Recently, I’ve become an avid reader of Living off Dividends, an excellent blog with plenty of awesome reads. The subject of passive income is the key pillar in this financial blog, and it is incredibly intriguing. Passive income, or income that is stable with little or no upkeep, is the ultimate way to make our money work for us, rather than the other way around.

Passive income sources essentially replace us as the provider of our income. Ponder this question for a second: would you rather take an offer to make $100,000 a year working 50+ hours a week, or $50,000 a year for only a few hours of work a month? Despite the fact that the first offer is twice as much money, the second offer sounds more enticing to me. Why? Because financial freedom is not defined only by financial numbers, but by a time factor too. How financially free are you when your income is completely dependent on you constantly sacrificing large amounts of valuable time?

Some common sources of passive income are interest, dividends, royalties, rental properties, vending machines, etc. All of these sources, set up properly, can provide constant income without a ton of further inputs. Notice that none of these examples of passive income are particularly easy to set up. They are almost all labor, time, and capital intensive to get up and running. However, the up-front work is well-worth the effort in the long-run. Passive income is the ultimate key to financial freedom, and I’ll be discussing it a lot more in my future posts. Stay tuned!