What is income? Well an income is defined as the money which is earned by doing hardwork.

Hardwork is done by everyone but why is their a difference between the incomes of many people? You may cite the reasons like difference in qualifications, difference in aptitude, difference in number of working hours etc. But what about two people having same qualifications, aptitude and same number of working hours but different incomes. There are many people whom we all know in our day to day life who work for hours and don’t earn the much they deserve .

One of my friend told me that whatever a man actually ,really want s in his life he gets all. In short your life is what you think. Have we ever thought something beyond our daily routines? How much time do we give to ourselves? How much time do you daily take out and think what you really actually want in life? And this was the time when I was introduced to the concept of PASSIVE and ACTIVE INCOMES.

ACTIVE INCOME

The word “ACTIVE” income means income earned by doing a daily act. This daily act is done almost by all of us. These daily acts includes jobs, businessmen including shopkeepers, practices like lawyers, doctors etc. Though these people are from different backgrounds, all of them are work on daily basis meaning amount of work done= amount of money earned.

But in the present situation, people in job are not earning what they deserve. They are giving in more time but they don’t get equal in return. Same thing is also applicable for businessmen also. The return is quite less than the investment.

Also, what happens if you are not able to go to work for few days due to any reason? You are not paid for the leave or you lose the profit in the business. This means that whatever be the circumstances we have to work daily in and out.

Another aspect of our life is our family and friends. Have we ever thought that, how much time do we give them? What we do daily? Getup, freshen up, have breakfast, rush to the workplace spending our entire day and come home in the evening tired, rest for sometime, have dinner and then are off to sleep. So where does the family stand in your priority list now? How much time do u get to spend with the people who matters the most, hardly an hour or two.

How many of us are really satisfied with our job? Satisfaction here does not mean the love for the job or income earned. But it means are we at the correct place. Do we get support from our colleagues or appreciation from the boss? What happens when we don’t get correct appreciation, I feel dejected, what about you? Just give it a thought.

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. 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? If the answer is no, it’s active income.

PASSIVE INCOME

This is the type of income which is misconcepted by the people in such a way that it can be only earned by those people whose luck favours them with the money of the ancestors. Isn’t it?

But its not such a way. People earning passive income also do a lot of hardwork. Then whats the difference between the two incomes.

People in this category work once and earn again and again. These people create a system and the system works for them. These people do not focus on the qualification, they just focus on the time multiplication meaning their work is done by hiring people in the jobs and others to whom they give franchise.

Generally the people falling in this category are Singers, writers, big businessmen like Mittals, Murthis etc. The system created by them is such that even if they are not working, the money flow is continuous in their account. They don’t work for money, money works for them.

But how does a common man like us get an opportunity to earn passive income? The some of the sources of passive income are:

1. Interest income
2. Dividends
3. Real Estates
4. Royalties
5. Networking

I am particularly interested in networking. This is also called MLM of Multi Level Marketing System. This is another form of passive income yet a lot disagrees to its pyramiding concept. It’s like building a team of sales people who will provide you with huge passive income as your group and sales increase.

So there you are the sources of passive income. The secrets of the rich are to increase the streams of income more on the passive income rather than on the active income so that if one stream of income dries up, there will be other streams to support them. This what makes rich get richer.

Which is the right kind of income?

Both types of income require hard 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.

Think about it

Do you want to work 40+ 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.