The Truth About Passive Income

Hey, this is Leo for And in this video I'm gonna tell you the truth about passive income. Passive income is a really interesting thing and if you are studying material or products on how to start your own business maybe you want to start an online business maybe you want to start an offline business you know whatever you want to do one of the things you hear talked about a lot when you're doing that just getting started is the the whole passive income thing and there's this ideal kind of this holy grail that everybody talks about which is passive income and now that I've been in business for about five years for myself I live primarily off passive income I used to live a lot more off passive income that I do now now a little more active income now that I do one-on-one coaching but the passive income thing so I've learned quite a bit of money with passive income and I have a couple of ideas just some thoughts that you should understand about passive income because i think that some of the stuff out there that you can watch on youtube or anywhere else can be a little bit misleading there's really three main points here that I want to make it past them number one is that it's awesome it is awesome number two is that it's not really as passive as you're told and number three is that it's dangerous and I really want to cover why it's dangerous and some of the traps and pitfalls of passive income because when we start off if you're working a salary job here with a nine to five job the way that I was before I started my business then you're probably thinking like well passive income that means what that I get to sit at home in my underwear and do nothing and i'm still getting income and that's basically what it means it means that if you're on vacation you're still getting income it means that if it's Christmas or if it's a labor day you're still getting income it means that if you go on vacation somewhere far away you're still getting income and so this is a cool thing it might seem like well what could be the downside of something like this so let me go into that in some detail so first of all yes it is awesome and I love that feeling that you get when you first get even a little bit of passive income i remember when i was getting just five dollars a day for ten or twenty dollars a day that already feels like a lot to you especially if it's in addition to the salary income that you've got ten dollars a day twenty dollars today you're thinking in your mind stuff like well that's like a free meal like if i get 20 bucks a day extra that means i can go for some nice sushi every single day I don't have to work for it is just coming in like that's awesome now what if we can ratchet that up to a hundred dollars a day well damn for a hundred dollars a day you know I could I could be buying cool stuff every day or I could be using it to pay my bills or whatever and if then you increase that to two or three hundred dollars a day then at that point for most people that's kind of the area where they start to feel like oh damn if I had that much I would quit my job and I go travel the world I wouldn't have a single worry in the world anymore because that is that magic number where basically your expenses are all covered and you even got a little bit extra for the luxuries of life and so I mean that feels sweet that's awesome the other really cool thing about it is the freedom of the schedule that you get so the whole key to passive income is that you get it without having to sit there and punch on the keyboard or whatever other type of work you're doing it just comes into you right it's just like a guaranteed stream of income every single day for for me it was only websites on websites that get traffic when the website to get traffic that traffic is usually fairly consistent throughout the day and throughout the week throughout the month throughout the year so that's a pretty reliable source of income and you can have statistics that track all that stuff so you can be know exactly how much you're earning per you know a thousand viewers or 10,000 viewers or whatever your traffic levels are and when i started basically within a year I was able to build up the business to the point where we were making six figures passive income and ultimately generated probably over a million dollars and and passive income over the last three or four or five years or so kind of don't really keep track of that stuff anymore but it's just like it just comes in so this is a really awesome thing the freedom to schedule this allowed for me it'll add for some really awesome stuff actually this is kind of what allowed me to do a lot of person development work that other people are able to do because they're so busy with their nine to five job right the nine-to-five job really drains you not only does it drain you but it's also like a very fixed schedule so can't really work around it like for example when I wanted to go date and I want to get better with dating and relationships I would literally take months off of my work or you know I'd be working but my work was flexible enough that I can do is just like a little a little bit here a little bit there and basically i was able to spend like almost pretty much a whole year just really pursuing a master of relationships to the point where I wasn't working that much just focusing on that and that that had that really build me up really fast and got me to the point where i was really satisfied and then I could go back to work and so it kind of allows you to to swing your pendulum from one thing to the next thing without having to simultaneously beats feels doing ten different things and stretching yourself too thin that's a really cool thing with the this freedom of the schedule and the other really cool thing about passive income is that is very scalable so unlike doing something made like manual labor you can't scale that much you can only do nine hours of that per day or however many hours you do but with passive income there's really no limit at all so if you're getting a hundred dollars a day there's no reason you can't be getting 200 500 thousand or even more and they're your mind just kind of runs while it's like oh man look at the possibilities if I'm already earning a hundred hours a day I can already picture how I could turn that into 200 or 300 and then it's like damn that's you know that really opens up the doors for anything so that's why it's awesome the other point