Is It Really Passive?

We love to use the term [passive income.](http://Income that is really passive may not truly exist. Instead, it might be more fitting to discuss residual income from a front loaded venture. Apparently nothing is for free.) It is the calling card of the financial independence community. The idea is to build wealth actively for a short period of time, retire early, and then reap the benefits for decades to come. It sounds great. In fact, it sounds almost too good to be true. Is it really passive income? Are these perpetual money making machines that we dream about truly possible?

It’s not that there aren’t side gigs, hustles, and investments that can sustain a lifestyle. The more salient question is how much work they take to maintain. Otherwise we are becoming servants to another W2 like situation. The only difference is the we have now become our own uncompromising boss.

The Passivity Index

I have argued before that there is a relative passivity index. Some money machines require more maintenance than others. Winning the lottery and inheritance are really passive. They require almost no work, and immediately propel one into financial stability. They also are fairly unlikely.

The stock market comes in at a close second. It can be argued that after a certain amount of reading and education, your average portfolio will take merely hours a month to maintain. If that. This even includes reading the latest investing books as well as keeping abreast of the ups and downs on Wall street.

The tables start to turn with real estate and other forms of the business asset class. These endeavors can swallow up large chunks of time, and may lead to creating as much work and stress as any ballyhood W2.

Residual Income

Is it really passive? Some will argue that we are using the wrong terms. The proper term is residual. As with any money making venture, often there is a flurry of work that is done up front. There are many examples of this.

Real estate investors often spend years accumulating knowledge, buying and managing properties, and setting up systems before they move into a more passive role. Business owners, consultants, and book writers often work long and aggressively at the beginning of their venture to assure success.

It is a mistake to view one’s ending and assume that the journey was equally as passive. The term residual makes most sense. These are revenue streams residual to the hard work and effort put in at the beginning of the venture.

Our Old Friend

The trick to being really passive in the end is our good old friend in the beginning. Front loading. What we like to call passive income streams are actually front loaded businesses that now have been put on autopilot. By aggressively stacking effort and time in the beginning, momentum allows for coasting later on in the journey.

We see this with the great real estate investors. Hear about it every time we marvel at an online sales expert. And drool over it when we see a blogger who makes millions with advertising and online courses.

This income was fought for with blood, sweat, and tears. Probably long before we were able to recognize the current success.

Final Thoughts

Income that is really passive may not truly exist. Instead, it might be more fitting to discuss residual income from a front loaded venture. Apparently nothing is for free.

But if you are wise enough to work hard early on, you might just be able to benefit from these residual income streams.

Income streams that now feel quite passive, if I do say so myself.