Any money you will ever make, besides winning the lottery – and I wouldn’t be waiting for that if I were you – will fall into one of these income categories; Passive Income or Active Income. And each one has its own benefits and drawbacks.
Passive income: is the money you profit continuously from assets you have created or purchased. Here’s an example; if you buy a house and rent it out for more money than it costs you to pay your mortgage and other expenses every month, that profit you make is considered passive income. Other example is writing a book, you only have to write it once and put it on the market for sale, after that, your only job is marketing that book to increase sales, giving you a steady influx of profit. One downside of this source of income is that you don’t start collecting your money immediately, so there is a time gap between your job being made and when you star to collect your money.
Active income:a is any income that is generated by your work. This is the most common way for making money, but its obvious downside is that once you stop working, you stop making money. Therefore, if you ever intend to be rich, this is definitely not the way to go. It’s major downside is that you are exchanging time for money and that is limiting you to grow and earn more money. Imagine if you were a Shiatsu therapist, even if you had 1.000.000 people waiting to make an appointment with you, that wouldn’t be possible, and therefore you would never receive that money from them, even with the high demand of your exhausted body… The only advantage is the immediate gratification, a misleading trap in my opinion.
Now that you know the difference maybe you can understand they’re importance. Remember, you aren’t getting younger, and things happen.Relying on active income is a risky business wrapped on a warming blanket.
Start thinking on your future, start putting money to work for you. There are many ways you can create passive income these days, online or not. So write that book, rent that house, build that website, buy those stocks, launch that cd you’ve always wanted and put it on the market, maybe you would be surprised by the tremendous results.