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Secret Truth of Passive Income vs Active Income (Secret to Get Rich)

Do you like to see your money grow?

Money management 101,

“Ensure we have more money coming in then going out of our pocket.”

With the increased cost of living, everything gets much more expensive every single day.

For us to maintain our current living standards, we have to constantly look for ways to grow our income. This can be in the form of a pay raise, a change of job, or even doing a side hustle.

“Since, there are so many options to choose from, which option is for me?”

Before we choose what method should we use to grow our income. Our first step should be understanding where our money comes from.

This may sound simple, but without a good foundation of understanding this concept, growing your income will be next to impossible.

2 main ways to grow your income:

  1. Active Income / Earned Income
  2. Passive Income

But what is the difference between active income and passive income?

Let’s Find Out!

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What Is Active Income?

Do you like to see your money grow?

Money management 101, “Ensure we have more money coming in then going out of our pocket.”

With the increased cost of living, everything gets much more expensive every single day.

For us to maintain our current living standards, we have to constantly look for ways to grow our income. This can be in the form of a pay raise, a change of job, or even doing a side hustle.

“Since, there are so many options to choose from, which option is for me?”

Before we choose what method should we use to grow our income. Our first step should be understanding where our money comes from.

This may sound simple, but without a good foundation of understanding this concept, growing your income will be next to impossible.

2 main ways to grow your income:

  1. Active Income / Earned Income
  2. Passive Income

But what is the difference between active income and passive income?

Let’s Find Out!

Editor’s Recommendations: My Best Books Library

What Is Active Income?

Active income is simply the income we earn through active effort. This is the most common form of income that employees, freelancers, and some business owners earn. Active income is the most common way most people earn their income.

But…

“When you stop working, the money will stop flowing.”

So, if you want to earn more?

Simply take on a part-time job or work overtime to get that extra cash.

Most traditional jobs will require you to work 9 to 5, either sitting in the office or working out in the field. At the end of the day, your payment will be calculated by the time you spend in the company or the work you’ve done for the company.

You can be one of the best employees who finish an 8 hours task in just 5 hours. And spend the next 3 hours just walking around, chatting with your colleagues distracting them from their work, or simply enjoying a cup of coffee at the café next door. Or simply sitting in the office all day just staring out in the window.

In both cases, you are still earning an active income.

Even though it may not be a physically strenuous job, like the construction worker working under the hot Sun at the construction site.

For an active income, you have to be actively doing something to earn that income. Even if it means just sitting on your desk.

If you stop doing that certain task, money will just stop flowing into your bank account. Thus, these tasks you do to earn an income are called active income or earned income.

Examples of Active Income:

  • Doctors and Lawyers
  • Common 9 to 5 Day Job
  • Freelancers
  • Project Based Business
  • Small-Business

My Active Income Rating

  • Consistent Effort: 4/5
  • Popularity: 5/5
  • Income Growth: 2/5

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What Is Passive Income?

Passive income is income earned even when we are sleeping or out traveling some exotic places. Basically, a passive income is an income earned by not actively working to earn that income flow.

And passive income is generally categorized into 2 forms:

  1. Investing: Earning passive income by letting money work for you instead of you working for the money.
  2. Money Machine: Earning passive income by doing work for a period of time so that for the next 1, 5, or 10 years, money will keep rolling into your bank account with very little effort on your part to maintain the income flow.

Each form of passive income when done correctly can bring you hundreds, or even thousands of dollars monthly or even daily. Yes, you read that right, thousands of dollars daily! Ka-Ching!

Investing

The first form of passive income comes in the form of making an investment with your cash. This is a passive income built by letting money work for you day and night. Usually, it is done by investing in dividend-generating stocks, or simply renting out the spare room of your house.

You are basically letting your investment do all the work for you. The initial investment of your money will allow income to be generated passively with little to no effort on your part. Perfect for retirement.

Examples of Passive Income:

Money Machine

The next form of passive income is by doing something now that will helps you to generate an inflow of income in the future. This form of passive income requires you to have an initial investment. You’ll need to invest your time and energy to build the income-generating machine.

The time and effort to build this form of passive income can be huge, but the benefit of having this money machine is definitely worth it.

Once your money-making machine is built, it will generate income 24/7 even when you are sleeping or lying on the beach of Hawaii. You will earn money with little to no effort on your part to maintain the income flow.

Example:

  • Selling Online Course
  • Ads from YouTube Channel
  • Selling Stock Photo
  • Selling eBook
  • And many more…

My Passive Income Rating

  • Initial Effort: 5/5
  • Popularity: 1/5
  • Income Growth: 5/5

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What Is Better? Passive Or Active Income?

Both passive income and active income are great to have. Because both types of income help to grow your finance.

While active income is getting paid now and passive income is maybe getting paid later.

Only one type of income will truly make you rich and successful. Do you know which?

Drumroll, please…

Yes! You are right!

Passive income is what makes you rich.

But “Why passive income is better than active/earned income?”

Here are the 2 main reasons.

