How many legs does your table have?

Curious as to the title of this edition? The table, as we call it, is a metaphor for your life, and the legs are the sources of income that support your life. Have you ever thought about how many sources of income you have? It should be no surprise that the more income you have coming from different sources, the better insulated you would be from the loss of any one source. If your only source of income is your job, you would do well to develop additional sources.

“But my job takes up so much of my time!” More than likely this is most people’s answer when they start thinking about creating another stream of income, but trading time for money isn’t the only way you can pad your bank. As of late, passive income has become almost a buzzword, and there is almost an attitude that passive income is better than active income. So what are they, and what’s the difference?

Active income

The definition of active income is income earned in exchange for duties or services rendered during a specific time. In other words, it’s the old 9 to 5 grind or any position which requires the trade of time for money. What else falls under the active income category?

Door Dash, Instacart, and any other delivery-type job are considered active income. Even though you ARE making more money after you finish your regular day job, you’re still trading time for money. Eventually, you’ll just run out of time. Of course, delivery jobs can also be full-time jobs. Just remember that you’re also adding to the wear and tear of your car when you’re delivering.

Other jobs such as writing, film editing, bartending, etc would also be considered active income. Granted, it’s not as sexy as making money while doing nearly nothing, but it pays the bills, puts food on the table, and helps us achieve other financial goals. Most of us were not born rich, so we depend on this income. To help dig yourself out of this continual cycle of trading time for money, consider using any extra money to help build a business or an investment portfolio. You’ve worked hard for your money. Find some way to make it work for you. Money in the bank will only be outpaced by inflation.

Although we are not investment advisors, we are here to help you understand that there’s more than one way to make money. Investing is just one form of passive income.

Passive income

Contrary to the name, passive income does not mean that you don’t have to do anything for it. It means income with minimal effort. Passive income can come with the investment of money, time, or both. For example, a dividend stock is a stock that pays you while you hold it. However, it requires that you spend the money to buy the stock first; thus, the investment of money. If you decide to go this route, consider researching DRIP (dividend reinvestment program) campaigns. This allows you to reinvest your dividends, resulting in more dividends. Don’t forget that stocks involve risk. They do not always perform well, and there is a possibility you may lose money. You must do your research.

Another example of passive income would be a vending machine or ATM route. You would literally be making money without having to work all the time, but again, you would have to purchase the machines and supplies first, and then establish your route (an investment of both time and money).

In other words, passive income is not free. It requires upfront work or monetary investment. What if you don’t have money to start a passive income stream? You can start a blog, youtube channel, email newsletter, and/or create digital products that can later be monetized or sold. In fact, you’re reading an email newsletter that we’ve started for free with beehiiv.com. We are not guaranteeing success in any way, shape, or form. We are simply presenting possibilities. And yes, we have several sources of passive income that we have listed in this edition of the newsletter.

If you already have money and would like to make more, you could always purchase an existing business. My personal favorites are businesses that do not require a lot of effort such as digital businesses. A few examples of low effort, brick and mortar businesses would be apartment buildings and parking lots. Hiring a management company to help you run the day-to-day will give you back your time to do other things.

No matter which route you choose, learn the business, improve efficiency, and outsource to scale up.

Eventually, your passive income sources could replace your active income. This is when you effectively become your own boss. Until then, you can use your current position to fund your passive income dreams. Just remember that action is required to transform dreams into reality!

Prefer video over the written word? The subject isn’t the same but feel free to check out: