Even if you use a different term to describe it, you already
know what active income is. Active income is the kind of income that requires
you to actively engage in work for a set period of time before you earn it. For
example, if you have a job that pays you by the hour, you receive money only for
the hours you work – right? That’s active income because your activity is
required on a consistent basis if you want to earn a living.
The same is true of a job where you earn a salary. You are
expected to do certain work in exchange for your salary. You must show up at
work on time, work a set number of hours, and complete the duties that are part
of your job description in order to earn your salary. You may even be required
to work additional hours without additional pay if you are an employee with
exempt status.
Finally, freelance work also qualifies as active income.
Freelance workers get paid only for the work they complete. If they get sick and
are unable to complete a task or job, they earn nothing.
Now let’s contrast that with passive income. Passive income
is income that may require some work to set up. However, once you have
established a passive income stream, it often requires only minimum maintenance
to keep the money flowing.
Let’s look at a simple example. If you write an eBook, you
must spend time and energy writing it. You have to hire an editor and someone to
design the book’s cover, and you’ll have to make sure that it’s in the proper
format to sell on Amazon. However, once the book is completed and it’s for sale
on Amazon’s website, you will earn money every time someone buys the book.
That’s what makes the income passive. If someone buys a copy while you’re on
vacation or asleep, you still earn money.
I hope you are beginning to see why passive income is the
answer to achieving financial freedom. Instead of adding more hours to your
workday, passive income can make it possible for you to work fewer hours and
still earn a living.
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