The allure of passive income is often dreamed about by the average person. At dinner with friends, one of them may throw out, “someday I won't have to worry about paying for a night out!” or “just wait and see, someday I'll have that big house, no more student loans, and living off the interest of my wealth!”
Or for the laziest of dreamers, they might exclaim, “I can't wait to win the lottery, so that I won't ever have to work another day in my life.”
People dream about passive income all the time. And in fact, its not so far fetched to say that the entire traditional workforce (at least in the US), works long hours for decades at a job so that someday when they are old and retired, they can finally travel and live off their “retirement savings”.
When it comes to internet entrepreneurs, we are just as vocal about “passive income”, but we often couple this discussion with passive assets such as businesses that run themselves, free traffic from Google, and making money from websites while we sleep.
However, does passive income really exist? Sure its a nice dream, but are there actually people (other than those silver spoon heirs) that live passively and still have income rolling in?
In other words, is passive income a dream that's possible?
And even if it is possible, is it something that is all its cracked up to be?
Today I want to discuss those questions related to passive income, and then share a little bit more about my own work schedule.
The Mystique of Passive Income
Many people often dream of when they can live lazily and still have income pouring in the door. This dream is taken advantage of by many late night infomercials and shady internet marketers.
Unfortunately for most, no matter how many products containing passive income secrets they buy, the dream is never obtained.
However, when we look at the Forbes list of the 400 richest people in America, we can clearly see that the ridiculous amounts of wealth that some dream of actually has been achieved.
I find it interesting to see how many of these individuals achieved their wealth. Here's a small sampling:
- Bill Gates (worth $72B) – Microsoft
- Warren Buffet (worth $58.5B) – Berkshire Hathaway
- Jeff Bezos (worth $27.2B) – Amazon.com
- Mark Zuckerberg (worth $19B) – Facebook
- Phil Knight (worth $16.3B) – Nike
- Elon Musk (worth $6.7B) – Tesla Motors
- James Jannard (worth $3B) – Sunglasses
- James Leprino (worth $3B) – Cheese
That last one is my favorite…cheese!
I want to make just a couple of points about the wealthy people on this list. First, most of them are entrepreneurs. The way to achieve true wealth is to create income producing assets as demonstrated by these individuals.
Second, all of these people have clearly made enough money to live passively for the rest of their lives. However, what I find interesting is that the individuals that I'm aware of such as Warren Buffet, Jeff Bezos, Mark Zuckerberg, Elon Musk, and others…all of them are still working!
So, while they could be out sipping drinks and playing golf all day; instead these billionaires are actively running their businesses.
In other words, these people don't want a life of luxury and laziness; even though they have the bank account to live that way.
Why is that?
The simple answer is that all of these people are high achievers and would get pretty bored not making an impact on the world.
I've personally come to the realization that I never want my life and income to be 100% passive. In other words, I would never be happy or comfortable if my life was a vacation everyday.
Passive Income vs. Residual Income
So, perhaps “passive income” is not a good dream to have or at least not the right phrase to use when you formulate your income dreams. A better goal in my opinion is residual income.
In other words, what activities can I do or businesses can I create today, perhaps by working long and hard hours for the next several years, that will allow me to collect residual income even after I stop putting in the long hours in that particular business.
If I build a website that starts earning well after a couple of years, this can become a mostly residual income website…it may continue to earn money for many years.
Rental properties are another common residual income asset. You buy the property once, but continue to earn residual rental income for as long as you keep tenants. (This is also clearly not a “passive” income stream as it requires maintenance and more).
This is partially what I've done for my Long Tail Pro business. While I still remain involved in many aspects of the business, I've also developed systems that don't require me to be involved in all the sales.
I'm no longer trading my working hours for dollars.
Here are some aspects of Long Tail Pro that I no longer have to be involved in:
- People find Long Tail Pro via Google or other blogs
- Users watch demo or sales videos and read testimonials
- Register and download a free trial of the software
- Autoresponder series begins; and users get regular emails from me (without my involvement).
- Prospects get discount offers via email after a certain period of time, if they have still not purchased
- When prospects buy, the software is delivered automatically with user manual, demo videos, and more
- Payment is all done online, automatically.
- If they file a support ticket, my customer service rep handles the queries (again without my involvement)
- If bugs in the software are found, my customer support rep files a ticket with my programmer
- Programmer fixes bugs as requested
- Software updates are delivered automatically
Now clearly there are some aspects of my Long Tail Pro business that I'm very much still involved in such as strategic decisions, ongoing marketing, and some other details I still handle.
However, for the amount of residual income that this software business continues to generate for me, I work considerably less on it than someone working a traditional job and even many entrepreneurs.
My Daily Schedule
I have to confess that as I write this blog post, I'm actually on vacation with my family. I'm sitting in a cabin in the woods near Wallowa Lake, Oregon. The scenery is absolutely beautiful and we woke up this morning to find several deer just outside our door (the kids loved that!).
However, most of my time I'm not on vacation…but do have the privilege to work out of my home office as I look to grow my online business ventures.
I've been asked by readers on several occasions what a typical day is like for me as an internet entrepreneur. So, today I am going to dive in and share what a “normal” schedule looks like each day…and I'll let you decide for yourself how truly “passive” my income is.