that I wanted to make is that it's not really as passive as you're told so passive we kind of assume like oh well you know I can go do anything I want and the income keeps coming in well the reality of is it is of it is a little bit different the fact is that the way this passive income is generated is that usually you spend a lot of time initially without any income at all building it up so basically you're kind of paying it forward you might sit there for a year or two years working on your business building it up and not be seeing anything then the passive income starts rolling in so first we got to take into account that the passive income is paying for all the work you did you know the hard work you did months earlier so you got to get paid for that but then in addition to that once you have the passive income there's always maintenance work required this is an interesting phenomenon because you this means that really it's not a whole holy grail that's made out to be because the Holy Grail is that you just have some sort of product or business or service that you're selling or whatever it is and that customers just keep coming to you well in reality this work that way because markets are evolving pretty quickly and especially if you're running an online business man online stuff evolves very very fast in six months time the whole landscape can change of your industry even if you're doing an offline business the landscape the landscape can change quickly too so this is actually what a lot of businesses go out of business this is actually why a lot of really big corporations fail and go into bankruptcy is because they're actually not proactive enough at looking at the horizon of where the landscape is going so it's kinda like you're going to her miles an hour the car and you're not looking too far ahead you get lost you make that turn to make bad decisions and so that's the thing that I found with passive income is that yes once i was even getting six figures of passive income the travelodge was that I always have to be on my feet and I was actually working I wasn't doing the 4-hour workweek I was doing the 60-hour work why because i'm always looking at the horizon see how to adjust my business so that the passive income can stay preserved you might say well maybe that was just your business I don't know about that see I think that this is going to be the case in any business where you're earning decent money because if you're earning decent money fairly easily that means that you can have more and more competition creeping in there just by the way that the market system works that's how the free market system works really business is about finding areas and imbalances in the market and then exploiting those imbalances and those imbalances usually they're kind of like a gold rush you know you first spot a bunch of golden hills then you go there you dig it out the first version of spots that he becomes a billionaire the next person might become a millionaire the next person might just get a a hundred thousand dollars and the more people come and come and come like that that resource of gold just gets exhausted until afterwards maybe five years later that there's nothing left of this mountain of gold is just a plain old mountain it's been sucked dry now of course there are evergreen businesses that will never be sucked dry but I find that you still have to engage with the with like development you have to be bettering your product bettering your service better in your business I'm not even talking about the very basic maintenance work that's required so for example if you're running an online business at the very minimum you're going to have to have some sort of customer support if people are buying stuff from you so if you sell a hundred products is guaranteed at least perhaps two to five percent of the people who buy that product will come back and ask for a problem a technical issue you know whatever so just for that you're gonna have to have some sort of manual labor and you could say sure why don't we just outsource that and you can you can outsource some of that stuff and hire somebody to do it for you but then you still have to oversee that person you can't outsource literally your entire business if you try to do that what's going to happen is that your bed is going to collapse it's just a matter of time it might take two years five years ten years but it's going to collapse I've seen this in my business the more time i put into it the more I'm looking at the future the more on spotting cool trends and I'm working towards that I'm improving my products and services and then stuff is growing as soon as I stop doing that it's not this thing stay the same they start to die and sometimes that can be really quick or to be more drawn out but I find that for example online businesses just one or two years is enough to kill your whole business if you're not on top of the ball so that's the maintenance work stuff but also because there's this kind of pressure to always be looking at the future it's also stressful and one of the things with passive income is that it's kind of addictive it's like a drug you start getting it then usually what people do is they ratchet up their life style to match the passive income so now you're feeling nice but what now happens if your passive income is threatened and your lifestyle has been improved you might say well just go back to my old life style but see you say that now because you haven't ratcheted up yet once you do Ratchet it up then you're going to have a different opinion about that you're going to be very worried and afraid and so what's going to do is kind of put you and like fear mode and you're always going to be in in this mode where you're trying to protect yourself against other people taking your income away from you because you're kind of dependent on it's your lifeline and so this creates a constant source of stress this is the kind of stress that entrepreneurs and business people always have to deal with but i think it's even worse when you're dealing with passive income streams and kind of basing your lifestyle on the passive income that you're getting which is a really popular kind of idea nowadays especially online so it's not all peaches and cream you do have you have this problem and the stress you know gets to you especially if what I found you know if you just want to put your business in maintenance mode and you don't want to keep growing it then