an impact how the the ball rolls.

Let’s take an author as an example. To be able to generate that income, the author needs to spend a lot of time to write a book, find a publisher and get the book published. Once it is published, the publisher needs to be able to advertise the book and sell it to the mass. Getting your book noticed is difficult because there are literally thousands of books being published everyday. Sure you can publish your book using ebook, but you are facing an uphill battle against other authors who have the same idea.

Let’s look at at an angle as a YouTuber. At any given minute, there are hundreds of videos being uploaded to the YouTube platform. How do you get noticed among seas of videos? If you are lucky your video could go viral and you may continue to generate views and possibly monetize your video. However, there is no guarantee that you will continue to be successful as a YouTuber.

4. Getting Rich

Unless you are one of the few YouTubers who have millions of views, it is unlikely you are going to get rich. We all read about who makes the most money being a YouTuber every year. The list is very short and very difficult to get into. If you believe that by publishing a video on YouTube you can begin monetize, then you are wrong. Google has several conditions that every YouTuber must satisfy before he or she can start monetizing the videos.

Even if you can begin monetize, it is unlikely you will get thousands of dollars from YouTube. It is believed that conservatively you could earn up to a thousand of dollars for every million views you generate. Plus if you make over $600 in a year, you have to pay over 40% as income tax to the IRS. Being an author is not as easy as it sound. You get paid a royalty (a set percentage) for every book you sell. The publisher usually gets a bigger cut and leave a small fraction that goes into your pocket.

3. Many Ways to Earn

This is the biggest BS I’ve read. Yes, there are many ways to make extra money but they are not for everyone. As I noted in my earlier paragraphs being an author is one. But how many of us can actually write as well as Tom Clancy? Being YouTuber is stressful and takes a lot of time, but none of us can be as successful as PewDiePie or Mr. Beast.

What about rental income? Sure if you have a lot capital lying around to invest in properties and time to manage each one. Then there is also developing apps for smartphones. Let’s be honest, when was the last time you check the app store? Even if you have, there are literally hundreds of thousands of similar apps on one subject.

2. Press and Forget

The major reason Passive Income is coined because it is supposed to generate income stress free. You are supposed to hit the send button and forget about it; and magically you will start making money. Unfortunately, this is wishful thinking. Any ventures that you invested in require constant maintenance. Let’s take investing as an example – you have to constantly monitor the market to ensure your investment strategy is sound.

Ever wonder why successful YouTubers have a team of people working for them? Because it is a full-time job. Not only they have to produce the videos, they have to constantly keep the quality of the video high to keep their subscribers happy. Additionally YouTubers must ensure the videos the create do not violate YouTube guidelines or risk being banned or censured.

  1. It Is EASY

If anyone tells you that it is easy to get into any activity and start generating passive income, turn around and walk away. None of the ideas are easy. Either they require a lot of investments or that you have to be extremely lucky. My major problem is the market is too crowded. The pandemic forces a lot of people to start thinking of generating income out of their regular full time jobs. Being a YouTuber is a shoot or miss because there are way too many YouTubers. Investing in stocks is perhaps the easiest but it is not without its risk.

Here is another advice that I’ve read a lot. Take stock photos and sell them in the available platform such as ShutterStock or StockPhoto. Unfortunately it is very difficult to get into because these websites usually have high requirements. Even if you could start selling your photos on these platforms, it is very difficult to get noticed and start generating income because there are just too many photos that are available now. Additionally, there are thousands of photos already available online for free; how many are willing to pay for photos? Not many unless if you are big corporations who are in need to have certain photos for their in house publishing. The point is there are too many hurdles before you can actually start making money from the photos you take.

I’m not here to discourage anyone to attempt generating passive income. We just need to be realistic of what you can earn. Passive income requires a lot of effort and time and it is not without is stress. If you able to earn handsomely from your ventures I salute you. Until then, I recommend that you invest in passive income as a side hustle.


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