Active Income vs Passive Income

99.9% of the world’s population starts their income with active income. They then move from active income to passive income. Active income is the income received or earned through active rendering of benefits and meeting of needs in the form of goods and services. Active income stops the day you stop rendering goods and services. Passive income starts flowing for you at that moment. It would not flow if you have not done the necessary things you need to do. Passive income is the income earned when money is the one working for you.

 

Active Income (or Earned Income)

You are working for money. The key characteristic of active income is the cost of time. You must trade time (a limited resource) for money. If you stop, the income also stops.

 

Passive Income (or Residual Income)

Money is working for you. This is the opposite of active income. Once you stop spending time on these income sources, the income flows don’t necessarily stop. Of course, there are varying degrees of passivity and it’s desirable to have highly passive alternative income sources.

 
Here’s an illustration of active-passive income spectrum:

 

Active and Passive Income – Create an overall strategy that allows you to diversify your income by building multiple income streams and purposefully moving toward more passive income sources.

 
On Make Money Online Nigeria, we will teach you how to make active and passive income through the internet. It is not a one day teaching though, you will need to subscribe to our updates to learn how to make income on the internet steadily. What we are doing today is just an introduction to prepare you for more updates.

 
There are three classes of people in this world. They are grouped as regards their potential as follows;

 
Class 1: 60% Money Making Potential, 50% Managing Money Potential and 25% Multiplying Money Potential
Class 2: 75% Money Making Potential, 50% Managing Money Potential and 20% Multiplying Money Potential
Class 3: 90% Money Making Potential, 95% Managing Money Potential and 98% Multiplying Money Potential

 
Where do you fall?

A larger percentage of the populace falls into class 1. Robert Kiyosaki will call class 1 the employees and short term investors; class 2 the self-employed and short term investors and class 3 the business owners and long term investors. If you want to move from active income to passive income, you need to walk your way from class 1 to class 3.

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The numbers of years it will take you to class 3 depends on your talent, learning/aptitude desire and hardwork. I don’t have anything against active income. It is just wrong for anyone to start and end his life on active income. It is also wrong for anyone to depend all his/her life on active income. It is good to work for the money you earn. It is better to earn from the money that works for you. It is very possible.

 
What to do

Before we update more on how to make money on the internet, you need to get to work now. If you do this, it is to your own benefit. What you need to do is this, get a sheet of paper and write out the following headings;

 
This is how much income I make now.
This is how much I save now.
This is how much I invest now.

 
After you do this, find the percentage of each from your total earnings. Then write the following heading also;

 
This is how much income I want to make in the next 6 – 18 months.
This is how much I save in the next 6 – 18 months.
This is how much I invest in the next 6 – 18 months.

The answer you give to the above headings should reflect that you want to move into class 3.

 

Originally posted 2011-08-28 17:00:57.