Active Income or Passive Income or Both?
Do you know the key difference between active income and passive income?
Main Pointers:
- Income is just the ability to make money.
- Time – the key differentiator between active income and passive income
- Active income: give up a portion of your time in order to make money
- Passive income: making money while you are not actively spending time in the process
Most of us only have one source of income, and that is from active income from our day job.
We spend our time on the job in exchange for a paycheck.
This is also the most important income, as it provides for our basic living needs.
However, if we only have one source of active income, it is not possible for us to retire.
A classic quote from Warren Buffet to remind us of the importance of earning passive income in order to achieve financial independence.
Time is the key differentiator between active income and passive income.
In active income, we use our time to provide a service in exchange for money.
In passive income, money continues to come in without our active time spent on it.
We can be sleeping, watching movie etc and yet, it still generates an income for us.
All forms of passive income actually starts from active income.
Some examples of passive income are dividends from equities or rentals from real estate.
They too starts from active income.
In order to generate passive income, you usually need these two kinds of investments;
- Financial investment
- Time investment
In the beginning, in order to reduce the financial risk, you will need to spend lots of time doing research on stocks or real estate with active management.
Time is spent in this active phase, any income generated during this period is active income.
Active income is then turned into passive come after a period of time when things are stable enough to run on its own and you don’t need to be actively involved in the generation of income.
As you can see, in order to have passive income, you need to have a sum of money to be invested first.
The problem is, not many people have spare cash to invest into such investments.
At the start, Atomy requires lots of active involvement.
Learning about company and products and introducing Atomy to people, any income received during this period of time is active income.
After a period of time, when your network reaches a certain number of sales per month and is more or less able to generate the same or higher level of sales every month without you being involved, it has turned into passive income.
You will be pleased to know that Atomy business is a risk-free business as it does not need any capital investment to get started.
Conclusion
All forms of passive income start from active income.
If you want to achieve financial freedom, put your time into building things that will create passive income for you in the future.
You can have both, but you have to start thinking.