What is Passive Income

What is Passive IncomePassive 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 considerationsΒ 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?Β 

  1. 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.
  2. Side jobs. Extra income does not automatically equal passive income.
  3. 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?


Comments

What is Passive Income — 33 Comments

  1. Hi Michelle,

    Cheers on the launch of your new site…I know it will be great! As for your question, yes, I’m highly interested in passive income and it is part of my plan. While you can never turn a blind eye on any investment or stream of income, some methods are much more passive than others. I agree with you on that point!.

    My preference is to have a bunch of employees working for me ~ the type of employee I want are the ones that are in the form of US dollars that go to work for me every day, without fail, no sick days, no worker’s comp, and so on…they even work 24 hrs a day and never complain! I’ve got a pretty good start on growing that work force πŸ™‚

    On top of that, I want to do work I love for a fair trade in income. That’s what I’m working on now. I don’t have a standard definition of retirement. While I hope to never have to go back to Corporate America, I do love to work and add value to peoples’ lives. I’ll look for ways to do that for as long as I am breathing air.

    Ree ~ I blog at EscapingDodge.com

  2. I agree that anything that you have to put in considerate work on a regular basis shouldn’t be categorized as passive income. I do consider rental income passive though, especially commercial properties.

  3. I think do many people put hobbies/side hustles in the passive income when they are still busting there butts and hustling to make the money. Everything involves a little bite of work from the things you mention and in some cases a lot of work. If you can create a page, gain traffic and not touch it but once or twice per month and make some income I would consider that to be more passive. Be creating, running, and maintaining a blog in my opinion is not very passive. And side hustles are work as well.

  4. I would certainly agree that blogging is not passive. Anyone who says otherwise has never done it. I do think it can lead to certain passive streams of income though. You yourself have said that your post on switching to wordpress has brought in a large slice of income. I would imagine that it continues to do so, even though you are not continuing to work at it. If you can build something of value, like that, that people will continue to use after you’ve put the work in, that is what I would consider passive income.

  5. I have a pretty sizeable chunk of passive income that are pretty much all in the form of dividends. This is about as passive as it gets (except for the time I spend researching and monitoring my investments which is fairly minimal). I also have a business loan that is going to start being repaid this year so that will add to my passive income as well.

    I am looking at rental properties and would probably hire a property manager to make the income from that much more passive in nature too.

  6. I would definitely agree with you that blogging is not passive income. I DO think it has the potential to be passive, though, if you outsourced everything and hired someone to manage the entire page and all the divisions (advertising, marketing, content, etx.) and you didn’t have to touch it. I know one couple who own a site that I think would qualify as passive income – everything is outsourced and they take a nice profit off the top each month. I think an ultimate goal of mine is to own enough in stocks that the dividends I receive from them more than cover my yearly expenses. That is true financial freedom that could free up your time 100% to pursue whatever it is you want to pursue.

  7. I think a lot of passive income has to start by being not passive. Blogging, for instance, is a ton of work and therfore not passive, but if you eventually get to the point of hiring everything out then it could be passive. Same thing with starting a business, it isn’t initially passive, but could end up being at some point.

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  9. I’ve come to realize that blogging is far from being a passive income. Until I find a way to have all my posts written for me, comments responded to, backlinks created, and still make $5,000 a month net income, it will just be work. But it sure is fun!

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  11. I think it’s all personal preference. If you truly like blogging and enjoy writing blog posts, then I would consider whatever income you generate from that blog as “passive income”

    The moment you say I have to “work” on something (blogs, niche sites and whatnot) then it becomes sidejobs.

    I enjoy writing my blog posts so I don’t really consider that as “work”. However, I am “working” hard on my niche sites for side income.

  12. Hi Michelle, good post. Passive Income is my favorite business model. That’s exactly how I achieved my financial freedom. One thing about blogging though. Although it’s not a passive income source it can become one at some point.. Cheers!

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  17. Providing information about passive income ideas is really amazing. We can do few works from home like writing, typing, blogging etc. But the most important thing for most of these income resources is having a website to showcase your talent. Keep Writing!

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  19. Yes, this passive income have always fascinated me. There IS always an option available for an individual to make your surplus money, which is “GROSS INCOME-TAX paid – EXPENDITURES – INSURANCE PREMIUMS”. This surplus money can be used wisely and can be invested into some good and reliable investment instruments go that money grows and give you returns which can be utilized for some good self-purpose.

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