The TRUTH about passive income
The holy grail of retirement early or at the regular time is passive income. The most true form of passive income is social security. Except for one problem. Passive income is not really passive.
1. You have to front load your effort
If you want to invest in stocks you need cash to make those investments and you will most likely need to earn that cash by trading time for money.
That front loading of effort can often be all consuming. Instead of working a regular 40 hour work week you may need to ignore all other obligations in order to make your new venture work. This can be hard to do with a spouse and a family.
2. You have to 'maintain' that income
Real estate is not really passive. You build the property and then you have to maintain the property in order to receive rental income from tenants.
You have to pay taxes.
You have pay for insurance.
You have to fix things when they break.
And then you need to find tenants and collect rent. Or work with a property manager.
3. Your best work is your next work
The wealthiest authors like Stephen King and John Grisham make most of their money from their catalog. One single book is not going to generate you enough passive income to live off of. Although it might if you write a massive best seller on the first go.
You are going to need to write multiple books and over time the sale of your catalog will bring you enough passive income to retire.
You need to keep getting better and keep adding fans.
4. You most likely will need up front funds in order to generate that income
Real estate is expensive.
Starting a small business can be expensive.
5. You have to manage people
Generating passive income is really about creating systems that generate money for you.
Those systems generally require people which you will manage. So instead of doing your own work and earning money you will be spending your time communicating with people and making sure that they are doing what you need them to do.
6. What are you going to do once you have that passive income?
People often do not think long enough about what they are going to do once they quit their job and ride off into the sunset. Too much extra free time can be a bad thing for some people.
Think about what you really want your life to look like when you are free.
7. It might not last forever
Real estate goes up and down. Investment income goes up and down. Oil prices go up and down. You need to be careful that the passive income you generate might fluctuate in value over time.
8. A lot of people fail at it
Dropshipping store. Youtube channel. Real estate.
You are going to have to experiment to find out which one fits you best. Not all passive income is made for you. With passive income you are creating a small business and lots of small businesses fail each year.
Do not be discouraged if something does not work.
Try something different till you find what works for you.
9. It is a team effort
Passive income is really a small business. Businesses hire employees to help grow that business and make it big. The same will be true of your passive income. You may need to learn the skill of hiring and firing people that are going to help you along the way to grow your income stream.
10. Don't forget about Uncle Sam
Because he has not forgotten about you.
As a passive income owner, you are not self employed and you will need to manage those assets to avoid the eyes of the IRS. There are more rules that you need to follow. More taxes that you need to pay.
Make sure you have those ducks in a row earlier rather than later. Because Uncle Sam is watching.