Experts use the term “making passive income” so often we don’t even question if it really exists anymore. Why should we question it?
Everyone likes making money without doing any work. Even though we know that nothing in life comes for free, the appeal of sitting back and watching an investment grow is a perfect dream. After all, wouldn’t we all like to wake up rich one day?
But let’s hit ourselves with a dose of reality. The ugly truth is that passive income is a myth.You can’t get rich by doing nothing.
I’ll share a quick story. At one point in my business career, I was generating a lot of passive income because the books that I read talked about this concept. They talked about having passive income coming in so I could retire early. I liked that idea so much, I started a side business.
What I Thought Passive Income Was
I had a lot of digital products I was selling on ClickBank online, and I was running ads on Google. I was getting a lot of traffic for my affiliate marketing business by selling $37 to $67 products.
My business was making me tens of thousands of dollars in passive income. I saw myself retiring in a few years.
Suddenly, Google changed and the ad that was profitable before was no longer profitable. A couple products got shut down. And then everything changed.
I was passive one moment and then a few months later, I wasn’t so passive anymore. That’s when I realized there was something wrong with the concept. You can’t really expect to make a lot of money for little to no effort.
But if passive income is a myth, then what is the truth?
Watch this video about the passive income myth.
What Passive Income Really Isn’t
Let me give you an analogy. Let’s say you’re in a relationship. I want you to imagine going to your significant other and saying, “You know what, honey? From now on, I just want to have a passive relationship, so we’re just going to have some passive sex.”
How long do you think they’re going to stick around? Not very long.
How about, “I want to be healthy, but I just want to have some passive health. I want to have some passive fitness.” How could you become fit by sitting around and watching other people working out at the gym?
The most common passive income ideas – investing in stocks, selling products online, and buying real estate – all require some effort if you want to be successful at it.
The market could change and your stocks will be worthless if you don’t do your research. When you’re selling products you’re also putting money into marketing. About a third of people who buy real estate as an investment say they wouldn’t do it again.
But, somehow, in business and in finance, passive income is what everybody talks about. In what other areas, if you think about it, does that work?
It doesn’t, because “passive” implies you want something for nothing. You want to do nothing and somehow, results and income just fall on your lap without doing any work. It doesn’t exist.
If this worked so well, I would challenge you to think about Richard Branson, Bill Gates, Warren Buffett, and Elon Musk, the wealthiest people on the planet. How many of them created or kept their wealth passively?
They are all still working. They are all very active in their investments. They’re very active in their business.
Even writers and singers who make royalties from their books and album sales had to work hard to create the products that give the passive income. For example, Michael Jackson died in 2009 but he still makes millions in royalties.
Instead of using the word “passive”, which is very dangerous, here’s a better word to use: leveraged income.
Leveraging is when you borrow something, such as money, to increase your return in something, such as an investment. Maybe you can’t afford some new equipment for your office. You ask for a loan from the bank and then you buy the equipment you need. That is an example of leverage.
You can also leverage people’s time. You can empower employees, contractors, or outsourced help to complete some of your routine tasks, such as replying to emails, answering the phone, or maintaining the website server.
For my organization, I think about how I can leverage other people, or technology, or systems to create money. I have a lot of active income that I involve and create. I also have a lot of leveraged income which I create through my team, through my businesses, through technology. There are several ways to create leverage, which I talk about in this article.
The irony is that people who use leverage are people who don’t want passive income. They love to work and continue working after they retire. Those who want passive income the most are those who can’t wait to retire from their jobs.
Job Mentality Versus Business Mentality
There are two types of people in business.
People with a job mentality are always thinking about passive income. They want effortless success and something for nothing. That’s like wanting to go to the beach and sitting around and doing nothing and hoping their investments went up in value when they get home.
The other type of people, the ones with abundance mindset and business mentality, are not looking for passive income. They’re looking for active income. They want meaning, legacy, and success.
These people have retired from their jobs but they are still actively doing things to keep themselves fulfilled. They have retired to their next business venture.
It could be supporting a charity, working on their next business idea, or investing in their next business. For them, that’s what living is about. That’s what being a human being is about. It’s about happiness from growth and contribution.
When you start to think about how you can contribute more, that is when the wealth finds you. You’re asking questions like, “How can I be more? Create more? Do more? Give more?”
With this mentality, you’re not only going to get the money, you’ll get satisfaction, and fulfillment. You get it all.
The Truth About Passive Income
Stop looking for passive income. It does not exist. You can’t invest some money in something, like an e-commerce business or stocks, and expect it to grow while you sit back and do nothing. Instead, strive for excellence, and strive to create leveraged, active income. Leverage other people’s time, money, and systems. That’s the smart thing to do.
Do you want to know how millionaires actually think? Click here to find out more about Dan On Demand where I reveal the secrets to developing the millionaire mindset.