There are two ways to earn money in this world, Active Income and Passive Income. Which is better? Neither option is bad. Both can earn you an income. The better question is which is the better option for you. If your goal is to earn the most money possible then the better question is how can you do both.
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What is Active Income?
Active income is any income that you actively have to work to earn money. When you are getting paid to perform tasks you are actively working and earning an active income.
A typical “job” is an active income source. If you are going to work – whether your a laborer or working at a desk – and you are performing tasks to earn an income, you have an active income source. These types of jobs usually will pay wages (hourly, daily, etc) or a salary.
Commission-based jobs. pay per job (like a contractor) and tips earned are also active forms of income.
What is Passive Income?
A passive income is an income source where you are earning money without actively working. Passive income sources may take an initial investment of time and/or money followed by minimal to no upkeep.
A passive income source would include jobs like landlord and investor. Bloggers and YouTubers could also fall into a passive income source.
Why do you Want It?
Like any income you earn, you want it for obvious reasons such as paying your bills, buying food to live, as well as buying other essential and nonessential items.
The added benefit to a passive income source is that a bit of initial work will continuously pay you with little to no upkeep. This will allow you to earn from multiple income streams at once. Which is something you can’t do with an active income source as there are only so many hours in a day?
How Much Can You Earn With Passive Income?
A passive income can earn you anywhere from pennies to millions. The amount you earn will depend on many factors and vary between the type of source you choose.
As a landlord, your rental’s location and the purchase price or mortgage can all affect your earnings.
The best way to earn more is to have multiple income streams. And they don’t have to all be the same type of income.
What are examples of Passive Income
Saving accounts are a very low risk however, they also have very little return. Unless you have a ton of money sitting in the account, you aren’t likely to see a high return. However, if you are saving up for something anyways or just as an emergency fund it could earn you a couple of extra dollars a month.
Stocks & Investments.
Unlike savings accounts, stocks and investments can be a bit riskier. They can vary between little to no risk to high risk. Typically, the higher the risk – the higher your return.
If you can afford to purchase a house, you can rent out that house to increase your income. If that’s too big of an investment for you, you could consider renting out a room if you have space. Room rentals usually won’t be able to cover your mortgage but they can definitely help with the bills. Depending on where you live you can also rent out parking spaces. Parking spaces can be a great opportunity if you live downtown. If you live on an acreage, you could also consider trailer parking
You can rent out more than just space. Turo is a site that will allow you to rent out your car. You can also rent out your tools with a tool rental app.
Write a Book.
A single book can earn you royalties for years to come. You can easily write a book, upload it onto Amazon and start selling your book immediately with little to no start-up cost. Amazon will pay you a portion for each sale.
Create an App
Are you good at coding? Creating an app could be a great extra income source. App can earn money by charging to use the app (one-time or subscription,) ads, and in-app purchases.
If you are a graphic designer, you can create stock designs to sell. You can sell these designs over and over again on sites like Creative Market. If you want to take this to the next step you can turn these designs into shirts, hoodies, phone cases and more with sites like Threadless.
A typical photographer isn’t a passive income, but a stock photographer can be. Take stock photos and upload them to site like Shutterstock and earn a percentage on each sale of your photos.
Blogger & YouTuber.
Bloggers and YouTubers can earn a passive income through affiliate marketing. A post or video they create can contain affiliate links when a person makes a purchase through these links the blogger or YouTuber would earn an income. Read more about affiliate marketing here.
Summary: Which is Better?
Ideally, both. But this depends on your goals and how you want to live your life.
You could live your life completely off either. Most people live solely off of active income sources. A few live solely off of passive income streams.
Which passive income source would you like to try?
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