Active Income VS Passive Income - A General Guide

While there are countless ways to earn income, all fit into one of two categories: Active income and passive income. Some sources of income may be some sort of combination of the two, but that's basically it.

Active income is income that requires continuous physical input/labor in order to earn it. It basically means trading time for money. Examples of active income include a job where you get paid for each hour that you work or get a salary for being present and working, a side hustle such as freelancing where you get paid for each service, or a business where you have to be present to earn money such as a storefront. The problem with active income is that you need to be present and working in order to continue generating income. You also need to earn passive income in order to ever become financially independent.

Passive income is income you earn by putting up the labor or cash upfront and continue to earn money whether you continue to work or not, even while you sleep! Doesn't this sound enticing? Examples of passive income include dividends paid by companies for investing in their stock, writing and publishing a book or other creative work that earns you royalties after you finish producing it, or some side hustles such as a YouTube channel or a blog where the content you made months or longer ago continue to generate advertising revenue.

Passive income does not usually come without putting in some, often a lot, of upfront work. For example, in order to earn money from dividend stocks, you might have to make money actively. Another example is a YouTube channel, which often requires months of producing many videos before your channel gains any traction or makes you any significant money. However, many times once the snowball starts rolling and compounding, you may generate a respectable amount of steady income from effort you made long ago.

It is wise to have multiple sources of income, both active and passive. This way, if one of your income sources slows, at least you have other money coming in. For example, you may be earning enough dividends to retire, but you may want to continue working at least part time just to be secure in case of a stock market crash. On the opposite end, you might lose your day job, but at least you have some advertising revenue coming in from your YouTube channel or blog, which you now have more time to devote to.

I hope you enjoyed this article, and that you learned something that you can apply in your life. If so, please check out my other articles, and please also consider checking out Prosperfessional elsewhere online at:

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Email: prosperfessional@gmail.com

If you're interested in earning extra income with your own precious metals business, please reach out to me through any platform listed above.

Thank you again for reading!

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