Idea 031: The Secret of Passive Income – or Active Income?

I first learnt the term “Passive Income” when I was reading one of the most famous financial book “Rich Dad, Poor Dad” a decade ago. By that time, I was attracted by this magic term and thought that I had to earn this type of income in the future.

So what is passive income? Basically, passive income is the type of income that we can earn passively, ie, don’t need to do anything and earn it. Most of the people who want to talk about passive income will use this example – that earning passive income means that we can earn money even when we are sleeping.

The theory is that we set up a money earning system that can automatically runs 24/7 instead of being manually and actively operated. One of the example is writing blog.

We can write some valuable blog posts to provide value to the audiences, and then monetize the blog by adding Google Ads or doing affiliate marketing. Once we built up a large audience base, and they click the Google Ads or affiliate links, we can turn their click into money without doing anything.

Another example is creating Youtube video. By creating many Youtube videos we are providing values to out audience. Google will then turn the click rate into money. Also, we can add some advertisements in the middle of the video to earn advertising fee.

It seems so easy to earn passive income. However, in reality, if it is so easy to earn passive income, how come most of the people still work for others, work from 9am to 6 pm at the office? Besides, is passive income really passive?

The Term “Passive” is Just a Sugarcoat

Sugarcoat is the thin layer that covers medicines and make it easy to swallow, otherwise patients might refuse to take medicines because of their bitterness.

Similarly, I see the term “passive” as a sugarcoat of the whole earning activity. The term delivers a wrong message to us – that we can do nothing and earn money. I wish to have such free lunch, but there is no free lunch in reality.

The whole concept of earning passive income is that the whole money-earning system operates automatically in 24/7 and we don’t need to actively participate. However, there are some limitations.

First of all, we need to actively build the money-earning system. How much time do you think we need to build such system? A LOT. Just imagine how many Youtube videos or blog posts we need to prepare to keep attracting audiences?

Secondly, we need to actively update the system because the world is changing every second, so does the knowledge we have. If we create Youtube video for doing Yoga, we need to update the Yoga moves regularly so that the audiences are attracted by some new moves.

In other words, passive income is not really passive and requires our active participation and hustle. We may earn some money during sleeping at some nights, but at most of the nights we might need to work very hard to offer sufficient content to our audience.

How to Define Value?

One of the most important key in the concept of passive income is “Value”. to make sure we have large audience base to support this passive income, we need to make sure we can offer value to them. The thing is, however, what is value?

For example, I am a qualified accountant. If I want to make Youtube videos to teach accounting, what is the value I can offer? The Accounting knowledge? Yes and No.

Yes – if the audiences want to learn accounting knowledge from my video, my accounting knowledge is definitely the value, and it can bring money to me.

No – if the audience can learn Accounting knowledge from thousands of resources, eg, many Youtube channels, books, etc, the value that can be offered from my video is so minimal, and it might not bring any money to me at all.

Since the key of passive income is the value we offer, we need to spend a lot of time thinking through what kind of value to be offer, and how to be offered? Back to the example, it might be too broad to just make “Accounting knowledge” to be the value. we should narrow it down based on the target audiences.

For example, I want to teach those with NO accounting background but want to learn some accounting knowledge. Then, I need to make sure the Accounting knowledge I offer is easy to understand, and the value I offer will be “some easily understand Accounting knowledge”.

Another example is that if I want to teach kids some useful accounting knowledge, so as to build up their financial mindset when they are young, I can offer some basic Accounting knowledge with life examples. Kids who watch my video will learn some basic Accounting knowledge very easily. Then my value offered will be “Basic Accounting knowledge that even kids can understand easily”.

All in all, it is not easy to earn passive income. We need to work actively to earn this passive income.

***********************************************************

If you want to know more about what I have learnt from other successful people, you can click the below link. This could the one of the life-changing articles for you:

Leave a Reply