What defines passive income?

Passive income is defined as income that is generated from investments or business activities with minimal ongoing effort. This means that once the initial setup has been completed, the income continues to come in without the need for significant effort or time on the part of the individual. Examples of passive income include earnings from rental properties, dividends from investments, or income generated from a business that operates without requiring continuous involvement from the owner.

This concept distinguishes passive income from forms of income that necessitate continuous active effort, such as a regular job or freelance work. It also excludes any income derived from part-time jobs or compensation that is directly tied to hours worked or active engagement. The of defining passive income centers around the reduced need for hands-on management, enabling individuals to potentially earn money while focusing on other pursuits or investments.