1. Time Limitation

With a limitation of just 24 hours. If you focus solely on active income, your limit of growing your income without sleeping or eating will be just 24 hours.

Passive vs Active Income Time

You can be earning a 5-figure, but there will always be a ceiling, a limit of how much income you can earn actively.

If you only have an active income, it means you cannot have the luxury of stopping working. Because once you stop working, your income stop coming in and you will soon be out of money.

On the other hand, passive income doesn’t limit you to just having 24 hours to generate your income. By investing, or building your very own income-generating money machine, you can have more than 24 hours to generate your income every day.

With no limit cap of 24 hours to generate an income, your potential to grow your income has just become limitless.

2. Growth Potential

Passive vs Active Income Growth Potential

Passive income allows you to earn money while you sleep or just do stuff you like.

Having a passive income will give you the freedom to choose if you want to work and the benefit of having no limit on the growth potential. This makes passive income much superior to active income.

“Who doesn’t want to make money while they sleep, right?”

Why You Might Not Want To Have A Passive Income?

The biggest problem with passive income is that it can take a massive amount of work upfront to create. Many people have an impression that passive income means, ‘do nothing and being lazy. But passive income actually means planning for the future.

Passive income needs time and energy to create and succeed.

Passive income is not strike rich quick solution, but a way to becoming rich slowly through your initial investment of your effort, time and money.

Passive vs Active Income Pay Today or Tomorrow

The time and energy that is essential to create passive income simply prevent many who are unwilling to make the initial sacrifices. This prevents them from having a passive income.

Why It Is Easy To Start Earning A Passive Income?

The amount of opportunities for earning passive income nowadays is basically everywhere. Furthermore, the benefits of earning a passive income are simply endless. 

Major benefits of passive income:

  • Passive income gives you the freedom of time.
  • Helps to ensure financial stability and growth.
  • Can reduce your anxiety and fear of the future.
  • Gives you the option to pursue the things you love rather than what pays the bills.
  • Lastly, it gives you the ability to live and work anywhere in the world.

Everyone, including that 10-year-old kid next door can earn a passive income if you are willing.

There are just too many opportunities nowadays for us to earn a passive income.

Some YouTubers as young as 7 years old made a fortune online by playing with toys in front of a camera. You can create your own videos by sharing your opinions with others on topics you like.

With dedication, you can create these amazing streams of passive income that will keep flowing into your bank.

Fun Fact:

The highest-earning YouTube star in the world is a 7 years old elementary-school kid.

He makes 22 million a year passively.

Yup, USD$22,000,000 passive income per year…

Now… let that sink in…

Although, you might not make a fortune with YouTube like that 7-year-old kid. This example shows the immense potential of how much you can earn from passive income.

If a 7-year-old can do it, so can you!

Are you excited about the potential earning power of passive income now?

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Should You Build A Passive Income?

Active vs. passive income is a difference between getting paid now and maybe getting paid later. Both types of income are great at building your finance. Both active and passive income are required depending on the different stages of your life.

Active income ensures that you are getting paid for all your work. Though there are limits to the amount of active income you can earn. Having the comfort of knowing you will get paid at the end of the day is definitely good.

Every passive income idea may, or may not work. Some may earn you hundreds or thousands of dollars every month or even every day. There is always a chance you will never get paid. After all the hard work of working for weeks on your passive income project, you may just end up with a big fat $0 in income for months.

(I too have experienced my own share of $0 income for months, it is a truly painful experience.)

To be able to get the food on your table today, you will need active income. But to be able to get the food on your table and live a life of freedom tomorrow, you will need passive income.

Balance is the Key

Initially, when we are still starting out, we will need to focus more on increasing our active income. But as time passes, it will be probably a great idea for us to start building our passive income.

This passive income can be in the form of investing or building a money machine.

But how much time should we invest to build our passive income?

My Experience In The Time Invested In Building Passive vs Active Income.

The time you invest in your active and passive income can be different for each individual. This ratio can be changed from time to time during your journey of wealth building.

Here’s my current time split on developing each income:

  • Active Income: 80% 
  • Passive Income: 20%

Like many of my readers out there, I am at the beginning of my financial journey. Thus my current time split is weighing more on the active income. But eventually, as I develop each of my passive income streams and let time do its wonders.

Each of my passive income streams will allow me to have more time available to develop new passive income streams.

My target time split between active and passive income in 5 years’ time:

  • Active Income: 20% 
  • Passive Income: 80%

The financial journey is a long exciting ride with lots to learn and explore. I am always amazed at how much I can learn each day. It excites me to be able to share any financial tips and the things I learn along my journey that may help you in your financial journey too. This is simply an amazing and fun ride.

“Friendship is never anything but sharing.”

By Elie Wiesel

Question: “Do you think your friends will love to read about this as well?”

Success is not made overnight, but through determination and the conviction to keep learning and getting better.

Remember the difference between success and failure is what you know, and what actions you take.

Here are some resources that will help in guiding you to your success.



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