Home Lifestyle Passive vs. Active Income: Addressing the Myths

Passive vs. Active Income: Addressing the Myths

by Out and About Mag.

Late in the evening, while comfortably nestled in my armchair, I flip through TV channels.  Hundreds of programmes, movies, and shows—some of which I’ve already seen, some I don’t want to waste my time on.

Benjamin Franklin’s famous words, “Time is money”, ring in my head. One click on my remote control and the TV is off. Silence. Instead of passively spending my leisure time, I decided to actively invest it and focus on my studies and ideas to build and grow my income.

What is income?

Passive income

There are detailed definitions of income, typically in most countries, to understand the concept for tax purposes. More simply, we can define income as what we earn; the money that we, as individuals, receive in exchange for our work.

We have disposable income—the money left in our pockets after paying our taxes—which is spent on our necessities such as food, rent or mortgage payments, utilities, car payments, and other transportation. Suppose we earn enough to have a surplus after paying all of our bills. In that case, we end up with a discretionary income that we can save or spend on our heart’s desires: restaurants, beauty salons, vacations, club memberships, shopping, and many other activities or products that interest us.

With few exceptions, we all want to have as high an income as possible, to guarantee ourselves as comfortable and as pleasurable a life as we can imagine. Who doesn’t dream of a nicer place to live, a more comfortable car to drive, or an exotic spot for our next vacation?

Some of us focus only on active income, some on passive income, and yet, some successfully mix both sources of income.

What is active income?

It might be through our proverbial 9-to-5 job, producing and selling some goods or providing services, that we earn our income with salary or wages. When we receive a pay cheque from our employer for work done, we receive active income whether engaged in permanent or hourly terms. When we work based on our performance, we also receive active income with our remuneration being a commission. The same pertains to tips we receive from clients if we are employed in the service sector.

Often, we are so focused on increasing our active income, working overtime or having two jobs, that in the end, we have no time for people and things we love and about which we are passionate. This is when we start to question our actively earned income and think of other possibilities, reviewing passive cash flow options.

What is passive income?

Here, the more unknown and the mysterious begins. When we think of passive income, we imagine people having a lot of leisure time on their hands, spending time on yachts, beautiful beaches in jet-set destinations, having chilled piña coladas served on a silver platter, often pointing out how lucky they are. Unless one is born with a gold spoon in their mouth or has the right stars shining from above to win the lottery, one has to earn a living with no exception.

Passive income

Passive income might be the money we receive from dividends from our investment, rental property, or from work we have done and completed in the past, which keeps giving without our constant and continuous involvement. This means that to be a recipient of passive income, we have given an upfront investment of our time, money, and creativity to reap the fruits of our initial labour or capital down the road.

We might have saved as much as possible on our discretionary income, and, instead of spending money on our daily pleasures, we kept investing in the stock market or a real estate portfolio, building it gradually while investing our spare time in learning about the industries, economic cycles, market performance, and product evaluation. Much like Warren Buffett and other great investors in the past, we turned our savings and our time on research to find a profitable investment and used our knowledge about the market and economy to establish a sizeable investment.

There is also the option of monetising our hobbies, talents, and passions. No wonder social media and e-commerce platforms have seen exponential growth and interest in recent years. There has been an explosion of YouTube videos, self-published books, and the selling of creative digital ideas, which can generate a passive income with every click.

Yet, it is usually not enough to create content and then expect a miraculous turnaround. It is about investing time in researching economic conditions, consumers’ needs, as well as wants and desires to fit into a certain niche industry, and learning about traditional and modern marketing tools to introduce creative products, maintain public interest, and eventually generate revenue. It is about delivering timeless content for users, readers, and viewers to enjoy and keep buying our products for us to receive a passive income.

Back to basics

It is not easy to define creative products, which might not always stand the test of time depending on the era and current trends and fashions. However, by going back to basics and giving some historical perspective, we can analyse the current generations’ interest despite the passage of time.

Beautiful photos, prints, and engaging stories about human nature, life, and love are just a few examples of what interests the majority of us, no matter our age or generation. We still choose for our children the classic stories of Hans Christian Andersen, The Tale of Peter Rabbit by Beatrix Potter, the Brothers Grimm Fairy Tales, or books by Dr Seuss, and, of course, J.K. Rowling’s Harry Potter. We return to the great reads of Jane Austen, Agatha Christie, Sir Arthur Conan Doyle, or Ian Fleming’s James Bond adventures, just to name a few. These are still as popular in print as in movie productions, for which the authors’ trusts, cast and crew generate a sizeable passive income with each of our views.

YouTube represents a challenge to create something of lasting value as many videos fit into the “here and now” model. Despite a sudden spike of views providing temporary advertising income for one or two downloads, there has been a struggle to create continuous returns, unless there are “how-to” or general topics and subjects that viewers can keep watching years from now. Many historical and geographical publications garner a lot of attention, with millions of views from both a returning and new audience, giving the creators, subject matter experts, and other involved parties a repeating passive income for years to come.

“Some people want it to happen. Some wish it to happen. Others make it happen.” – Michael Jordan

No more wishful thinking

We need to start creating instead of remaining in a wishful state of wanting things to happen. Passive income comes as a by-product of our active involvement when we invest our time, creativity, research, and resources into projects with income-earning potential. It is about starting from understanding yourself and your passions, and then cultivating your hobbies while actively learning the nuts and bolts of presentation and marketing created products.

It is about turning off your TV and starting to actively invest in your passively spent time. It is never too late. As an ancient Chinese proverb tells us: “The best time to plant a tree was 20 years ago. The second best time is today.”

Invest in your talents and your skills. Have the courage to create. Allow yourself to build your passive income, and give yourself a chance for that piña colada served to you on a silver platter.

“Success is dependent on effort.” – Sophocles

About the Author:


annaAnna is a corporate consulting professional experienced in international capital markets, finance, and innovative technologies. Being an effective communicator, negotiator, and strategic management ambassador focused on growth and development, she served as a Director of Business Development at various organisations and has been called upon to serve as a judge and mentor at various financial and entrepreneurial competitions.

She studied Blockchain technology at York University, Lassonde School of Engineering, Strategic Business Management and Negotiations at Harvard University, and received her accreditations from the Canadian Securities Institute. Fascinated with a holistic approach to life and business, and wanting to understand the human mind and human behaviour, Anna studied foundations of psychology at Yale University.

She is a media personality known for her stage presence at various speaking engagements, popular talks, and interviews with progressive, innovative technology entrepreneurs, industry influencers, and idea trendsetters.





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