Passive Income: Myth or Fact?
Estimated read time: 3 minutes
5 Reasons Passive Income is Not What It Seems
We have all heard and read articles claiming that one can double or triple their money by taking advantage of passive income streams. One can find dozens of books similar to “The 4-hour Workweek” by Tim Ferriss or articles titled “31-year-old makes $105,000 a month in passive income.” 1 These paint a picture of an alluring opportunity of less work and greater financial freedom, one that often goes against what we learn from the Bible.
The following are 5 reasons Passive Income is often myth over fact:
1. Time to Establish:
No income can be made with zero effort put in. The amount of time and work it takes to get a new income stream off the ground is often greater than what most people are willing to give. The people who are successful creating second income streams have often put years of time and work in before that stream becomes profitable.
Whether it be rental properties, investment income, social media, or online sales, all of it will require some form of upkeep. This takes time. No source can be completely left alone. Especially for people who are not experts in their field, the time spent on maintaining a project can be significant.
3. Consumer and Market Changes:
No business can remain profitable without changing and innovating. As time goes on, people’s habits, interests, and needs change. This requires businesses to look for ways to improve and update.2 Time, awareness, and skill are required to stay up to date on how one’s income source may need to update to stay relevant.
4. Initial Investment:
Upfront cost can often be the most significant initial hurdle when starting a second income stream. The time/effort a project requires, and the initial investment made are often inversely correlated. People looking for second income streams are doing so because they need that additional income. Yet on the contrary, it is those with significant cash reserves who may have the easiest time getting a second income stream started.
5. Biblical Principles:
We as people, made in God’s image, are created to work. Truly passive income with little continued effort can eliminate much of the benefit of the work itself. Tim Keller wrote in Every Good Endeavor:
“Work is as much a basic human need as food, beauty, rest, friendship, prayer, and sexuality; it is not simply medicine but food for our soul. Without meaningful work we sense significant inner loss and emptiness. People who are cut off from work because of physical or other reasons quickly discover how much they need work to thrive emotionally, physically, and spiritually.”3
Passive Income is a title often used to define secondary income sources. Having a secondary source of income is a wonderful and recommended strategy, yet is often promoted without proper guidance. Be aware of businesses that encourage a large upfront investment with a claimed “zero effort required.”4 All income takes some form of work, and we should be proud of the work that we do.
If you are interested in different income strategies, or how best to make your money work for you in a biblically responsible way, we encourage you to reach out to our advising team at Values First Advisors. We would love to spend time discussing your financial goals.
- Purcell, W. (2019, October 31). The importance of innovation in business. Northeast University. https://graduate.northeastern.edu/resources/importance-of-innovation/
- McCall, J. (2023, April 21). 31-year-old makes $105,000 a month in passive income from her side hustle: “I work just 2 hours a day.” CNBC. https://www.cnbc.com/2023/04/19/31-year-old-makes-105000-a-month-in-passive-income-from-her-side-hustle-and-works-10-hours-a-week.html
- Keller, T., & Alsdorf, K. L. (2012). In Every good endeavor: Connecting your work to god’s work. story, Penguin Books, an imprint of Penguin Random House.
- Fletcher, E. (2022, June 13). Income Scams: Big promises, big losses. Federal Trade Commission. https://www.ftc.gov/news-events/data-visualizations/data-spotlight/2020/12/income-scams-big-promises-big-losses