31 August 2021, Somewhere in the Metaverse - UplandDood (@Just1Dood)
Written on 2 August 2021
This series of 3 episodes have been sitting in my Article Bank for a while. As you can see, this one was written almost a month ago. It's just that I haven't found the appropriate time to post them. And also I have other articles written later that were more timely for publication.
Since I'd posted The Incomplete Idiot's Guide to "This is Not Financial Advice" yesterday, I thought today may be as good a day as any to post this series.
However, there will be a gap tomorrow as I've planned to post my very first monthly report tomorrow. Last month I tried to get my feet wet by posting Where is my July BCH report card? Good question!
Anyway, if you like the First Episode of this series, then do check back two days from now for the continuation.
Disclaimer
Since the word "Financial" and "Freedom" is displayed clearly and glaringly in the title, I feel the need to start this article with a disclaimer.
"No financial planners were harmed in the making of this article. I couldn't afford to find any to harm. With the limited budget, we got stand-ins. To be safe, do not take what they say as Financial Advice."
In case the above wasn't clear enough, let me repeat the "Wet Paint" warning again. "Do Not Touch" and...
"Not Financial Advice. Do your own research. All thoughts are my own. Did not run through any checkers. Definitions are respectively owned by the definers and attributed as such."
I think we can proceed now. Aren't you glad I didn't put the disclaimers above in fine prints? This editor wouldn't let me. No such option. Count yourself lucky.
Passive Income
The definition given by Investopedia for Passive Income is as follows:
Passive income is earnings derived from a rental property, limited partnership, or other enterprise in which a person is not actively involved.
It's really simple and the term is self-explanatory. It is just that - An income that is derived passively.
Though the definition is simple, pinpointing exactly what it is is not. In my opinion, there is no such thing as getting an income without any prior input. That input can be in the form of finances or time invested. It's always a trade between time for money or money for time.
Let's ask ourselves a question in order to get a better grasp of this.
Do you think that Blogging will help you generate a passive income?
My answer is - Yes and No.
Each sponsorship above is a form of passive income. But it'll stop sooner or later if I stop writing.
If you need to keep on working and writing, then no. It's not a passive income. You are still working for your income. As mentioned in the above paragraph, it will stop, if I stop writing.
However, if the article that you have written is monetized and is an evergreen article, meaning it's timeless and has information that readers are looking for, then, the answer is yes. All you have to do is write it once, and it will generate an income for you without further effort. In another word, passively generating an income.
If we look at the Investopedia definition again, you will notice that it doesn't say no work or effort is required.
Take for example rental a property. Does the property fall out of the sky onto your lap, so to speak, and all of a sudden you can start receiving an income? Think of the effort and time and sweat and risk put into acquiring that property. Even after you owned that property and assuming it's been fully paid off, if you are unable to rent it out, you are still not enjoying a passive income.
Passive income is like that elusive pot of gold at the end of the rainbow. But the good news is that unlike that pot of gold, passive income is achievable. But not without proper planning and much hard work.
The same train of thought applies to the business alluded to in the same definition above. Time and effort are invested in the business in order that it grows to a point where no more personal time and effort is required for it to generate a sustainable income.
I put "sustainable" because even though no time span is mentioned in the term Passive Income, I'd assume that all would like it to be somewhat "permanent" in nature and not for just one month or one year. I mean, if it's not sustainable, then what's the point of a Passive Income, right?
In short, my understanding of a Passive Income is that it is an income that is generated with minimal or without further input by the recipient and that this income is recursive in nature.
For many, traditionally the easiest way to generate a Passive Income is to put your money in a time deposit or fixed deposit. Depending on the amount of money committed, then the interest generated from that may provide you with a truly passive income.
To be continued...
This is a big topic and has to be broken down into multiple parts. I'm not sure how many parts yet as the remaining have not been written. One thing is sure, it'll be at least two. Duh. Yeah, cause this one isn't finished so there will be at least the next one. [Update: as of 31 August 2021, the publication date, there are 3 episodes].
Please, please understand that this is not a research paper nor is it a thesis. It is written purely based on my opinion and what I think should be common sense, which isn't common, and hence presented me with the opportunity to write this.
Thank you for reading. Stay safe and see you in Episode 2 the day after tomorrow (barring any unforeseen circumstances).
[This is not financial advice. It is the writer's personal viewpoint. Please do your own research.]
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Article Credits:
Executive Producer: UpandDood
Director: UplandDood
Actor: Non (couldn't afford any)
Key Grip: UplandDood
Catering: UplandDood
Housekeeping: UplandDood
Chauffeur: UplandDood
Sitting Duck: UplandDood
Header: Unsplash.com - Zlaťáky.cz
Image 1: Unsplash.com - Morgan Housel
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In all my years investing, I have never really liked the words "passive income" much either. For the very reasons you stated here. ANY income, I don't care what it is, has to come from SOMETHING, and that something is almost always something ACTIVE. Even when I think of the dividends I earn each and every quarter from stocks I own, while I don't have to do much but hold the stocks to keep on getting the income, if I don't do SOMETHING to pay attention to what the companies are doing I may miss something, and lose my underlying investment—or even the dividend if it gets suspended. And they sometimes do.
So even there I have to be somewhat active in my maintenance of that income.
And you mentioned real estate as well. Passive? Not hardly. Those houses and other properties don't fix themselves, and sometimes you have to deal with tenant issues. Even if you have a management company handing much of the minutia, you still have to be in concert actively with the management company.
Let's just all agree that anything defined as "passive income" is not necessarily passive, but just requires LESS work than other types of income.