As children, we are often taught by our parents to do well in school, go to college and get a good job to succeed financially in life? We have all heard that being active and hard work will make us healthy and wealthy. But being an active participant isn’t always good for your financial health.
Think about it, Do you want to work 8-10 hours a day or 40-50 hours a week for the rest of your working life? Chances are you have spent most of your working life working for the wrong kind of income. I’m talking about Passive vs. Active income, and which is right for you.
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Active Icome
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This is the kind of income most people are working for, unless they were born into wealth or won the lottery. This is the income you derive as tips and wages from your job. It may be in the form of product sales on eBay or providing a service as a dog walker or being employee in malls, fast food or call center. It’s likely your salary or your hourly wage in the form of a paycheck. If you have any doubts as to whether a given income is active, just ask yourself: If I don’t do the work, will I get paid?
Kung di ba ako papasok may kikitain ba 'ko? If the answer is NO, Then you are working for an Active Income.
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Passive Income
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Passive income is derived from a source that requires no work to generate the payment. This kind of income has historically come from investments in dividend paying stocks, interest in savings accounts or bonds, or renting real estate. The key is that it takes no work to generate the income – once income is being generated. It still takes a lot of effort to start the ball rolling.
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Which is the right kind of income?
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Both types of income require work, and both types are essential for most of us. The difference is that once the work is done for the passive income, one need not do the work again to receive the income. That’s why attaining a passive income should be a goal, and your active income should be the means by which you attain that goal. Think of it as the fuel to power your trip to a passive lifestyle.
Anyone can attain a passive income, the question is how soon do you want it? Typically the big payoffs come from the hardest work and the biggest risk of failure. Think of the starving artist or musician before he hits it big. He sacrifices much early on, but can often retire early.
If you don’t want to, or can’t, accept the risk then you can take the retirement nest-egg path. Retirement account like SSS and GSIS are all about building an investment portfolio that will one day provide enough passive income to replace your paycheck completely. That’s retirement, and it takes a lifetime of active income to achieve it.
The sooner you can cultivate a successful passive income stream, the better off you will be. To this end, you should be using as much of your active income as you can to create these passive income streams. If you’re in debt or want to accelerate your path toward passive income, consider taking a second job and using that income to pay down your debt, or build up your income streams quicker.
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The Possibilities
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The information age has opened up other avenues to the ordinary person that were previously available to only a select few. Royalties are a good example of this. Before the Internet, you had to work extremely hard on a book or record or some similar product, then you had to be lucky enough to find a publisher or distributor. Then you had to wait for marketing to do its thing and hope it was successful enough to generate significant income for you after paying all the middle men.
The Internet has opened up the royalties piece of the passive income pie like never before. Ebooks only require personal publishing software, a computer and a blog. Throw in some gorilla marketing or affiliate programs and you can generate some sizable income.
Investing is another good example. There is a mountain of free information on the Internet about investing, and discount brokers make it possible for the average person to build a portfolio of dividend paying stocks and bonds without ever leaving their home.
Passive income doesn’t have to be from the stodgy old school of investments, or the up and coming new technology. Some sources of passive income are strikingly bland and unexciting. ATM’s and vending machines can fit this category. While they do require some upkeep, it’s not as much effort for the income as your standard 8-10 hour dailly job.
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Network Marketing
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Network Marketing is also a form of business where you can have an active income at the beginning where you build a downline organization. You can build it until your efforts will continiously pay you day after day week after week month after month.
Network Marketing is probably the easiest way to create passive wealth from nothing. The startup costs are extremely low, the system is already in place, and anyone can do it.
Robert Kiyosaki calls it "The Perfect Business". Donald Trump has stated that if he ever had to start over from nothing, he would find a good network marketing company and run with it.
In the end, you’re looking at two basic methods to passive income: An entrepreneurial approach, or an investment approach. Which one is right for you depends on your interest, desire and inclination. The important thing is to start thinking about being more passive in your income, and more active in your life.
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