3654: Is It Fair to Earn Passive Income? by Steve Pavlina on Money Mindset

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[00:00:54] This is Optimal Finance Daily. Is it fair to earn passive income? By Steve Pavlina of stevepavlina.com. Hello friend, I'm your narrator Justin Malek reading you articles every single day of the year to help you save more, make more, all that good stuff. There are no interviews on this show, just me sharing great content with permission from the authors. So let's get right to it as we optimize your life.

[00:01:25] Is it fair to earn passive income? By Steve Pavlina of stevepavlina.com. Some people have asked whether it would be sustainable if everyone tried to earn passive income. So let's get that out of the way before we continue with this passive income series. I think the supposition here is that certain jobs don't adapt well to passive income strategies, and therefore certain work is best suited to active income.

[00:01:53] Let's suppose that's true for the sake of argument. Passive and active income strategies compete in the marketplace. People are free to choose either strategy. Most people choose active income. Why? I think the main reason is that they've been socially conditioned to choose this strategy. They probably make this choice without much knowledge of passive income strategies.

[00:02:18] Schooling, parents, and peers help train most people to choose active income. Even if a lot more people started earning passive income and fewer people were willing to earn money as active income, I believe the market would adapt without skipping a beat. For critical tasks that could only be performed with ongoing labor, prices would rise, and therefore more people would be willing to perform those tasks.

[00:02:46] Presently, we have an oversupply of people who are looking for jobs, and we have a shortage of jobs for those people. So is it really wise to keep training more people to look for jobs? No, that would be foolish, and will only make the problem worse. It will also cause salaries to drop, lowering people's standard of living. I think a better solution is to teach passive income strategies and help some of those people make different choices.

[00:03:14] Passive income is a great choice in this economy since you won't need to find a job. In fact, you can actually help to stimulate more job creation. Passive income has the effect of creating more jobs as well as supporting existing jobs. Whenever I create new passive income streams, I create income for other businesses. These generate revenue that helps cover the salaries of many employees.

[00:03:42] Remember that passive income methods involve delivering value to more people than you probably could with an active income strategy. I see no reason to hold back on providing value. You may be providing different forms of value with a passive income strategy, but it's still a net gain for others if you increase your contribution. If you license your book to a book publisher and receive passive income in the form of royalties on sales,

[00:04:10] the publisher may in turn pay people to perform specific jobs to keep their system running, and those employees may receive active income in the form of a salary. Your book deal helps to facilitate this and creates and sustains jobs for others. Passive and active income strategies are mutually supportive. They're not opposites. I think it's healthy for both to coexist.

[00:04:38] I don't personally want a regular job, but I understand that many people do, sometimes desperately so. I may poke fun at the regular job mindset now and then to get people to think about this more consciously and to consider alternatives, but I respect people's ability to make their own choices. As for whether it's fair to earn passive income, I'd say it's more than fair. It's downright generous. As I've shared in previous posts,

[00:05:07] passive income tends to be more heavily rewarded and less taxed than active income. But passive income strategies can also add a lot of value to the economy, and so it makes sense to reward these strategies more heavily. By helping to create and sustain more jobs for others, you can actually generate significantly more tax revenue than you would if you earn the same amount via active income.

[00:05:33] It's not uncommon for active income earners to think of passive income as a greedy strategy. The irony is that it's just as easy to regard active income earners as holding back and making a lesser contribution, contributing to just one employer when they could be serving many more people. The truth is that both strategies seek to contribute just in different ways.

[00:06:01] You just listened to the post titled, Is it fair to earn passive income? By Steve Pavlina of stevepavlina.com. And I'll be right back with my commentary. This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales. Using automation, analytics, and smarter workflows to simplify campaign delivery

[00:06:29] and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify. I've tracked my income and expenses since 2010, back when that meant a spreadsheet I built myself and updated every day. I loved it, but I still missed things. Categories changed and I'd go months before noticing my spending had doubled.

[00:06:58] Monarch does in seconds what took me hours, and it catches what I never would have. Last year, the weekly AI recap flagged that my dining out had crept up almost 40%, charges I'd stop seeing. My financial picture has never been clearer. My favorite part is the AI assistant. I can just ask, can I afford this trip without touching my savings? And get a real answer, not a chart to interpret.

[00:07:26] It's like having a financial advisor in my pocket. Write your own money story with Monarch. Use code OPTIMAL at Monarch.com to get your first year of Monarch core half off at just $50. That's 50% off your first year at Monarch.com with code OPTIMAL. And thank you to Steve. This one's a bit more of a thought experiment than a how-to, but I found it interesting.

[00:07:53] He makes a pretty good case that passive income isn't greedy. His main point is that passive and active income aren't enemies. They support each other. When he licenses a book or builds something that earns royalties, that creates work for the publisher, the employees, and so on. So the passive earner is quietly funding a bunch of active jobs. I hadn't quite thought of it that way before.

[00:08:21] Now, I'll add a caveat because I don't want anyone to hear this and think passive income is easy money that just falls from the sky. Almost all of it takes a big chunk of active work up front. Writing the book, building the product, making the thing, before it ever pays you while you sleep. So it's less passive and more front-loaded, if that makes sense. But instead of seeing it as taking,

[00:08:49] you can see it as a different way of contributing, often to a lot more people at once. So if passive income is something you've been curious about, but felt a little guilty about, hopefully this one helped. I do think it's a fair and possibly even generous way to build wealth. So thank you to Steve. And thank you for being here. I'm really happy that you're here. Have a great rest of your day. And I'll see you tomorrow, where your optimal life awaits.