What is Passive Income With Full Information
The first step is to know what passive income is and how it differs from the type of money earned by hourly or salaried jobs. Passive income is the way to go if you want to be your boss and ruler of your destiny. The similarities are fundamental because they highlight the path to financial independence.
Active And Passive Income
Active income is a type of income that needs you to work for a certain amount of time before you can earn it. For example, If you work for a monthly salary, you should only be paid for the hours you work, right? That is active income because if you want to make a living, you need to be active regularly.
The same can be said for a salaried position. You must arrive at work on time and work a specific schedule. In exchange for your compensation, you are expected to perform certain tasks. To earn your income, you must work a certain amount of hrs and execute the tasks that are part of your job description. If you are an exempt employee, you may be required to fulfill longer hours without additional pay.
Finally, freelance work also qualifies as active income. Freelancers are usually paid for the work that they do. They will not be paid if they become ill and are unable to accomplish a task or job.
Now let’s contrast that with passive income. Passive income is income that requires some effort to build. Once you have established a passive income stream, though, it usually only provides limited care to keep the money going.
Let’s look at a simple example. If you want to publish an eBook, you’ll need to invest time and energy in it. You’ll need to hire an editor and a cover designer, and you will need to make sure the book is in the right format to sell on Amazon. However, once the book is completed and it’s for sale on Amazon, you will make money every time someone buys the book. You still make money if someone buys a copy when you’re on vacation or sleeping.
I hope you are going to see why passive income is the key to financial independence. But instead of adding more hours to your job, passive income allows you to work fewer hours while still earning a living.
Why Passive Income Matters
Now let’s talk about why having sources of passive income is so important. The average person is not going to earn a huge salary. Only a selected few people do earn enormous salaries as CEOs or in other top executive positions. However, for the large number of us, our earning potential is limited. Our ability to work is restricted by our education, experience, and the number of hours we can physically and mentally spend on it.
Passive income opens up doors that would otherwise be restricted. It enables us to earn money in methods that do not necessitate hrs of extra labor regularly, which is tremendous. Passive income matters because it’s the type of income that may easily increase and, in the long term, even replace your active income. With active income, your earning are restricted by the number of hours you work, as well as factors such as your educational and career experience.
There are no such limitations on passive income.
Nobody can limit it since you have ultimate control over it. You have the freedom to do whatever you want with your time because you may earn it while sleeping or playing with your children. As you can see, passive income and active income are very different. Money is money, but the money you earn from this stream is the kind of money that can set you free from the daily grind and helps you to focus on the things that matter most to you.