“If you don’t find a way to make money while you sleep, you will work until you die.” – Warren Buffett
There are two major types of incomes and both are needed to reach financial freedom. Passive income and active income are the types of incomes that should be acquired. The act of making money with no effort has been around for decades. Yet, people rarely find ways to create passive income streams.
Abhi Golhar of Forbes believes “setting up passive streams of revenue or finding ways to make money from your hobbies will leave you in a better financial situation for the long term.” The benefits to passive income streams are endless. Read more about each type of income and decide how you can incorporate both of them for a richer lifestyle.
Passive Income
Passive income can be described as earned income that does not require any physical effort. Most passive income takes a majority of the work upfront; however, if the upfront work is done correctly, you can relax and collect your checks on the backend with little to no effort. Passive income is also taxed differently than wages income. Listed below are some ideas for this type of income.
- Rent out a room
- Sell items online
- Write an ebook
- Create an app
- Make Youtube videos
Active Income
According to Investopedia, active income is income earned from performing a service. Active income is less risky because you are aware of how much you will earn each month. Active income requires more of your time and energy. The only way you can earn money through active income is through physical or mental effort. Active income is generally taxed higher than passive income. The type of active income:
- Your Job
Do Your Research
It is important to utilize both sources of income. Understanding the advantages and disadvantages of each income will help you decide which type of income to focus on more heavily. The way you choose to earn income depends on your determination.
