Are you curious to know how you can earn some extra money on the side with minimal effort? Then, it is about time that you learn more about passive income.
Passive Income – What is It?
Passive income is an income source that can be achieved with minimal effort. Good examples of these passive income opportunities include stock market investments, rental property incomes, and affiliate marketing participation.
Most people who try the different avenues of passive income use these as secondary sources of income and still retain their primary income at the same time such as their hourly wage or salary.
Similar to other forms of income, passive income can also be taxable. But, depending on the specific passive activity, you will notice that there are some that have higher tax rates compared to others. For instance, interest income is being treated similarly to ordinary income as far as taxes are concerned. Capital gains and dividends, on the other hand, have a tax category of their own.
Passive Income vs. Active Income
Now, you know what a passive income is. This time, it is time to know what sets passive income apart from the two other forms of income namely portfolio income and active income.
- Portfolio income is the form of income made from stock investments, capital gains, interest, and dividends. Portfolio income is often considered as one type of passive income.
- Active income is basically the exact opposite of passive income since effort is required to maintain and keep it. In general, active income is your hourly wage or salary.
Benefits of Having a Stream of Passive Income
Just like other financial decisions, it is important to consider the effects of a passive income stream not only on your financial situation but also on your personal life. Most financial experts suggest that people should try having a passive income as it provides a long list of advantages that could help boost your goals for personal finance.
Here are some of the exciting benefits of having your own passive income stream:
- Having your own passive income stream helps you improve your discretionary income with no need to sacrifice other aspects of your budget. Have you always wanted to tour Europe but you cannot afford it with only your primary income? Passive income will give you the much-needed financial freedom so you can pay for all lifestyle expenses with no need to use up most of your free time.
- Upfront money is not always necessary to start earning. You can choose from different options to earn extra cash with no need to spend anything to get started. There is also no need for you to become an expert just so you can take advantage of your skills.
- You can start earning passive income no matter where you are. With all the available passive income opportunities online, you are free to work from the comforts of your home, during your lunch break, or even as you travel the world.
If you wish to establish better financial security and earn money according to your own schedule, passive income might be exactly what you need.