We hear a lot about “passive income” when we discuss alternative income streams. For many, passive income is the Holy Grail of money making. The idea that you do nothing, and the income just comes to you is bewitching. However, is there really such a thing as passive income? I suppose that if you have some sort of inheritance that is managed on your behalf, that might qualify. However, much of the passive income that we talk about does require the expenditure of effort.

Passive Income and Mental Work

When you are setting up alternative income streams to generate passive income, you might actually be doing work. Indeed, you don’t receive a wage for checking out income investments and dividend paying stocks, but you are still putting in some effort. And, periodically, you may have to rebalance your portfolio, or make decisions — based on research — about what to do in order to keep that income stream intact.

Even more work goes into the “passive income” of creating a web site. Putting together a web site and then building traffic so that the ads generate income can require a great deal of initial effort and work. You will also probably have to do a little bit of work on occasion in order to ensure that the web site remains up to date and producing as it should.

When you consider some of the above, it appears that maybe truly passive income is little more than a dream. The reason that some still consider these sources “passive” is due to the fact that you really aren’t doing much work — once things are set in motion. After an initial outlay of effort, you become largely passive, making small adjustments here and there. But you do not have to actively toil away for your income, day after day, like you would at a regular job.

In the end, cultivating additional income streams in the name income diversity is a good idea. Don’t fool yourself into thinking that it’s all easy, though. Make sure you understand that even passive income usually requires an initial effort in order to get things running smoothly, and putting you on the path toward wealth.


Miranda is a Freelance writer focusing on banking and personal finance.