Passive Income Eclipse

What is financial independence? It seems we all agree on a few different definitions. One is having enough wealth saved up that one could live the rest of their lives without making another cent. There is some juxtaposition of the 4% rule or a calculation of 25X spending. Another oft used definition is that financial independence is when passive income streams accrue to a high enough number to pay for monthly needs. There may not be a fortune in the bank, but some admixture of business income, dividends, and real estate fill the gaps. In my humble opinion, there is one other definition that I believe gets short shrift. I call it the passive income eclipse.

The What?

The passive income eclipse is the point when “passive” income streams overcome active ones, and thus trigger the opportunity to leave a traditional job. You’ll noticed that I put the term passive in quotes. The reason is simple. Almost all forms of income generation require some work. Even broad based stock market indexing requires some thought and manual labor to secure these assets.

We have many examples of this in our community. Real estate mavens like my podcast co host Paul Thompson who used various income streams to free themselves from the daily grind. Side hustlers whose side gig became so successful that they were able to hand in their resignation. Bloggers who now make over six figures from their site alone.

The list goes on.

Is This Really Financial Independence?

Is the passive income eclipse truly financial independence? I guess you could argue that it isn’t. But I would politely disagree. After all, what is financial freedom other than the ability to spend your time doing what you like, and follow your passions instead of an income stream.

Real estate, blogging, side hustles. These are usually passion projects that most of our community would be doing even if they didn’t need the money.

And maybe that is a better definition of financial independence. Spending everyday doing exactly what you would be doing if you never had to make another dollar again.

My Journey

Over the years the passive income eclipse took hold. I took on enough hospice work that I could pay my monthly expenses from the stipend. Yet, I was able to feel like I was involved in meaningful work that I would do even if I didn’t need the money. It truly felt like it was passive. A side gig.

A side gig that overtook my main gig enough so that I could close my practice.

Hospice work, for me, started as a meaningful side hustle to my very stressful and time consuming practice. I considered it passive income because most of my activities were based on answering phone calls when I was otherwise busy with other things. Throw in a few low stress meetings here and there. But mostly it was pleasurable.

Final thoughts

There are many definitions of financial independence. I propose a new one that is less based on wealth and more on the activities that fill our days. The passive income eclipse is when “passive” revenue streams overtake active ones and allow you to fill your time in a way that is money independent.

To me, this is the definition of financial freedom.