The Quest For Passive Income: Where Are We Going Anyway?

What The Hell Is Passive Income Anyway?

"Passive Income" seems to mean a lot of different things to different people. To Pat Flynn, it seems to mean income as the result of smart marketing, engaging content, and huge amounts of hard work. And it seems to be paying off - he made $130,000 profit last month alone.

To others, passive income means "fire and forget" - small websites or ebooks, set up and left to run unattended and without attention, bringing in a trickle of money but with little drive and little ambition.

Even governments have a definition for it, though it's a bit less charitable - "unearned" income, usually from rental, royalties or investments which don't require you to be personally involved.

None of those really capture what it is that I mean when I talk about "passive income". I don't mind hard work, but Pat's own model is quite reliant on him personally. If he wants to go off and potter around some Caribbean islands on a boat for six months with no internet access, his empire will directly suffer as a result. His blog and podcast are his primary sources of income and they are very much dependant on him and a growing team.

Similarly, "Fire and forget" isn't my idea of passive income. It's just not smart, and isn't likely to remain income for long. It's also closest to the model I've followed so far, albeit unintentionally.

The government definition also doesn't really match any definition of passive income that I want to chase - at least, not for many years yet.

So with some idea of what it's not, I started to try to form some better ideas of what it is. And I ended up with this:

Passive Income is regular income derived from sources that don't rely on my day-to-day involvement.

As a web developer, I am usually in the business of exchanging my time for money. There's a maximum number of hours I can exchange in any given week, and the higher that number, the greater the costs in other areas of my life.

I can increase the amount I sell my hours for, but that work by itself cannot grow my income past a certain point, and is dependant upon my health, my skills, my proximity to civilisation and the (hopefully) slow spread of web-developing-AIs.

However, if I can use my knowledge to make products that can earn money perpetually, and which can continue to earn money while I work on other projects and goals, then that is passive income.

So, to me, passive income is:

• Income which is not dependant on my health, or my skills, or me being near a computer
• Income which allows me freedom to explore new career opportunities, or to spend time with new (or old) hobbies, or to visit interesting countries
• A way to remove personal reliance on selling time for money
• Income that isn't dependant on me, personally - I should be able to hand over maintenance of a passive-income resource to someone else without a serious dent in its income
• Income which is derived from making my own skills scalable

OK, Now We Know What It Is. What Next?

I am not aiming to build the next Facebook. I'm still more interested in building websites that grab my attention, and earning enough from those sites to afford me a comfortable lifestyle - and one that allows me to continue to develop interesting websites. That may involve growing my company, but that's a decision I'm happy to leave until further down the line, when that becomes a realistic choice.

I'm not sure I want to set a "final" goal, because I don't think I'm ever likely to sit back and say "OK, job done, no more work needed". I'll achieve the right sort of level when it becomes my choice what to work on next, and when I can take a chance on an idea without needing to set out a safety net first.

30 March 2016   |   passive income, the start