What is Passive Income and is it Real or Too Good to be True?

One of the most popular keywords you’ll see regularly online is “passive income”. These are usually associated with get-rich-quick schemes and various scams that claim to offer ways of making unlimited income in exchange for a “small” investment. So what is true here? Is there really such thing as passive income? The answer in short, is yes– but there are caveats to it. 99% of the time you will need to put work into creating such income (I wouldn’t trust those so-called “traders” who take your money no questions asked and claim to give you back a handsome amount every month).

Passive income, to put it simply, is income derived from sources other than from employment. So you may have a 9-5 job, but have invested a portion of your earnings into rental property, or stocks and bonds, all of which give you an income for which you don’t necessarily need to constantly work for. With a rental property, for example, your income would be from rent, but you may choose to spend a percentage of that income into hiring a property manager to look after your property so you don’t need to be hands on. This would be considered passive income.

However, we want to clarify that it usually takes some work to get yourself to the point of passive income. You may have taken out a mortgage to pay for your rental property, and are using the salary from your job, as well as the property’s rental income to pay it off. Until the property is generating income that outweighs your expenses, this cannot be considered passive income.

With the broad use of the internet, there are now many more and very accessible ways of creating passive income. The barriers to entry are at an all time low and one of the most popular ways of creating passive income is through e-commerce. Just take for example dropshipping– where you sell another company’s products and services directly to the consumer, without ever having to touch or keep inventory. Many successful entrepreneurs have created dropshipping websites that get the point where they are so automated, they produce large amounts of income and only need a few hours a week of care, if that. For example, a website is created selling hiking gear, but when the customer chooses to order from the selection of rain jackets for men, the order goes directly to the wholesaler who fulfills the request, and the dropshipper does nothing but profit from the margin they have added on top. Now, there are many more ways of creating passive income online, but you get the jist– the opportunities are seemingly endless.

In conclusion, passive income is very real, but do not be fooled into believing that you can get there without having to put some (possibly a lot of) work in at some point. Just like anything you plan on putting your money into, always do thorough research and your due diligence beforehand.