Anywhere you see ads for business opportunities, you'll see something that tells you how to make money without working. "Earn money while you sleep" or "Learn how I make $500/day with my turnkey automated system." Of course you can buy this magic system for $19.99. But you know something doesn't sound right.
Are there people making money while they sleep? Yes. Is it what most people think? No.
First let's start with a good definition. Active income is money you make by working. The classic example is earning a fixed amount of money for each hour you work. This is the method most of us are used to, and it's highly effective and not necessarily a bad thing. Active income is how corporations run, the economy produces goods and services, individuals make money to pay the mortage and put food on the table and maybe save for retirement.
The main drawback is what happens when you stop working? The active income stops.
This happens a lot. Companies go out of business, or merge and then go through layoffs. Healthy companies downsize or send production to a country where labor costs are lower.
It can happen suddenly. And it's not fair. But we have to acknowledge that it can happen to anyone, any time, regardless of work ethic or good attitude.
Passive income is money earned without direct involvement. Common examples are rental property, dividend stocks, even a vending route. The main idea is that passive income can deliver earnings without your direct involvement.
But it doesn't mean there is no work!
Passive income is not like winning the lottery. There could be years of preparation, and ongoing monitoring is also required.
So it sounds great, but what should we do?
For most people who are working in a job, active income is what keeps the bills paid. Is there a way for you to keep the active income coming in while slowly growing a source of passive income? That would be prudent but it's not easy.
We'll discuss how in a separate article, but for now it would be good to think what would happen if you lost your source of active income? Do you have a Plan B?
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