In a nutshell this is the number 1 difference you should think about when comparing passive income vs. non passive income. Around 95% fall into the first category, of working to earn money, while the other 5% works to generate income.
The incredible thing is that this difference has absolutely nothing to do with intelligence. It’s not that one group of people is smarter than the other, they’ve just learned to approach money, investing, and earnings with a different mindset than the majority of the population.
Passive Income vs Non-Passive Income: Understanding The Two Sides
You might also think of this as “tradtional” or “normal” income. In fact there’s nothing inherently traditional about it, but since the overwhelming majority of the population earns their money this way, it’s come to have a certain bearing in our society.
Non-passive income is exactly what you think of when you work a job. You put in your time, earn a wage or salary, and then spend you earnings to live your life. If you’re smart and/or earn enough money, you’ll also save as much as you can and invest your earnings towards you future.
There are advantages to this type of approach to income. You’ll be guaranteed your salary for your time worked and you can begin earning money much more quickly than you can with passive streams. Whether it’s a job or a career, it pays.
The Passive Income Difference
Passive income, on the other hand, is income that you earn as a return on a previous investment. That investment can come in the form of either time or money, but it is an investment.
Unlike non-passive income, there’s no guarantee you will ever see a dime from your work. But, the flip side is that when you do see returns, those returns often pay out for years, decades, and even generations.
To think about this simply: would you rather earn $100 now or $1 a month for the rest of your life?
Unless you’re absolutely desperate for money right now, you should probably take the recurring payment. Not only will this eventually earn more than the one time payment, but it’ll give you the ability to reinvest and compound your earnings. This can have a very important multiplying effect and get you on the path to achieving real wealth.
What This Means For You
Basically, this distinction means two things:
- You need to develop a passive income mindset for your work. Look for passive income opportunities to build assets, rather than earn a wage.
- Little investments (of time or money) you make now can payoff in big ways down the road.
You can develop a passive income stream for yourself. You can also start to build that asset today. Learn more about how to achieve financial income freedom here, and then read about how to get started here.
You can do this, but even more than that, you deserve to do this. It’s the only way you’ll ever build real freedom. And it all starts with a single post.