what you're going to do is you're going to always you're basically going to kind of do it yourself to the death of your business and you're just going to kind of waiting and just seeing and drawing out drawing out you're going to see that the end is coming for you the way to deal with that is to put all your attention and resources and time and energy into growing the business but then that takes a lot of time growing the business is like a full-time job plus it could be a 60 hour a week job so in reality most online entrepreneurs it's not like they're sitting on the beach sipping pina coladas most of them what they're doing is they're looking for the next thing they're doing research and development they're testing stuff out there are building new products creating new services polishing everything up improving the cult the quality of everything they're doing because they do have competition and they're very mindful of that and also because if they didn't do that you start to feel really bad just psychologically because you would admit to yourself that well this is the best that I could do I've already reached my peak this is the best business I could do this is the most income going to have now I'm just going to maintain it see when you go into maintenance mode it's really hard to motivate yourself to get up in the bed out of your bed in the morning because you you wake up and you're like oh man I have to go do more maintenance for maintenance work nobody likes to do maintenance work that's not work that you can get passionate about so just keep that in mind and the last point to make is the dangers of passive income here's where I can really see people screwing up their lives the problem with passive income is that it makes you lazy and it makes you complacent you don't have that thirst that fight anymore to go out there and grow the business look for new opportunities and really work hard I've really noticed in myself you even lose the drive to do proper good quality maintenance work even maintenance work will start to do is you start to just kind of like shrug it off not want to do it procrastinate on it and this really even if your business is going to perform decently the problem is that like your mind your head space is going to become so screwed up and so like toxic that is just going to put you like into this rut and I can definitely see this rut growing larger and larger larger and really robbing you of that extraordinary life that you want the reason you went and you want to get that passive income is probably because you're in a type person you want to go out there accomplish big stuff with your life and in the world input impact people well what I see is that when you get up oh six figures passive income every single year that like totally robs you of all your motivation even if you didn't go in to the business for money this funny thing happens when you just like someone throws a lot of money at you and all the sudden it's like well you know that big ambitious goal that I had to help people and it's not important and you know this impact that I wanted to have in my community that's not important and this product that i wanted to create it's going to be all super special and really make it you know cool impact in mine it industry or my niche you know i'll do that next year so you just kind of procrastinate and procrastinate and procrastinate the other problem that I see is passive income keeps you in the wrong niches within your business it keeps you in the wrong wishes and also encourage it encourages you to pursue the wrong wishes what i mean by this is that your business should be also kind of self actualizing with you this means that if you start a business which is all about profit maybe you have to do that just to you know get some cash in the coffers ok cool but then what happens is that if you get the cash what you should do is you should evolve your goals so that your business is not about just earning cash but your business about helping people or living out your passion doing something really meaningful for the world for society your life purpose right this is getting into the topic of life purpose and what I really find is that the stuff that is your life purpose many times that's not the most lucrative and profitable thing and it's also not necessarily a guarantee passive income source so just to give you an example let's say that I have my online business and then when i discovered that oh I'm really passionate about art and I want to become a painter well it's going to be very difficult for me to make that transition even if I'm really dead set on becoming up danger and I know that that's what I want to really passionate about it it's gonna be very difficult because i got this source of income coming in and it's incentivizing me to stay in my online business and there's probably gonna be new opportunities within this online business where i can grow even more I can increase the income even more so what you'll find in practice that you're gonna have this kind of a really difficult choice one you can stay doing the thing that you know isn't necessarily your passion but you can grow and earn even more money or you can go to become a painter becoming a painter is going to seem like well that's kind of risky you know painters they don't make that much money not most of them there's a high failure rate there's a there's all sorts of risks involved and this opportunity with the income like why would I give that up I might never get this opportunity again a couple years ago by this opportunity might go away if I don't capitalize on it now that's how your mind tends to think and then what happens is that you're like this page or think it can wait I can wait i'll just put it off till you know two years down the road five years down the road and that inevitably leads to put it off forever so you're wasting a lot of your time and energy into this passive income thing and what I found very interesting about that is that it's not even the best thing if you want actually lots of money and i find that the passive income thing it will make you think so small that you're not ultimately to put yourself in the position to earn the most money that you can because here's what's going to happen if you were really passionate becoming a painter and you were really sure that was your life purpose then you should go and do that that's the proper strategy and if you go and do that then perhaps you could make