What is Passive Income?

By Rachel Victoria, MSFS, former CFP

November 11, 2008

One of the most popular phrases searched for online is "Passive Income". In fact, when I Googled it, over 1.9 million responses appeared.

Yet, when reviewing most of the results, they were just Business Opportunities. How disappointing. They thought Passive Income involved Work !

Really, What Exactly is Passive Income?

Passive income is Income that is generated Without any exchange of

"work" from you!

What truly qualifies as sources of Passive Income? Income and dividends from investment accounts, royalties, pensions, and residual income sources. (Again, that is only if the income it is not exchanged for work.)

So, that eliminates the following sources that are often advertised online as "passive income":

Affiliate Marketing : requires Work- setting up a website, marketing and customer service.

Online Businesses: requires Work- setting up a website, marketing and customer service.

Home Based Businesses: Requires Work- Often require referrals or sponsoring, or exchanging several hours of "work" weekly in exchange for compensation.

Offline Businesses: requires Work- office management, staff management, and obtaining goods or services to sell.

Some people also define real estate rental income as passive income. Unfortunately, those rentals usually have to be managed, tenants secured, rent collected, houses painted, property landscaped and maintained, property taxes paid, and appliances replaced. That doesn't qualify as true Passive Income. (Of course you can hire someone to do those things, but when you can generate passive income even without having to be responsible for hiring these tasks to be done, rental real estate and passive income still don't seem to belong in the same sentence.

100% Passive Income should at the most require an account set up, cashing of checks as they are received (or set up direct deposit), and completing income taxes on those receipts.

For more information on 100% Passive Income, please visit:

High Yield Income

The author, Rachel Victoria, is a former CFP with an MSFS in Financial Planning. Ms. Victoria owned an American Express Financial Services Franchise for 20 years. Rachel currently enjoys researching, testing, and writing about alternative Financial Income Strategies.

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