What is passive income, how do I get it?

Passive income simply means money that you can receive without exerting effort. And by this definition it does not exist. I think what people mean to say is “money you can receive with very little effort”. Well in that respect I suppose some things somewhat fit the bill. If you own a home and rent out that home to tenants, well then those tenants could be paying you a check for $2,000 a month. Well guess what, you still need to own the home, pay taxes on the home, deal with bad tenants, perform maintenance on the home, etc… So I wouldn’t exactly call it “passive”.

If you put $100,000 into a stock that provides 12% a year in dividends, then that could be an easy $12,000 a year right? Well you have to first make a $100,000 and accept the risk of losing money on the stock. Again, not exactly passive.

Truly passive money does not exist. If you have a different opinion or an counterexample, please let me know in the comments.

Leave a Reply