Active Income vs Passive Income: Which is better?

You can earn money or income through various means, such as employment, self-employment, investments, business ventures, or any other legitimate sources of income.

It allows you to meet your daily needs, save for the future, and achieve financial goals.

Are you aware of these terms like "active income" and "passive income"?

These are two different types of earnings that individuals can generate.

Active Income

When someone earned money through direct, active efforts and the exchange of time and skills for compensation. It typically involves performing a service or working for an employer.

In Simple words Active Income is,

Work = Money [as long as you work you get paid]

Some common examples of active income sources include:

1. Salary/wages

Income earned from being employed by a company or organization. This is typically paid in regular intervals, such as monthly or bi-weekly.

2. Hourly wages

Payment based on the number of hours worked, common in jobs like retail, customer service, or manual labor.

3. Freelancing

Earning income by providing services on a contract basis. Freelancers often work on projects for different clients and are responsible for managing their own finances and taxes.

4. Commission-Based Earnings

This applies to sales positions, where individuals earn a percentage of the sales they make. It can be common in real estate, insurance, and other sales-oriented industries.

5. Self-Employment Income

Earnings from running one's own business or being a sole proprietor. This can include income from consulting, coaching, or operating a small business.

6. Bonuses

Extra payments given to employees based on performance, company profits, or meeting specific targets.

7. Professionals Services

Earnings from professions such as doctors, lawyers, accountants, where individuals provide specialized services to clients.

8. Acting and performing

Income earned by actors, musicians, and entertainers for their performances.

Many People hate active income because it can't make them rich. But what about actors who makes thousands of crores from a movie? So, this is the most important thing that you need to learn.

"It doesn't matter how much money you earn, the only thing that matters is how you spend your money".

If You are an employee who earns his income through a job, you can still earn a passive income by investing your money in the right place.

Passive Income

The income generated with little to no active involvement or ongoing effort. Once the initial work is done and systems are set up, passive income streams can continue to generate money with minimal maintenance.

In Simple words Passive Income is,

Initial work = Money [You just have to work in the beginning; after that, the money will come automatically]

Some examples of passive income sources include:

1. Rental Properties

Owning and renting out real estate properties, such as apartments, houses, or commercial spaces, can generate passive income through monthly rent payments from tenants.

2. Company owner and share holder

The business owner of a successful company can earn passive income through many methods, like franchising or licensing, automated systems, intellectual property, and more.

A shareholder earns passive income by buying shares in that company. Every time a company gains profits, the shareholder also gains profits.

3. Dividend Income

Investing in dividend-paying stocks or mutual funds can provide a stream of passive income through regular dividend distributions.

4. Royalties from creative work

Authors, musicians, artists, and inventors can earn passive income from royalties generated by their books, music, art, or patented products.

5. Peer-to-peer Lending

Participating in peer-to-peer lending platforms allows individuals to lend money to others, earning interest on the loans as passive income.

6. Affiliate Marketing

Earning commissions by promoting and selling products or services from other companies through affiliate marketing programs.

Learn more about affiliate marketing.

7. Digital Products

Creating and selling digital products like e-books, online courses, software, or photography can generate passive income as long as there is demand for the products.

8. You Tube Channel Monetization

Building a successful YouTube channel and monetizing it through ad revenue and sponsorships can generate passive income.

Many people hate passive income because it takes time, money, patience, night-less efforts, dedication, willpower, energy, and more.

Generating passive income is not as easy as you think.