The Differences Between Active and Passive Income
Money is a necessity in our society.
We need it for survival. Without it, you cannot buy food, clothing, education, or healthcare. There are different ways you can make money and there are also different types of income. There is an active and passive income. In this article, we will highlight some of the differences between the two types of income. So, let’s begin.
Active income
What is active income? I am sure most of you have heard of this term so chances are you already know what it means. Active is the money you earn when you put in the work. It is the most common form of income. You invest in the time and effort, and you get money out of it. For most people, active income is the only form of income. They go to their work every morning and come back at night after having made some money. If there is no job, there is no money.
Examples of active income
The day job you have is a form of active income
Freelancing
Teaching
Coaching and consulting
It doesn't matter how you are paid. You could be paid according to the hours, a salary, or anything. However, as long as you are trading in dollars, you are earning active income. With active income, you can see the results of your work almost immediately. However, there are disadvantages to this kind of income. For instance, if you stop working because you are ill or injured, you will not be able to earn. Sure, many workplaces do provide compensation when you get injured, but they do not accommodate you if you become disabled for life. That is how the world works.
The thing is, you will not have extra income for a very long period. Sure, there are savings, but these will eventually dry out. To put it simply, there is no saving it for a rainy day in this stream of income. Another problem is that active income is limited. You earn according to the effort you put in. For instance, if your salary is $5000 per month, it will remain that way for some time. Sure, you can change jobs or be promoted, but that does not happen frequently. Besides, even then the income will be limited. You will run out of it if you are not careful.
Passive income
This is the second type of income you earn when you are not doing anything. For most people, this comes as a surprise. However, for others, it is the only form of income they earn. Passive income is beneficial in the sense that you continue to earn long after you have stopped putting in the effort. It sounds like a dream come true, and almost impossible. But it is not. There are ways you can easily opt for this type of income.
So what is passive income? It is the money you will earn from assets you can control like rent, dividends from profits, returns on stock investment and so much more.
Examples of passive income
To make things more clear, the following are some of the examples of passive income:
Book sales are passive income; you wrote a book a long time ago and you still receive royalties.
You put up a video of yourself and slip in an ad. For every viewer that watches the ad, you earn some proportion.
The return from investment is a form of passive income. You invested the money a long time ago and you are getting a good return.
The best thing is that it does not require you to be directly involved - not after the initial set up. Like we said before, You wrote a book once and got it published. After that, you will keep getting royalties. Yes, there is a lot of effort involved at the start of it, but it pays off very well, and over time, can just continue to make you money long since you put down the pen. You can earn so much without having to sacrifice your time and effort.
The second best thing about passive income is that you can earn from multiple streams. With active income, you could only earn from one place. Because the amount you earned depended on the time and effort you put in. Yes, some people work two jobs. They want to be able to make enough money. However, they barely get time for themselves. They are constantly running from one job to another and trying to manage the workload of both. Over time, it starts to take a toll on you. Passive income prevents this sort of thing from happening.
You can work actively, and in the background, your bank accounts will be filling up with cash. So if you want to take a vacation but your active income is not sufficient, you can always look into your passive income account and withdraw from there.
Another benefit of passive income is that you attain financial independence sooner. You don’t have to rely on other people. You want to buy a house, but your active income is not enough; passive income might open that door for you. You will be able to move out more quickly. Furthermore, with passive income, you have a lot more free time on your hands and you can spend them with your friends and family. You can also use passive income to generate more income to live a better life.
Having a source of passive income can really make your life easier. It can turn things around for you. For instance, think about it this way. If you could put in some work on a project that would generate income for years—even decades—would you not opt for it? would you pass on that opportunity to someone else? Most likely not.
Our brand of passive income comes through the use of Amazon, and other platforms, to publish books. Hiring authors, designers, and the works up front - so that the books simply generate a passive income over time. Self-publishing can be that passive income - and create a different life for you, one where you aren’t a slave to earning money - the money just earns itself! If you’re interested in learning more about online self-publishing, and how we do it without being writers, or authors - fully automating the process, and creating these streams of passive income with a low investment, time or money? You might be interested in our online training!
There you have it, folks. These are just some of the differences between passive and active income. We hope you have been able to understand the difference. Both come in handy, and both are means to live.
But if you were given the option of choosing one, what would be your go-to income, and why?
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