Passive income is becoming hugely popular, but it’s not without its critics. Like any movement or idea that challenges the status quo—in this case, the concept that the only way to earn money is through traditional forms of work—passive income has attracted its share of disapproval from people who believe that this financial strategy isn’t all it’s built up to be. If you’ve ever talked to someone about your passive income plans, only to have them disparage your ideas for being unrealistic or unachievable, then you know firsthand how discouraging this kind of criticism can be.
The important thing to understand about such naysaying is that it’s usually based on a fundamental misconception of what passive income is (as well as, in many cases, a lack of understanding of your real motives and goals). Much like the common myths about passive income, the most frequently cited criticisms of passive income take for granted the persistent misunderstanding that passive income means “money for nothing.” To rebuff your critics, therefore, all you usually need to do is lay out the facts. Read on for a look at some of the top criticisms of passive income and helpful ways to respond.
Criticism: Passive income isn’t actually passive.
One of the first things that critics of passive income usually point out is that calling it “passive” isn’t accurate, saying that you have to put in some work to earn passive income. Many people use this as a reason to disparage passive income, but in doing so they’re missing the point. What matters here is not that passive income takes work (no one who has ever tried earning passive income would dispute that fact), but that your work-to-income ratio is vastly different from when you’re earning money from a traditional job.
For example, if you’re employed by a company earning $20 per hour, you can expect to earn $2,000 for 100 hours of work. On the other hand, in a passive income scenario, you could spend that 100 hours developing an information product (such as an online course) that you then sell for $100. To earn the same amount from your course that you would have earned at your job, you only have to sell it 20 times. However, if you sell the course 100 times, you’ve earned $10,000—five times more than your job would have paid you—all without having to put in any more hours. Yes, you’ve still made an initial time investment of 100 hours, which is not “passive,” but it’s a finite amount of work for a theoretically infinite potential income.
Criticism: Most passive income opportunities don’t last long because of growing competition.
This criticism is essentially another “passive income isn’t really passive” comment. But competition is only a problem if you believe that passive income is something you should be able to set and forget. If you understand that virtually all passive income streams will take at least some ongoing maintenance, then the fact that you will need to keep an eye on your competition and make upgrades to your passive income projects accordingly is not a major issue—and certainly not a reason to avoid pursuing passive income.
To go back to the example of the online course: you created it in 100 hours, and now you’re selling it for $100. While passive income critics might feel that you should now be able to keep selling that course forever, without changing it at all, the reality is that you will need to update it from time to time. Information or ideas offered in the course might become outdated, or someone else might come along with a similar version of your course. So while some further work will be required to make these changes, the amount of work you need to put in will be relatively small compared with the income you can receive.
Criticism: You can’t make enough money from passive income.
The best response to this criticism is a simple question: What does “enough” mean? Not everyone who pursues passive income wants or expects to get rich quickly and spend the rest of their lives on the beach. On the contrary, most of the people who launch passive income streams are looking for just a little more of the stability and freedom that extra revenue can provide. You might not be able to make enough money from passive income to take luxury vacations all the time, or even to quit your day job entirely, but earning passive income could help you to pay down debt, save for retirement, or have more time in your life for the things you truly enjoy, which certainly sounds like enough to be getting on with.