Income can be earned in two forms: active and passive. Active income is money you earn during your job; you have to actually be working to receive the money. Passive income, on the other hand, is earned by the money you have invested (cash, stocks, etc.). Even if you are not working, this money is still working hard for you, and earning money for you even while you sleep! Or while you are playing video games. Or watching TV. You get the idea.
It’s been just over 13 months since I last had a job, so I haven’t earned any active income from a day job during that time. As a result, my main source of income I have these days is earned passively. I thought it would be interesting to document this going forward, as it may help me set up some financial goals for this year, as well as determine whether or not my current asset allocation is ideal. Who knows, I might even get a real job or something crazy like that. 🙂
So my income for December is as follows (rounded to the nearest $10):
Active income from financial consulting: $100 (Cheap labour people! Get it while you can!)
Interest income from my savings: $80
Interest income from my investments: $760
Dividend income from my investments: $500
Total income: $1,440
Some notes on the above:
– This is not a normal month as a lot of my investments have either annual or quarterly payouts, and December is definitely one of the higher (if not the highest month). An annual summary would be more useful as my monthly income will fluctuate greatly, but it is still interesting. (For me anyways! :))
-My investment income is automatically set to reinvest in more shares. If the money is not sufficient to buy additional shares, then it will increase my cash balance.
To actually be financially free, my passive income should be enough to cover my monthly expenses. I still have a ways to go to get there, and this will always be my long term financial goal. Now.. how to do that without having a 9-5… 🙂
What do you think? Do you think of the money you earn as being active or passive? Is this something you would want to start tracking?
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Vix's Money 