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Finance Glossary

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Passive Income


Income you make without having to deal with your boss or having to schlep into work every day. It's usually money made from investments or from businesses that are mostly self-managing.


Ellen hates her job as a barista and decides she’d rather be relaxing rather than spending all her time dealing with caffeine zombies every morning. She decides to set up some passive income for herself. She sets up an online business where people can download her e-books and seminars about how to make the perfect cup of coffee, and she uses her savings to buy up a house she rents out to tenants. The money she makes from her coffee business and real estate business is passive income.

Of course, Ellen would still have to work really hard (at least at first) on creating her coffee business or investing cash (in the house) to earn passive income. There are online courses that promise you can create a passive income with no cash and no work, but the reality is that it usually does take time, money, and hard work (sometimes all three) at first to start creating a passive income. And that income might not be enough for you to give up that crummy job right away, either.