Passive Income
Financial term in the Budgeting category
Definition
Earnings that require minimal ongoing effort to maintain, such as rental income, dividend payments, interest, royalties, or income from automated online businesses. Building passive income streams is a common strategy for achieving financial independence.
Related Terms
Financial Independence
The state of having enough income from investments, savings, or passive sources to cover living expenses without needing to work for money. Often defined as having 25 times your annual expenses saved, based on the 4% withdrawal rule.
Side Hustle
A job or income-generating activity performed in addition to a primary job. Common side hustles include freelancing, rideshare driving, tutoring, and selling goods online. Extra income can accelerate debt payoff or savings goals.
Dividend
A portion of a company's earnings distributed to shareholders, typically paid quarterly. Dividends provide a steady income stream in addition to potential stock price appreciation.
Frequently Asked Questions
What is Passive Income?
Earnings that require minimal ongoing effort to maintain, such as rental income, dividend payments, interest, royalties, or income from automated online businesses. Building passive income streams is a common strategy for achieving financial independence.
Why is Passive Income important in personal finance?
Passive Income is an important budgeting concept that helps individuals make better financial decisions. Understanding Passive Income can improve your financial planning and help you achieve your money goals.
How does Passive Income relate to Financial Independence?
Passive Income and Financial Independence are related financial concepts. The state of having enough income from investments, savings, or passive sources to cover living expenses without needing to work for money. Often defined as having 25 times your annual expenses saved, based on the 4% withdrawal rule.
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