Passive income

Passive income is income that can keep coming with limited ongoing effort. It doesn’t mean “zero work”—it usually means you do the work upfront (or you provide capital), and later you maintain it.

Most common sources

• Investments: dividends, interest, and selling assets after growth.
• Pensions: public pension benefits and private pensions (often funded over many years).
• Rental income: property rent (often “semi-passive” because it needs management and repairs).
• Royalties: books, music, licenses, intellectual property.
• Digital products: templates, courses, small apps (again: usually needs updates/support).
• Businesses with systems: a business that can run without the owner doing every operation.

What people often miss

• Passive income usually requires active income first: most people fund it using surplus salary, or by building something on the side.
• Risk exists: markets fall, tenants leave, products become obsolete, laws/taxes change.
• It’s rarely instant: it’s more like “slowly compounding leverage” than a quick hack.

What most people do about it (typical pattern)

In practice, most people take one of these approaches:

• Do nothing (for a long time): all income is spent, so nothing compounds.
• Start small and consistent: automated investing/saving, even if it feels “too small”.
• Over-focus on “perfect”: they delay because they want the best strategy, and lose time.
• Try something too complex: they pick high-effort projects and burn out, instead of building a stable baseline first.

Why time matters (TVM)

The time value of money (TVM) is the reason passive income is so sensitive to “starting late vs starting now”: time is what turns small contributions into meaningful results. See Time value of money.

How this connects to active income

Active income is often the fuel that builds passive income. If you want a simple mental model, think: protect essentials → build buffer → create surplus → invest surplus. See Active income.