millions of dollars selling your paintings now if you go to the passive income thing you might be earning six figures or something like that but the problem there is that like it's just that's that's going to be kind of yours your max even if you grow that business more and more and more because you're not passionate about it because you know that the passion is over the air but you're looking over here that's going to suddenly undermine every action that you take its going to rob you of your motivation and you're just not going to be as engaged with this business anymore as you used to be all the stuff I'm talking about from personal experience and I think that I was better equipped than most people to have this infusion of cash and this passive income coming in I was stuck really kind of you know in a world full of chasing money even though I was not materialistic and I never really was and I knew the dangers of that but still it trapped me for a couple of years and it was very difficult to say no so I really feel like passive income is one thing that's so dangerous because it could keep you from pursuing your life purpose it can keep you from even looking for it if you don't know what your life purposes and you're getting passive income ninety-five percent chance that that person will never even bothered to go looking for the passive for the for the life purpose because they they're just not you know they're not feeling the pain of it they feel too comfortable they are getting more comfortable there and the other problem that i find is that passive income robs you of the willingness to do real work it really kills your work ethic this again connect with life purpose because for example if you're getting this passive income you're probably not working too hard for it after you've established your business so maybe you're putting in a five hours of maintenance work a week but you're getting back six figures that seems like a really amazing ratio of effort versus reward that seems so sweet it's like you can't you can't beat that now if you try to go becoming an artist well if you want to be an artist you gotta go taking some classes you got to go put on galleries and exhibits you've got to go to maybe travel the country you've got to to practice your technique you got to set up for hours practicing your technique drawing painting you know getting us to do going to all that stuff that would be so much work and that would feel like real work to you because this little maintenance work that you're doing on your passive income business is just like you know your kind of your you're basically phoning it in you're doing very dumb stuff that you've already done many times before it's not very challenging work but now when you're going to do the artist thing that all the sudden becomes really challenging work it really starts to push your comfort zone makes you uncomfortable and because you haven't been doing that kind of work for years because you've just been coasting here with the passive income what it does is that it means that you're you're never going to go and consciously want to do that work anymore and so you're gonna quit you're going to come back so what this creates this kind of Whirlpool effect where you leave but then you come back you leave and you come back it's almost like getting addicted to drugs - drugs or like like being in the Mafia like that kind of thing right just when I thought I was out they pull me back in that's what it tends to become because the rewards are too high and that's why criminals get sucked back into criminal activities is because again the the criminal activities the rewards they are really very high you don't have to actually go in and do a lot of labor to get a lot of reward of course there's a risk there so it's not smart so in the end I think that the the way that you deal with this you know what's the takeaway here the takeaway is that passive income it's a great thing I think that if you want to become a self-actualized person you actually have to develop passive income sources I think that's a really important thing for people if you value independence if you value freedom if you want to be in control of your life then go for passive income just be aware of all these pitfalls and i think the most important thing here the takeaway is that the more passive income you get the more you should balance it out with personal development work so one of the reasons that i was able to handle I passive income and I can still handle it today is because I've been doing a lot of personal network that gave me the wisdom that I need to see these pitfalls and to not fall into them I actually did fall into them but to pull myself out it gave me the tools if you go to an ordinary person on the street random person and they don't have any personal development training they haven't learned these kind of things they don't know the right mindset they don't know the dangers of this passive income stuff that they're just going to fall into it and they're probably never going to recover so watch out for that I think that you need to really balance it out so maybe make some goals for yourself say something like well if I'm going to be earning a hundred dollars a day of passive income then that means i have to read at least one - development book / / / week and if i increase that to two hundred dollars a day then that means i have to take one paid seminar live in person seminar for personal development somewhere around the country and then if any increases beyond that then maybe I'll go do you know some sort of training program here something else they're just so they like your you're getting that higher value wisdom rather than the lower value of just pursuing money and just running a successful business because in the end having lots of money in pursuing a successful business that's very low value you want the high-value the self-actualization is found in doing high value stuff like pursuing beauty excellence truth justice contribution to others helping others in some way making a meaningful impact that's high value stuff that's the stuff you want to be aiming towards right that's why passive income is so powerful that it can actually enable you to do this high value stuff but most people cannot be trusted to use the money for that most people use that money for stupid low value stuff so just be careful about that all right this is leo i'm signing 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