For many, the Holy Grail of personal finances is the development of passive income. Passive income is supposed to be income that just flows into your personal economy without the need for you to actually do any work.

However, can any income truly be considered passive? Even when you have income streams that are considered passive, chances are that some level of work is required to get you that point.

Doing the Work Up Front

Most passive income streams don’t just spring into existence. Unless someone left you an inheritance, you’re likely going to have to put in some work in order to turn your money into a “passive” income stream. Even that inherited money will have to be put to work if it’s going to provide you with passive income.

Some examples of the work that goes into many popular passive income streams include:

  • Doing research about dividend stocks and other income investments before adding them to your income portfolio.
  • Researching investment properties before buying them.
  • Doing the work of managing rental income properties and arranging for their maintenance.
  • Adding content to your web site or blog in order to attract the traffic that results in ad dollars.
  • Writing an ebook (or any book) that is expected to sell later.
  • Developing an online course that others can buy.
  • Administrative tasks associated with running a business.
  • Screening and hiring people to work for you if you run a business, or if you decide to have someone else provide content for your blog or web site.

Even though, in some cases, you can receive regular income without doing very much, chances are you had to put in a lot of work initially in order to get to this point. And, once your passive income stream is producing, there is usually some sort of effort required to keep things on track. You have to check in with your duplex manager on occasion, or you need to tweak your web site, market your online course, deal with a new advertiser or reallocate your investment portfolio.

All of this means that you can’t ever be completely passive as you manage your income streams. To some degree, you need to be engaged, even if it is for only a few hours a week.

The Real Appeal of Passive Income

The real appeal of passive income isn’t in the idea that you don’t have to work at all and money just comes to you. Instead, the appeal is in the freedom that such income can bring to your life. Many of the income streams thought of as passive don’t come with geography restrictions. Once you build them up enough, you can quit your day job, and have the ability to spend more time with your family, volunteer more, or travel; you have the freedom to redesign your lifestyle.

Really, the great thing about passive income is not how you manage to do nothing and still make money. It’s all in how you can work more on your own schedule, prepare for the future, and have the flexibility to do more of what you want with your free time.

Tom Drake

Tom Drake

Tom Drake writes for Financial Highway and MapleMoney. Whenever he’s not working on his online endeavors, he’s either doing his “real job” as a financial analyst or spending time with his two boys.