Why Passive Income Is More Expensive Than Active Income
When we talk about financial independence, we often emphasize the importance of passive income . Passive income makes you money effortlessly. However, in reality, it may be worth more, dollar for dollar.
As the personal finance blog Dividend Mantra explains, active income (i.e. your regular salary) comes with a lot of related expenses. Of course it is well worth your time and effort. But you also pay taxes on your active income. You have to pay for fuel to get to work, the house you are tied to, and a host of other expenses. Passive income has none of these problems:
Secondly, passive income does not require additional costs. No lunch with colleagues, no uniform, no dry cleaning, and no travel costs to and from work.
Third, financial independence gives you geographic independence as well. You are no longer tied to one particular place. How much would you pay (or refuse) your employer to work from home? To work from Spain? Work in the mountains in the summer and on the beaches in the winter? Work from … anywhere? What is the value in this?
While taxes are still required to generate some passive income, these costs can be less onerous than active wages. Of course, it is sometimes harder to get passive income. Investing, starting a side business or owning a rental property is not easy. Especially if you have nothing to start with. However, these goals are worth working towards. Perhaps this is more important than just raising the base salary.
Active or passive: the dollar is not the dollar | Dividend Mantra via Rockstar Finance