Passive Income Calculator

How to Calculate Passive Income

Passive income is money earned with minimal ongoing effort from sources like investments, dividends, rental properties, royalties, and digital products. To calculate your total passive income, sum the income from each source and subtract any associated expenses. Investment withdrawals typically follow the 4% rule — withdrawing 4% of your portfolio annually provides income while preserving capital over a 30-year retirement. Dividend income depends on your portfolio value and average yield. Rental income requires subtracting mortgage, taxes, insurance, maintenance, and vacancy costs from gross rent to find your actual cash flow.

Building Multiple Passive Income Streams

Diversifying across multiple passive income sources reduces risk and increases total income. Index fund dividends provide 1.5-3% yield with growth potential. REITs offer 3-6% yields with real estate exposure without managing properties. High-yield savings and CDs provide 4-5% in high-rate environments. Rental properties can yield 5-10% cash-on-cash returns but require active management. Digital products, courses, and content can generate income with minimal marginal cost after creation. The key is building each stream gradually while reinvesting earnings to accelerate growth through compounding.

How Much Capital for Target Income

To generate $5,000 per month ($60,000/year) in passive income, you need different amounts depending on the source. At a 4% withdrawal rate, you need $1.5 million in investments. At a 3.5% dividend yield, you need approximately $1.71 million in dividend stocks. With rental properties yielding $500 per month net cash flow each, you need 10 properties. Most people combine sources: $500,000 in index funds ($1,667/month), $300,000 in dividend stocks ($875/month), two rental properties ($1,000/month), and digital income ($1,458/month) totals $5,000/month from more achievable individual amounts.