Passive Income VS Active Income
What is active income?
Active income is income that we exchange our time (usually 8 hours or more) per day, 5 to 6 days per week for our month end salary.
The math equation for active income is:
$= XT
Where:
$-Income
X-Multiply factor
T-time or hours you exchange per day per month
Multiply factor shall be depending on what type of job you working as, it might be greater than 1 or even less than 1. From the equation it shows that the more time you exchange the more income you going to get, you have to work hard in order to generate more income. However, these active incomes stop or reduce once you no longer able to exchange your time for money. Nearly 90% of this world peoples (employee or self employ) are depending on active income to sustain their living
What is passive income?
Passive income is the income source that dint effect much by the time that you invested, it more on using money or asset to generate money.
The math equation for passive income is:
$=Ax
Where:
$-Income
X-System
A-Asset or money
From the equation, it shows that passive income is almost independent from time. Once the passive income starts and it will generate income again and again. Please do not misunderstand that passive income are not required to work hard, passive income do require working hard as starting. However, passive income only requires working hard once to earn your asset, and then through a system (x) it will continually generate income. X might be less than 1 or greater than 1 depending on the system used. What is the different between active income X factor and passive income X factor? The difference is for active income, no matter how big is your X value; it will only increase your income proportionally. But for passive income X, it will increase your income by exponentially. Example of system (X) for passive income is, interest income, dividend, real estate, royalties (franchise) and networking.
Which is the right type of income?
Which is the right type of income? As mentioned early, both type of income require us to work hard. However, passive income only required working hard at the starting point but active income required us to continually work hard in order to continually generate income. Active income is Slave of Money (work hard 40 hours per week) and Passive income is Master of Money.
I sure a lot of people will say that they don’t have the money or asset to start the passive income, as most of passive income (except networking) require to invest quite amount of starting asset in order for your to actually see the money come into your pocket. You can accumulate the money that you earn from active income and convert it into passive income source through a system.
From the math equations, I can conclude that passive income is definitely a lot better than active income. As a matter of facts, we should not only depend on active income; we should generate more passive income than active income.
