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Advantages and Disadvantages of Passive Income

By Edited Jun 20, 2016 1 3

           If you have heard about passive income (if you haven't, Learn about passive income!), odds are that it seems like an awesome, foolproof idea. Unfortunately however, everything in life has its pros and cons, and passive income is no exception. This article examines both sides of the argument relating to whether or not passive income is a good decision to make for you, and your family.

Advantages and Disadvantages of Passive Income

Advantages

Multiple Streams on Income

            One of the best things about passive income is that you can easily have more than one stream. As Pat Flynn did, you could begin writing an eBook as a study guide for an exam. Then you could start a blog in which you write articles about certain topics on the exam. At this point, if you are tired of writing about this particular exam, you could start a membership site about all of the different types of boats, and boat parts, etc. The possibilities are endless! You could have as many different streams of income as you would like.

More Time to Spend Doing other Things

            Whether it is playing with your kids, hitting some golf balls, or working out at the gym, the lifestyle of someone who pays their bills using passive income allows for some leisure activities. This may be a bit of an exaggeration, but you will have a bit more time to spend doing things you enjoy more than work. That’s the whole idea of passive right? Granted you won’t be completely free, you will still have more time.

Flexibility of Schedule

           Living the lifestyle of passive income means that, when you do work, you can do it whenever you want. There is no requirement to work from 9-5 every weekday when other people tell you to. You can work whenever you want, even at 2 AM if, for some odd reason, you really want to. Schedule flexibility means that you can go out with friends, and take a 3 hour lunch break if you like (instead of 1). Overall, this is a major advantage of earning passive income.

Increased Financial Security

            Because with passive income, you can have multiple streams of income, therefore you can also be more secure financially. With a regular 9-5 job, whether or not you can pay your bills depends on one person’s decisions, and that person isn’t you. However, with passive income, not only do you have control of your financial future, if, for some unexpected reason, an income stream is cut off, you have several others to keep money coming in.

Disadvantages

Low income when starting

           The biggest problem for anyone trying to develop streams of passive income is the fact that it takes a while for the income stream to grow, and start generating a legitimate income. This is the reason that most people quit their journey of generating passive income. The types of products that generate passive income often have exponential growth. You have to hang in there. You will succeed. The benefits of waiting will outweigh the negative aspects of making a small amount of money when you start.

Difficult Social Life

        Without your co-workers to be your friends, your social life will require an extra effort. You will have to consciously go out and try to make friends to be social. You do not just happen to meet people because you sit 5 feet away from them 8 hours a day. Personally, it would be very hard to have any social life at all if I were not in school. I have yet to see the value in a good friend base that supports and encourages you, though I know it is there.

Success is not Guaranteed

        Unfortunately, no matter how hard you try, and how much you research, success is not guaranteed.  You could spend months making a nice, informative blog, only to have it fail due to a bad niche or some other various reason. There are a number of possibilities, but success with passive income is certainly not guaranteed. Even if you do begin making some money, it may not be enough to support you and your family. The only rebuttal to this is to keep trying. Create more streams, while promoting your old ones. If nothing seems to be working, passive income is most likely hurting you, and you would be better off in an active income environment.

 

        Overall, the advantages of passive income certainly outweigh the disadvantages. I believe that 90% of the time, this is the case. Odds are that you, yes, even little ol’ you, can make a living earning passive income. However, there is always the rare case where someone simply must have the active income work style, whether it is due to productivity problems, or other issues. 

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Comments

Jun 15, 2014 2:04pm
Joey_Batz
Even those with healthy passive income streams might find that they still want to have active income (likely a 9-5 day job) just in case too many passive income streams start falling, to be absolutely sure they have enough for retirement, or just because they want something to do or they actually really liked the field that they worked in. I'm just now starting to develop multiple streams of passive income (meaning I'm doing the research and laying the groundwork), but I recognize that I still would probably benefit more from having a stream of active income as well. In other words, I doubt that I will be quitting my job (and I don't yet have plans to) unless I become EXTREMELY successful with my future passive income streams.

A great way to sort of "hack" the whole system, so to speak, is to combine active income, passive income, and a 401k. If you have a job that contributes to a 401k and you have enough passive income to pay your bills, then contribute more than the maximum amount that your employer will match. Contribute the max that your employer will allow YOU to contribute (for me, it's 50%). You'll pay your bills with your passive income streams, have some side cash from your paycheck, get free money from your employer when they contribute to your 401k, and the high amount you contribute will allow compounding interest to work its magic at record speeds!
Jul 16, 2014 11:06am
bandaid
I'm always looking for new passive income opportunities. So far all my attempts to make passive income have failed.
Jul 16, 2014 11:06am
bandaid
I'm always looking for new passive income opportunities. So far all my attempts to make passive income have failed.
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