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Active Vs. Passive Income Analysis

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Active Vs. Passive Income Analysis

 

The Definition of ‘Active Income:’ Income for which services have been performed. This includes wages, tips, salaries, commissions and income from businesses in which there is material participation .

Translation: if you are an employee and lose your job or are unable to perform the duties of your position, your income goes away. If you are a business owner and God forbid get in an accident or get sick you are up a creek without a paddle.

Active income is where everyone gets started; however, in order to create lifelong financial security you need to start generating passive income.

This is the money you can earn even when you are not directly involved or even present. There are about a million different get rich quick schemes that promise income without effort, but the truth is, it takes time and effort to truly begin generating passive income you can rely on. Does that mean it’s not worth doing? Absolutely not!

The Definition of ‘Passive Income:‘ Passive income is income received on a regular basis, with little effort required to maintain it

If you added $100.00 dollars a month of passive income to your household income each month for the next 10 years, you would be generating $12,000 per month by the end of the ten year period. Regardless of the time and effort required to create this, you can retire in comfort without having to worry about trading dollars for hours, slaving away at a job or always being on the clock running your business.

Here are some common ways to start earning passive income:

  • Any type of property income
  • Earnings from a business that does not require direct involvement from the owner or merchant
  • Rent from property
  • Interest from a bank account
  • Royalties from publishing a book or from licensing a patent or other form of intellectual property, such as computer software product
  • Earnings from internet advertisements on websites
  • Dividend and interest income from owning securities, such as stocks and bonds, is usually referred to as portfolio income, which may or may not be considered a form of passive income. In the United States, portfolio income is considered a different type of income than passive income
  • Pensions.

 

 

 

 

 

 

 

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