Passive Income – Stop Trading Time for Money

This is not passive income!

My wife and I started up a part-time business a couple of months ago selling assorted items online. It’s been going fairly well and the more time & money we put in, the more money we’re making. But yesterday was insane. We (mostly my wife) spent 17 hours packing up 375 items into 54 boxes. Yes, 17 hours on packing alone. Sure, I hope to make some decent money off of the sales of these items but make no mistake about it – this is not passive income!

With most jobs, the more time you spend, the more money you make.  If you need more money then you work longer hours, you work overtime, you pick up a second job, you create a side business, etc. More time = more money. Trust me, I know, because I’ve done exactly this for years.  Before I moved to Fresno to accept a full-time position teaching chemistry, I was teaching part-time at a college in Sacramento.  Shortly after I got married my wife got laid off, so I did what most people do when they need more money – I got another job.  In my case, I got two other jobs. I went from one job working 50-70% of full-time to three jobs at three different colleges in three different cities. Combined I was working about two full-time jobs plus spending 2-3 hours commuting most every weekday.  Did I make good money? Sure. Did I get to spend time with my family and pursue my passions? Heck no!

This Is Not the Income You’re Looking For

Here’s how most people think about financial freedom: I’ll work really hard now, save like crazy for 20-30 years, then after I retire hopefully I’ll be able to pursue my passion / take those trips / try that new venture / begin to really live! Really? Is that my goal? To start living after I’m 65 years old, my kids are grown and have kids of their own, and my most active years are behind me? Not any more!

Today my goal is to create passive income. So what is passive income?

I’d define passive income as income you receive on a regular basis without needing to put in significant effort to maintain it.

That doesn’t mean that you never work, it means that you do most of the work upfront and then minimal maintenance later. Examples could include blogging, podcasting, creating video content, marketing dropshipped products, selling eBooks and digital goods, producing software & smartphone apps, and much more. All of these things take effort now, but if you put in the hard work and set them up properly, then they’ll continue to generate income years after the work was completed. That’s a far cry from spending 17 hours to pack 54 boxes full of stuff that once it sells will never make me another nickel.

Stocks & Bonds & Gold, Oh My!

But how about stocks, bonds, precious metals, commodities, and real estate?  Don’t those generate passive income?  In a sense, yes.  But they also tend to require significant capital upfront for any type of substantial return. If you want to make meaningful income from stocks or real estate month-after-month then you have to invest tens of thousands of dollars into them.  Contrast that with setting up a blog, recording a podcast, or writing an eBook; Instead of investing huge piles of cash, you’re spending several hours and a few bucks for web hosting to potentially make hundreds, if not thousands, of dollars in recurring revenue. Don’t get me wrong, if I had the capital I’d be investing in real estate right now! But because I don’t I’m taking what I do have, time, and starting to invest it into various online ventures. Once the money from those begins to roll in, then I’ll invest in stocks, bonds, precious metals, commodities, and real estate.

That’s passive income in a nutshell. Instead of trading your time now for money now, you’re trading time now for money later.

How do we do it? In my next post, I’ll share a few of the baby steps I’ve taken towards making my dream a reality.