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Feasibility of Passive Income

“I don’t believe there is such a thing as passive income, it doesn’t make sense for it to exist. How can you not ‘work’ for an income.”

“So you believe that every person works equally for their earning and profits?”

“No, I believe that some people work a lot less for their income but passive income in the real sense of the word isn’t sustainable or possible in an efficient society.”

“If our economy was efficient we would have the exact number of jobs as the unemployed and there would be a job even for the person who is passed out on the street corner from their alcohol addiction.”

“Fine, but that passive income you’re earning from your portfolio isn’t going to last forever. It’s just not possible for someone to not do any work and earn an income.”

“If we lived in a society where there was no such thing as ‘ownership’ then you are right, passive income wouldn’t exist. When you can own a home, a piece of land, a car, or intellectual property then you can earn passive income.

“In order to invest and earn passive income I must have earned that money somehow or been fortunate enough to have the wealth passed down generation after generation. Somewhere along the line, work was put in, but what makes it passive is that it doesn’t require ongoing work.”

“I think people like the idea of passive income so that they don’t have to do any work. Without work a society would crumble.”

“I actually think a lot of work goes into creating passive income. In order for something to be a genuinely passive income, you must have either put in a lot of upfront work or continue to put in a little bit of intellectual or physical work on and ongoing basis.

“As a society we have agreed that we want passive income to exist. Without it we couldn’t get a loan to buy a home or a car. We also wouldn’t be able to rent a home and would only have the option to buy.”

“I don’t think it’s fair to others that someone with a lot of money can invest their money, earn a profit from it, and never have to work.”

“I’m not sure how fair or unfair it is, not sure I’ve thought about it that far. But if passive income didn’t exist then you would have to be taxed on any money you save.

“In a society without passive income, you would have to save money for all your years when you can’t earn a living. Can you imagine all that cash getting taxed year after year? You wouldn’t be left with much by the time you’re 90 years old.”

 

Feasibility of Passive Income

The owner of a bank or a fast food franchise earns passive income. They hire a team that acts out the owner’s vision and the profits from the business become the passive income for the owner.

Intellectual property is passive income. The owners of Star Wars Media can keep earning profits from the movies and licensing into infinity.

Types of Passive Income

My buddy from the conversation above had a point that maybe the passive income model that I’m pursuing won’t be around forever but neither will I.

If one disappears then another will replace it and I’ll move my assets from one passive income option to another. Whether it’s P2P lending, real estate, index funds, or venture capital – a viable option will always be available for the investor with assets.

Economic Paradigms

As a modern society we could have chosen to maintain our gold-backed currency system. We could have prevented citizens from owning real estate. Banks may have never existed as a marketplace and instead only peer-to-peer lending allowed.

However, we have as a whole agreed upon this current economic paradigm which makes passive feasible. I wouldn’t say lucrative, but feasibly.

Passive income isn’t as much of a panacea as it might seem, neither. A retiree could go through a market crisis and their passive income could negatively affect their lifestyle if they depended on it for income.

 

For The Healthcare Professional

The spectrum of passive income is so broad that it would hardly make sense to argue against the possibility of passive income.

Even the homes we live in go up in value over time as does any widely sought after finite resource such as the land that our homes are built on.

The Fear

The fear that passive income may one day not exist is a valid fear but nothing in the history of modern societies supports this fear.

A healthcare professional starts their career late in their lives, often in their 30’s. They also start with a ton of student loan debt and very little personal finance experience. It’s more worthwhile to take advantage of the passive income options available now rather than worry about the disappearance of such options.

Diversify

Next, a person who deeply fears not being able to earn passive income some day can focus their efforts on doing the kind of income-earning work which they love so much that they would never need to retire from it.

Having income-generating work is a form of portfolio diversification. Any decent financial adviser will create your retirement plan by asking you how much money you will expect to earn during your retirement.

If the feasibility of earning passive income from index funds seems suspect then consider investing in TIPS, real estate, peer-to-peer lending, or your own business.

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