Every time I hear the words ‘passive income’ my teeth grind down a little bit. Why do I have such a hostile reaction? Well it comes from the fact: there is no such thing as passive income! Every source of income requires some investment of time and effort on your part.
Don’t believe me? Let’s go down the list of few of the common ones.
- Dividend Paying Stocks – You think this would be a easy one to say it is passive, but most people seem to forgot the up front work of researching the company and then following the news on the company to protect your investment. You don’t have to read every news story on them, but you should have a clue on what the company is doing by reviewing the annual report.
- Real Estate – If you never had to look after a rental unit, people like to think that it really isn’t much work. They can be so wrong! Bounced cheques, late rent, repairs and upgrades and that doesn’t even include the work of showing the place to get tenants in their in the first place. Granted you can hire someone to do this for you, but that still requires the work to get the unit and research a company to look after it for you.
- A Blog – To be honest, this one always surprises me that people think blogs don’t require work. Have you every tried setting up a WordPress installation? Granted it isn’t hard, but it takes time to get all the plug-ins that you want loaded up and running right. Then creating content, linking to other blogs and rising up your page rank. It all takes time to get up and running even if you turn it into a static site down the road.
- Small Business – Depending on what you do here it can be set up fairly easily, but getting sales still takes time and effort on your part. After a while the business may require less handling, but in the beginning you can bet you will be putting in lots of hard work to get it running right.
This isn’t to discourage you from going after these kinds of means of making money, but do keep in mind some front end work will be required no matter what you pick. Granted if you like doing that kind of work, it won’t really feel like a burden at all. So make sure to pick what will work best for you.
So what do you do beyond your day job to earn more money? Why did you pick that method? In my case, I do #1, 3, 4 since I cover off #2 by owning a REIT instead of a single unit because as much as I like real estate I’m not interested in owning a unit directly.