Difference Between Active Income And Passive Income

Difference Between Active Income And Passive Income

Regardless of how you earn a living, your earnings will either fall under the heading of passive income or active income. You may have heard these terms before but many individuals don’t really understand the difference between the two. So, what’s the active income and passive income?

Passive income is money earned on an investment, or work completed in the past, that continues to make money without any additional effort. Active income, on the other hand, is money earned in exchange for performing a service.

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In this article, we are going to talk about active income and passive income, the difference between these two forms of income, a few active and passive income ideas  etc.

So, are you ready? Let’s get started!

Passive Income

Passive income is that which is derived from an asset that generates money without needing much effort on the part of the individual. Additionally, the individual is not required to remain physically present in order to continue making money. However, initially you need to put in your time and money so that you can earn passively. Once it begins, it continues to pay off even after the investment or work is completed.

Passive Income Ideas

Interest From Investments

The most effective type of passive income is interest from investments. In fact, it is for this reason that you should make retirement account contributions throughout your employment. If you can amass enough money through investments, you can rely only on the interest to support yourself throughout the remainder of your life.  You can also earn money in the form of dividends from stocks, shares and mutual funds.

Invest in Chit Funds and Start Earning Passive Income

Chit Funds

Chit funds are among the strongest business models for passive income. They existed in India even before the modern banking infrastructure was established. Millions of Indians still invest in chit funds today.
The Money Club is a digital chit fund platform. The idea is that s together is simpler than saving alone. Today, using a mobile phone while on the go is the easiest way for everyone to be able to achieve this! In order to help people organise closed, highly trusted groups where they can save, invest, and borrow money more effectively, The Money Club has developed a smartphone app. To know how the app works, read this page How Does The Money Club Mobile App Work?
You can make significant returns (25% annually) by investing a small sum of money every day, every three days, every 15 days, or once a month. The returns from FDs and RDs are 3–4 times lower than those you can earn from this online chit fund platform. The total registered members of The Money Club are more than 2.7 lakh.

Know How the Money Club App Works Here

The Money Club also runs a Money Club Referral program which is one of the best passive income idea available for users. This program is open to users registered with the platform. You can invite your friends by sharing your referral code with them. First, ensure that they enroll using your referral code. You become eligible for earning passive income, depending on the referral’s activities on the platform. Become a  Money Club Agent!

Rent From Real Estate

Rent from real estate is one of the best passive income ideas to generate regular cash flow. If you have the cash to invest in a rental property, you could make passive income for years by collecting rent payments. Except for owning the property, there isn’t much work involved with this. This has been simpler in the age of the internet because consumers can easily locate properties to buy, rent, or invest in. The property could be commercial, warehousing, industrial, or residential, depending on the area and demand of rent.

Sovereign Gold Bond (SGB)

Gold has always been a favoured investment in India. In recent years, notably over the last five, investing in gold has also helped many people produce passive income. These days people prefer to buy gold bonds. The SGBs are exact substitutes for holding real gold as they earn you interest between 2.5% and 2.75% annually, which is at par to the bank interest paid by major national banks. So, instead of facing hassles like storing your precious gold safely you can watch your digital gold earn interest every day!

Affiliate Income

Affiliate income is basically the referral commission you earn when customers use a specially coded link on your website to make a purchase. The prospects are infinite because thousands of businesses provide affiliate commissions for their goods or services.

One of the best ways to earn money online is to monetize a blog by doing this. You may make a lot of affiliate revenue online if you build a large blog audience online and monetize your site with relevant affiliate links.

How To Earn Money Online With Little Or No Investment

Display Advertising

Display advertising is another source of passive income. This is similar to affiliate revenue in which you need a website or blog with a lot of monthly visitors in order to generate income this way. You could earn a good amount of money from display ads if you work hard to create a website that receives tens of thousands or even hundreds of thousands of monthly pageviews. This passive income idea can comparatively take a longer time in order to generate significant revenue.

Active Income

Active income is defined as income that is obtained via work, such as doing a job in exchange for a wage, operating a business in exchange for profits, undertaking a freelancing project in exchange for payment, etc. The reason for wanting to make that money is the next thing to consider. Most people rely on active income to cover their daily needs. Active income is typically what we use to cover our daily expenses. You may or may not enjoy your current job profile, position, organisation, work environment, business, etc., but you have to keep working since it is necessary for your survival.

An active source of income necessitates a person’s actual presence and material involvement. In this system, there will be no income if there is no active engagement. It is more reliable and faster than passive income.

Examples Of Active Income

Salary

A person is considered to be earning an active income if they go to work at eight in the morning and leave at five in the evening and receive a salary. In essence, you are exchanging a year’s worth of your time and skills for a predetermined sum of money. You can save a little from your salary every month and invest wisely so that you can create a passive income stream. If you are salaried and new to personal financial planning, this article is for you Financial Planning for Salaried Employee: The Basics, Tips and Strategies

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Hourly Wage

The hourly wage of income is probably the most common source of income. You can make an hourly wage as a delivery boy, or as a full-time job as an adult. You could even be able to earn an hourly rate doing a nighttime side job. One of the best features of this type of income is that it frequently offers the chance to work overtime.

Commissions

Any commissions you earn as a salesperson are an example of active income. And this one has the greatest potential to earn you a significant sum of money out of all the active revenue sources. Agents in the real estate industry are an example of this. A fixed commission is paid to a real estate agent on the sale of a property. So, if they sell a home for Rs.50 lakhs, and get a commission of 3%, then they just earned Rs.1,50,000.

Consulting And Freelance Services

The two best ways to generate an active income are consulting and freelance work. If you possess a marketable skill set or if you can assist a business in improving a certain aspect of its operations and generating more income you can consider this form of income.

For instance, if you have excellent photography, videography, web development, graphic design, or writing skills, you may launch a freelance business, providing consumers your services.

On the other hand, you may provide consulting services to businesses that require assistance in your field if you have a thorough understanding of social media, digital marketing, logistics, or business operations. With this active source of income, many consultants are able to live extraordinary lifestyles.

Difference Between Active Income And Passive Income

Particulars Active Income Passive Income
Meaning Requires physical involvement and material participation Individuals work under a boss  Can be earned with little or no effort and without material participation Individuals are their own boss
Consistency Quicker and ensures a regular source of income Can take months or years to generate income and might not be consistent
Interrelation Provides funds for passive income  Serves as an addition to regular income
Lifestyle Effect Individuals may not be able to pursue their hobbies or have enough time for their families Individuals can devote more time and money on recreational activities and hobbies
End Result Need to be awake, active, dedicated, and working Income is generated while sleeping, vacationing and so on

With Money Club You Can Earn Around 10%-20% Return On Your Investment 

Active Income And Passive Income - Which Is Better?

Sincerely speaking, passive income is preferable to active income. Consider the possibility that you could take a vacation and return home to a larger bank account if you had a passive income stream that provided you with revenue when you weren’t working. You can nod off and earn money through your dreams.

Let’s be honest, passive income is better than active income. Think about it, if you have a passive income stream that generates money for you when you aren’t working, then you can take a vacation, fall asleep, and make money while you dream. Pretty awesome!