Money makes the world go round, as the old saying goes, and it’s true! It is an unavoidable and vitally necessary part of everyday life. We need money to purchase goods and services in order to live and stay healthy, to provide for ourselves and our family, and even to have some fun. Simply put, we can’t live without it in a modern, developed world.
The salaries that we earn monthly are known as active income, but there is another secondary revenue stream that some people can receive that is known as passive income. What this basically means is income that you earn but not necessarily working for it. So renting property, investment returns, royalties and publishing, capital gains, etc. In other words, a revenue stream that doesn’t depend on your primary salary-making job.
For many people, the thought of an additional revenue stream into their coffers is a very nice idea. On its face, it sounds very much like a win-win scenario… an extra salary coming in for doing nothing? Where do I sign up! But as with so much in life, the cold, hard reality can be somewhat different.
In this article, we’ll list 5 reasons why you may not necessarily need passive income and the potential disadvantages that can come with it.
1. Lack Of Control
As passive income returns are not usually based on factors such as job performance, salary reviews, etc, you have little to no control over how the returns could be affected by outside, external factors. For example, if you own stocks, the value could potentially plummet, or equally, if you are receiving passive income from real estate holdings, that marketplace sometimes has slow liquidity so relying on that particular revenue stream may not be advisable.
2. High Initial Investment
Getting a secondary revenue stream of passive income is a very desirable thing to have in life, but getting there may be far from cheap to begin with. If you are waiting to get returns on real estate, for example, there may well be a significant initial cost in purchasing, renovating, and refurbishing said property for some time before you see a single cent in returns. Similarly, for royalties and/or publishing from artistic pursuits, the returns could be substantial if you prove a success, but more often than not, you will not see any major returns in the short to medium-term in comparison to the time and effort you put into such endeavors.
3. It’s An Illusion
Even for those already receiving passive income, the game isn’t over. They simply can’t retire early to a tropical island for the rest of their lives. The very term ‘passive income’ itself is a little disingenuous as it implies you don’t have to do anything to continually get it. Whereas the truth is you do in fact have to continually keep on top of your respective passive income sources so they can keep generating revenue. Nothing remains static and if you sit back and virtually ignore your passive revenue stream with no thought to growth, you’ll find that it is an illusory facade that will lose steam as market forces shift and your golden goose will be little more than a clapped-out chicken.
4. Complacency
If you receive an additional revenue stream without essentially having to work a full-time job to get it, there is a danger that you will simply start taking it for granted and use it as a crutch, something to always fall back on. Human nature is such that a scenario like this may affect both your drive to succeed further and your overall work ethic. A certain slackness may come about in your attitude and demeanor, and if left unattended for a while, could start to have an impact on your self-worth. It’s best to realize that even with the advantage of a passive income, a consistent and steady working schedule is best for you on many levels.
5. Great Expectations
One of the biggest trapdoors in wanting to earn a passive income is that many people enter the process with unrealistic expectations. They feel that once they have established a means to generate a secondary revenue stream that money will start flowing in and all their problems are solved. When this doesn’t happen almost immediately, enthusiasm turns inevitably to disappoint and many just give up. It may be years not weeks or months before you start seeing significant returns on your efforts. Aside from patience, the most prudent thing to do is concentrate on building an effective business model first instead of concentrating on the potential of passive income, which is, in effect, putting the cart before the horse. A good business model will eventually generate income, but it may take time and you need to understand that from the outset.
Having a passive income definitely allows you more flexibility in life, but it’s not the end-all-be-all of business. Many people have found great success without one so be realistic and grounded in your objectives, don’t make it the sole object of your efforts. Good luck to you!