I'll be honest that I've been somewhat hesitant to post my true schedule; as I'm sure some people won't think I work enough, while others will think I work too much. But rather than worrying about what others might think, I'm just posting what my normal schedule looks like on a daily basis.
Also, note that I'm putting in more of my schedule than just business related items. I spend a lot of time with my family (I'm married with 4 children), and so I think it only makes sense to show where my time really is spent, even if its not related to this blog or my business.
- 7am – Wake up
- 7-8:30 – Eat breakfast, get kids up and ready for school, make their lunches, get their breakfast, and then drive them to school. (Summer just started, so kids are out of school, but I still spend some time getting them up each morning).
- 8:30 – 8:35 -Write down all the tasks I need to accomplish that day
- 8:35 – 9:00 – Respond to emails
- 9:00-9:30 – Answer Long Tail Pro customer questions (sent to my personal inbox instead of a support ticket), respond to escalated Long Tail Pro support tickets.
- 9:30 – 10am – Shower, shave (when I'm feeling ambitious), get dressed
- 10am – 11:30 – Research, write, and edit blog posts for NichePursuits.com (it usually takes me at a couple of days to get a blog post written).
- 11:30 – noon – Check earnings stats, traffic stats, or other website analysis
- noon – 1pm – Eat lunch, read books
- 1pm – 1:30 – Respond to emails, skype messages, or blog comments
- 1:30 – 3:00 – Strategy call with Perrin to review niche sites, or podcast interviews, or calls with partners/business associates, or writing for other websites I own, or other general business tweaks for Long Tail Pro or other websites.
- 3:00 – 4:00 – Answer emails, respond to Long Tail Pro tickets, read other news/blogs, or other administrative tasks.
- 4:00 – 5:30 – Go for a run, or help my wife out with the kids as needed.
- 5:30 – 6:30 – Dinner with family
- 6:30 – 8pm – Time with family: Go to a park, ride bikes, play in the backyard, or other activities.
- 8:00 – 9pm – Get kids ready for bed
- 9:00 – 11pm – Answer a few emails (its rare that I spend more than 30 minutes), check stats, watch TV with wife, or read.
- 11pm – Go to bed
I should also note that this is a typical schedule for Monday – Friday only. I am almost never online on Saturday or Sunday; I simply get back online Monday morning.
Also, this schedule clearly may vary depending on the day and what is going on in my business; but overall, this is pretty close to a “normal” schedule.
And finally, I should mention that I'm chatting with Perrin or others via Skype as things come up throughout the day.
So, if I were to give my best estimate as to how much time I spend on different activities each day, this would be it:
- 1 to 2 hours – Long Tail Pro (customer support, strategy, programming updates).
- 1 to 2 hours – Responding to emails
- 1 to 2 hours – Niche Sites, strategy with Perrin
- 1 to 2 hours – Blog posts/Podcasts for NichePursuits.com
- 1 to 2 hours – Checking earnings, reviewing Google Analytics, rankings.
So, generally I probably put in about 6 to 7 hours a day of “work”. Some days it's less if things come up with family activities, or some days its more just depending on the state of my business.
So, am I living passively off of my investments? No, clearly not. But I do have a nice lifestyle business going for me right now, and perhaps that's all that I will ever be interested in.
I don't know what the future holds. Perhaps someday I'll have the desire to run a larger organization like Jeff Bezos, Mark Zuckerberg and other billionaires.
Or perhaps, I will simply continue to enjoy working a relatively light schedule with a small organization. This allows me to work when I want, take vacation as desired, and generally have a low stress business that supports my family (and a few employees).
So, do I ever dream of the day that I don't have to work at all…and just live “passively” off my assets?
In fact, I enjoy what I do now, and if my schedule was completely free of anything business related, I would probably drive myself crazy.
I don't necessarily consider myself extremely efficient (as evidenced by my above schedule) or even particularly hard working, but I do enjoy working on something productive and seeing the fruits of those labors.
So, even if I ever achieved a ridiculous wealth level where I could truly live passively off the interest earned from my investments, I don't think I ever would.
I would keep myself engaged and productive building businesses or helping other through non-profits or education.
For these reasons, I basically consider “passive income” as a misnomer. I don't seek to achieve some blissful day where I no longer work at all.
And while perhaps this is nothing new for many of you out there, it is an important distinction from what is often portrayed by the late night infomercials or even the dreams among friends.
A better potential goal is to achieve residual income from valuable assets that you have built. This can give you the freedom to work as long or as little on any particular venture that you may become involved in.
However, the realization should be that once you've achieved one goal, to achieve your full potential and to help others as much as possible, you will always need to be engaged and working at some level.
So, having the freedom to pursue your business dreams through residual income is a great goal; living passively is not, in my opinion.
As always, I would love to hear your thoughts on the subject. Clearly this is a pretty broad subject that touches on everything ranging from passive income, wealthy people, income producing assets, automating businesses, my personal schedule, and even charity work.
However, much of this is simply my opinion, and we can all learn from each other and differing opinions. So, feel free to jump in and leave a thought. Thanks!