Of all the ways to make money, two methods that you’ll hear about are active and passive income. To familiar parties, making money through either is a part of a daily routine that is rarely thought on. If you’re new to the workforce or you’re just now being introduced to modern workspaces, these are two terms that could make or break your bank statements.
Before you get started on bringing in passive income or active income, you should know the ins and outs of making money in as many ways as possible to up your chances of maximizing profits.
The Difference Between Active vs. Passive Income
Active income is earned by actively working towards a work goal and contributing a significant amount of time and effort into a certain project or business.
Passive income is earned through projects on the “back burner” that don’t require daily maintenance or a lot of effort on your part to earn its own stream of income.
Active Income
Our best example of active income is your current wage or salary earned at a traditional nine to five job. When you sit at a desk or clock-in and dedicate set hours to your profession, you’re earning active income.
Because active income doesn’t often present opportunities to grow and earn a larger paycheck at the end of each pay period, it may be a wise decision to take up a passive income stream to boost your total amount of money earned at the end of each day.
Passive Income
Passive income could be your ticket to leaving behind your full time job, without being actively involved in any of the daily proceedings of your passive income stream.
A prime example of passive income is a successful blog or YouTube channel. Plug into your creative side and post to the world wide web to earn money and get one step closer to financial freedom without putting in the long hours.
Favorite Passive Income Streams
Using online resources to generate passive income is only one of many ways to watch the passive income roll in with little to no effort.
Leaning into several different branches can not only increase your chances at securing worthwhile passive income, but may open up new, better alternatives for earning active income as well.
Real Estate Investments
When investing in real estate or any sort of rental property, it’s important to understand that an investment property differs from the income generated by a real estate agent.
You have a few options when it comes to passive retail investments.
Remote Ownership
The first is remote ownership, which allows you to have as much control as possible without crossing the line into being a source of active income.
With this option, you leave your properties in the care of a property manager so that they are responsible for the property and its upkeep while you receive passive income simply for being the owner of the aforementioned property.
Remote ownership can be compared to being a landlord without having the deal with any of your potential renters while still earning rental income, should that be the route you choose.
REITs
Real estate investment trusts, or REITs for short, are another hands-off option that still allow you at least partial control.
These are largely companies that act as trusts, and your passive income will mainly lie in the hands of the types of real estate that they choose in invest in on your behalf.
These can be traded similar to stocks, and like stocks, they don’t come completely risk-free.
Real Estate Funds
Along the same vein, you have real estate funds, which are mutual funds that are incredibly diverse. These types of investments generally include a good bit of different types of properties, as opposed to investing solely in commercial real estate.
These are investments that can also be left in the care of professionals so that you won’t have to end up pouring hours of research into what you should invest in, resulting in truly passive income.
Blog Revenue
Starting a blog can become one of the easiest ways to make passive income once you have the ball rolling and a decent amount of traffic coming to your website.
With blogs, you have a wide range of options for earning passive income, ranging from affiliate marketing to multiple advertising opportunities once you have a consistent, loyal audience.
Blogs make passive income through affiliate marketing, display advertising, recurring commissions, online course sales, sponsorships, and more!
Affiliate marketing is one of the easiest ways to make passive income with little or no effort after you get your bearings and links posted.
Related: How To Start A Blog That Makes Money In 10 Simple Steps
Affiliate Marketing
Affiliate marketing is a type of partnership that a blog or individual may have with another website or larger company where you will earn passive income when your readers click on affiliate links that you leave in blog posts.
An affiliate link will lead your readers or customers to a product, and when they purchase your advertised item, you will receive a cut of the profits just for including a simple link!
A good affiliate partnership for those of you starting out is Amazon Associates.
Though affiliate income can be earned no matter where your link is posted, utilizing your own blog to generate income and clicks may end up aiding your blog’s overall growth down the road.
Why Should I Choose Affiliate Marketing?
Because affiliate marketing is so simple, it’s easy to apply and utilize it in almost any platform.
Adding links in your posts on your blog can increase traffic and profits, while advertising products on a YouTube Shorts or TikTok page can garner income, more followers, and cement your reputation as a reliable person to look to when making quality purchases.
Display Advertising
This type of advertising is one that everyone who has ever been online will be familiar with.
