Passive income is definitely something that interests me. Before I started blogging, I didn’t really give it much thought. I knew that it existed, but I just always believed that I would be the type of person to work a long time and have to actually put time into every dollar that I make.
Now that I plan on eventually making the leap to self-employment and becoming financially independent, passive income is something that I have been thinking about a lot.
Passive income would allow me to continue doing what I love in the future, just in case something does happen. For me, financial independence and passive income go hand in hand. It brings security and additional forms of income to our family.
We won’t have to be overly-reliant on one form of income.
So what is passive income? Different people have varying opinions on this. Some consider rental income to be passive income, whereas some do not because sometimes renting a home can be a TON of work, with income tax considerations and little pay/return sometimes. However, sometimes renting a home can be minimal work with a decent return. It all just depends on who you are talking to.
Formal definition of Passive Income:
“Earnings an individual derives from a rental property, limited partnership or other enterprise in which he or she is not actively involved. As with non-passive income, passive income is usually taxable; however it is often treated differently by the Internal Revenue Service.”
Some also consider blogging passive income, but I wouldn’t consider it passive at all! I’m not sure why some people think that… Just because someone has fun with something, does not mean that it is passive income.
For the most part, passive income is making money with little effort on a continual basis.
Something such as dividends would count, because there is only work in the beginning that needs to be done, and just a little maintenance afterwards. Dividends as a part of investment planning can be a great source of passive income.
What is not passive income?
- Blogging. A lot of my time is dedicated towards blogging. I would not consider it minimal effort at all. In some cases, I can see where affiliate income can be considered passive though. If you just throw one post up and you can make thousands off of it, that is a pretty good return.
- Side jobs. Extra income does not automatically equal passive income.
- Doing what you love. Some consider that if you have fun at your job, then it is passive income. This really shocks me that some people think this!
Does passive income play a part in your life? Are you currently working on building it up?