What is passive income? Get all your doubts here

Everyone knows that money doesn’t grow on trees. But making money multiply is something everyone wants, and with planning and discipline, you can make your money pay off. One of the ways for this to happen is to make investments. And passive income is one of the ways to obtain income periodically, but it is not directly linked to your work or employment.

What is passive income?

Basically, passive income is when you can increase your income, that is, the amount of money you have without necessarily having to work harder at it.

When people say that if they won the lottery, they would keep the money in savings and live off interest, it’s a good way to exemplify passive income. But if luck isn’t in your plans, there are other ways to earn passive income.

This type of income is also associated with financial independence, since by earning a passive source of income, you no longer need to work to earn money, but your money is what works for you.

What are the types of passive income?

As we said, keeping the money in savings can be a way to get passive income, but we also know that it is not the most profitable way. Even when not linked to financial investments, passive income is necessarily income in which you have income without having to work.

There are two most common types of passive income:

Passive income with capital: This is the case of investment income, that is, you apply a cash value and receive passive income, which is the income of the amount invested.

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Passive income without capital: in this case, the income is obtained by other means, such as image rights, copyrights or pensions.

Passive Income x Extra Income

Now that you know what passive income is, would you know if passive income and extra income are the same thing? Well, the answer is no. As the name implies, extra income is that which is beyond your budget. To earn extra income, it is necessary to carry out an activity, such as selling products, freelance, teaching private lessons and many others.

Also, extra income does not always happen or may vary from period to period. In the case of passive income, it is not necessary to dedicate time or work to obtain it, as in the case of a pension or rent.

Active income x Passive income

Active income is income earned through some activity, such as your job, benefits, commissions. That is, it is always linked to an action or work performed and is, therefore, the opposite of passive income.

As active income is directly linked to the performance of an activity, if you do not do it, for example if you leave your job, you also no longer receive active income related to your work.

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