With display advertising, you combine gripping text with colorful, fun graphics to grab the attention of your website or blog’s visitors and generate income with every click.
These ads on the sides or in the middle of blog posts can generate passive income when clicked by a potential customer, and can bring in anything between ten cents and seven dollars per click depending on the advert.
However, display advertising on a blog may take some up-front, active effort in order to bring in passive income later.
This method when combined with YouTube, however, can involve minimal effort on your part outside of creating content for ads to run on, so all you have to worry about is keeping your views high to continue to earn passive income.
Online Course Sales
Selling courses online requires a combination of putting in active effort up front and bringing in passive income later.
Create the course of your choice and showcase your work in a video or blog post to potentially catch the eye of an interested customer.
How To Create Passive Income via Online Course Sales
By pointing out the highlights and everything your readers have to gain by signing up for your online course, you increase both your chances at pulling people in, and your course’s overall allure.
After creating a complete course and marketing it to your audience, your passive income will begin to roll in once people begin signing up and seeing your course through.
Because your courses can be about whatever you want, it’s easy to create as many as you like until you’re satisfied with the combination of passive and active income you’re earning through this method.
Related: Boost Your Online Business Without Breaking the Bank: 10 Free Resources You Need to Know
Why Passive Income Is Important
If you’re making ends meet with your current pay, why should you consider passive income?
Passive income has nothing but benefits to offer, because it is, in a way, an effort-free way of earning money. When you create passive income, you open the door to improving your personal finances, creating a better flow of cash, and take one step closer to financial freedom and security.
The more money earned, the better off you, your family, and your business will be, which is why passive income is the route to pursue instead of taking up a second or third job to earn active income.
Related: Passive Income Businesses That Offer Life-Changing Income
Common Active Income Streams
Now that you’ve gotten your fill of passive income opportunities, you should have the chance to examine the most common streams of active income and familiarize yourself.
Active income is the most common way that the average American earns their keep, and by using a method of active income instead of solely passive income, you might find yourself with added benefits you may not have expected.
Salary
Your salary is the amount of money you earn for spending a predetermined amount of time at work, and is a less flexible way of earning income.
A salary is just a fancy way to say what you earn at your job at the end of each year, no matter how much you work.
An active income salary can depend on the type of job you have and the work you do, so choose your profession carefully.
Hourly Wage
Hourly wages are where most workers start out, whether it’s mowing lawns or braving the fast food industry. Your hourly wage determines how much you make per hour, and is a more flexible way of earning active income.
Instead of having a fixed salary, you earn money by the hour, meaning that when you move into overtime, you’ll be paid for your efforts.
Commissions
Commissions come in many shapes and sizes, from real estate to online art, and can offer ways to earn active or passive income, depending on what types of commissions you take.
Real estate commissions, for example, are a percentage that real estate agents take away from a sale when they close a deal. The exact percentage and commission fees can be negotiable, but it all depends on the realtor.
Consulting & Freelance Services
Working as a freelancer or consultant can be exciting and open up new opportunities to earn passive income while working solely online.
Put the Free in Freelance
Offering your services as a freelance writer, editor, or photographer are excellent freelance career options if you prefer to tap into your creative side, even if they end up requiring a lot of time and care to perfect your craft.
Be the Sultan of Consulting
Consulting services require less creativity and more authority in either a single field or multiple, depending on the advice you plan on offering.
Whatever your method of self employment may be, you’ll have opportunities to bring in significant passive income whether you choose to consult or try your hand at freelancing.
Why Active Income Is Important
Active income is arguably more important than earning passive income because one acts as your baseline to live off of, and the other acts as a metaphorical icing on the cake.
Final Thoughts On How To Approach Active Vs. Passive Income
Our biggest piece of advice to you is this: the key to independent wealth, stable savings accounts, and financial security is to find a happy balance of both passive and active income.
While active income is necessary for creating a stable life in the present day for you and your family, incorporating passive income into your work goals can aid in creating income streams that don’t drain every free hour from your day.
The end goal is to earn money through almost solely passive means to free up your days and ensure that your family is well cared for for generations to come.
What do you do to earn money alongside your active income and passive methods? Do you have any tips or tricks of your own? Do you have any passive income ideas of your own? Feel free to share with us or reach out with any questions on how to make more income!
