Passive Income vs. Active Income – A Detailed Guide
Active income is the money you earn for trading your time and energy. Passive income is the income you earn by putting your money to work, selling your creative output more than once, or by renting out what you own. Over time, active income can support you now. Passive income can support you in the future.
Be a Lender
If you have money in the stock markets, you know that there are times when the income from these investments will run short. According to the experts at SoFi Invest, one of the best ways to make passive income is to “lend directly to peers on a peer-to-peer platform.” Of course, there is a risk in this type of lending. Be prepared for fees and understand that not every loan is going to work out.
Passive Income Takes Time
While active income can pay out quickly, such as tips for delivering food or mixing drinks, passive income pays out longer. That being said, passive income often requires an initial unpaid investment to enjoy those long-term payouts. Buying a rental property can provide you with long-term income, but learning the best places to buy and making the right investment involves risk.
Be Ready to Invest
You may have time for one job during the week and a weekend hustle, but time is finite. As you study ways to build up passive income, you’ll find that building up multiple streams of passive income is the best way to eventually get to a place where the money comes in without having to trade your time and life energy.
It’s important to note that you can start building passive income streams with very little money. For example, setting up a blog, a YouTube video channel, and classes for online presentation can be started cheaply. If you have a job, you can live off of, starting an online course as a side hustle is a terrific way to stop trading your life hours for money. One good course, one quality blog, or one YouTube channel can allow you to build wealth without a one-to-one exchange of time for cash.
Stay Patient
As you build your multiple income streams, you will build skills and learn new ways to create other income streams. It’s important that you’re prepared for your passive income streams to sometimes be passive income trickles; sometimes, the trickles dry up. Initially, you should expect your job to support your passive income stream projects and expect your passive income streams to supplement your regular income. If you want to step away from hourly or salaried work, you will need several income streams to protect you against a financial hit if your industry fails or your product falls out of favor.
Passive income is a slow process. As you work your regular job and build up passive income streams, keep an eye on your budget. If getting free of the 40-hour-a-week grind is your target goal, keeping your expenses low is a critical step in the process.
