You’ve probably heard the term passive income either in passing, in conversation or from some lifestyle guru on YouTube. It’s something I’ve looked into numerous times, and at one point, actually believed it was possible to achieve. It took a while to realise that passive income, at least for most, is a myth.

What Is Passive Income

In its simplest form, passive income refers to money, or income, that requires no effort to earn. This sort of income can take many forms. You could earn money from shares you hold in a company, or from selling a digital product over and over. The basic idea is you put in the effort once to make something happen, and that something provides you with an income indefinitely.

In theory, the more you can repeat this process, or the better the product you create, the more passive income you can generate. Your product could be anything, an online course, digital book, website hosting, there are so many options. The key is to ensure that you only have to put in the initial effort to make the product.

That all sounds great doesn’t it? Spend a couple of hours designing a product that’s going to sell without any further effort. Generating passive income that you’ve hardly had to do any work for. But there are a few problems…

Breaking Down Transactions

Let’s consider for a moment exactly what happens when you buy, or sell a product. You may walk into a shop, pick up a product and buy it using money. That’s a fairly straightforward and common transaction. You’re exchanging money for a physical product. Except that’s not what you’re doing. You’re exchanging money for time. The time it took to design the product, gather the materials, create it, get it into a shop and sell it to you. All that has taken time. It’s that time that you’re paying for.

We can apply the same thinking to anything. Your monthly wage for example. You might get paid for completing work. That work could be anything, from gathering materials to selling products. But ultimately, you are giving up your time in exchange for money.

Again, let’s consider services. You could be a web designer, an IT technician or even a beauty therapist. All these professions provide a service. People will pay to receive those services. But breaking it down, what are you actually paying (or being paid) for? Time. The time to learn how to perform the service and actually do it.

With all that in mind, consider where the value comes from in these products and services. A big chunk of the value is in the perceived time it has taken to make that product or service available to you. The more time invested, the higher the perceived value.

How Does This Fit In To Passive Income

You might be wondering where passive income comes into all this. At the end of the day, you’re still making an investment of time into a product or service. But with passive income, it’s supposed to be a one-off. And that right there is the problem. The idea of passive income is that you invest a limited amount of time initially, and you earn income from it indefinitely. Except I can’t think of a single product or service that this could possibly apply to.

Designing online courses is a great example of something often referred to as a source of passive income. Spending a little time initially developing a course, add it to SkillShare and it starts to generate income. Sounds fairly passive. Except it isn’t. In reality, there are probably hundreds (if not more) of courses on sites like SkillShare that no one has ever seen, let alone signed up for. Now, this could be because the course just isn’t that good, but a more likely explanation is that the course just wasn’t advertised. Thinking about that for a second and suddenly you realise the initial time invested in creating the course wasn’t enough. It needs more time to advertise. This might generate some interest and some income. But what’s going to happen when you stop advertising? That income dries up. The income here isn’t looking so passive anymore, is it?

Another example and this one is true to my life. You develop a service, for me, that’s a website maintenance service. People pay me to look after their websites, keeping them updated, secured, backed up and so on. I’ve managed to automate pretty much the entire process. So with the upfront investment in time and initial marketing to gain some clients, I’ve got myself a nice source of passive income. Except I haven’t. I frequently have to perform updates on my automation to keep them working. I have to develop new complementary services and improve existing ones to keep the overall service relevant. And if a client decides to cancel, I either have to accept a loss of income or find a new client to replace them.

So It Doesn’t Exist?

Nope. At least not in the way a lot of life gurus, YouTubers and influencers want you to believe. Think about the times when these types of people have mentioned passive income. You’ll quickly realise that they almost always talk about THEIR forms of passive income. Which looks a little like marketing and advertising to me. So is it truly passive if they still have to plug it in their videos to maintain interest?

Instead, what they are actually advertising, and what I believe I personally have achieved, is semi-passive income. Which to me means I made the initial investment in time to design and develop a service that has value. Now I need to maintain that value through investing more time. The aim, however, is to ensure that the additional investment in time is as little as possible.

I’m sure there are many people who would argue that all this is rubbish, they have true passive income without any additional investment. That might well be true! But it won’t last. It won’t last long at all. That’s because, the way we live today, we’re always looking for the next best thing. Something bigger and better. It’s what humans do. Add to that the need to stay current (a course on how to build a website from 5 years ago is going to be next to useless today). Is it truly passive income if it’s extremely short-lived?

Semi-Passive Income

I much prefer the term semi-passive income. I think it’s far more accurate and less deceptive. Leaving no confusion around what it actually is. Reflecting on some of the semi-passive income sources I have, I can leave them for weeks on end and have no problems. But sooner or later, if I want to maintain them or grow them, I will be forced to invest more time. Effectively exchanging that time for a continued income source. My clients? If they stick with me, they are exchanging money for that time.

If this article reaches just one person and helps convince them that truly passive income is no more than an illusion, then it was worth writing. I hope that one day, all these passive income peddlers will realise that pushing these ideas isn’t helping anyone… Well, I guess it is helping someone. It’s helping them advertise and plug their own supposed passive income sources.