Passive Income vs Active Income In a Nutshell

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Most people have a dream of being wealthy and not having to worry about money.  For some people, that’s all it is.  It’s a dream.  They think about winning the lottery or getting a giant inheritance or winning a huge lawsuit.  For other people, this dream is more of an expectation.  They work hard every day to ensure that they increase their passive income while still maintaining enough of an active income to live the lifestyle they want.  Many people do not know the difference between active and passive incomes.

Active Income

active incomeActive income is money that you receive for work that you do, on a regular basis.

This might mean that you go to a nine-to-five job every day and you get paid a salary at the end of the week.  This might mean that you accept freelance projects and get paid for how many hours you spend on each project.

Whichever way you make active income, you must put the man hours into it in order to get paid.

Passive Income

passive incomePassive income is money that you make because of work that you previously did, and no longer have to put in hours to earn.

This might mean you invested in a start-up and now your investment is growing as it becomes more popular.  This might mean that you wrote a novel and now that novel is making money every day without you having to work for it.

There are many ways to make passive income.

Balancing Active and Passive Income

balancing active and passive incomeIt’s important that you learn how to balance active and passive incomes. The idea of making passive money is wonderful but it takes time and effort to set up.

To sell a product repeatedly (such as a novel), you must invest your time upfront to get paid down the road.  This is the same for many different things such as memberships to a site (you have to build the site), inventions (you have to build the invention), and many other things.  If you’ve decided that the path you want to take is to invest in stocks, you need to invest money up front.

Where do you get that money? Unless you have money from another source already, that’s where active money comes in.

There’s absolutely nothing wrong with making money by working hard every day in order to set up for a better future.  Set yourself a goal of investing a certain amount of money that you make each week or month. Eventually you can earn passive income.

Some people put aside ten percent of their income; some people set aside as much as twenty-five percent.  It all depends on the kind of lifestyle you want to lead.  If you’re living a lavish lifestyle, but still stuck in the rat race, then you’re probably rich, but you’re not necessarily wealthy.

What is the Rat Race?

what is the rat raceThe rat race refers to working the same hours every day for the same amount of pay every day.  If you have a nine-to-five job, and you’re not making any passive income, then you’re in the rat race.  This can feel very stable for some people, whereas other people feel very insecure about being in the rat race.  They worry about what will happen if they lose their job, they want a higher standard of living, and they want more free time on their hands.

Breaking out of the rat race means that you must learn to balance active and passive income. It’s a balancing act until the latter is enough to live off of. You can dedicate more and more of your time to increasing your passive income. Eventually you can stop working a nine-to-five job and have a satisfying lifestyle!

The most important thing is that you don’t give up.  Sometimes people make bad investments, whether it’s with their money or their time.  Keep on trying, though.  If you truly want to be wealthy, and live off your passive income, learn from your mistakes and keep investing.

 

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