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Passive Income Versus Active Income

Updated on November 20, 2010

Everyone needs an income to survive, but did you know that not everyone has to work for their income?  I bet everyone would like to earn money without working, right?  There are two types of income - passive and active. Most people (including me!) are working each day to earn an active income. Some people earn a good bit of money passively though, and I believe that is the goal for most people, at least long term, rather they realize it or not.

Whenever you work directly for a paycheck or other benefits you are actively earning an income. Almost everyone needs this type of income at some point in their lives. But if you ever want to retire you need to start earning some passive income. Passive income is when you are earning money without actively working.

I will give you examples of both active and passive income. When I do work for my employer each day I earn an active income. If I don't work I don't get paid. When I took the month of October off from writing hubs, I still generated an income through the Google Adsense program here. This required no work from me in October so it is considered a passive income.

Most people generate a passive income from investing. This can be in CDs, money market accounts, rental properties, retirement accounts, etc. If you ever want to retire, you are essentially hoping that by the time you hit 65 or 70 you will be generating enough passive income via Social Security, pensions, investment, dividends, etc. for you to live on but yet not work actively anymore. You work hard for years earning an active income in order to fund your passive income during your retirement years.

You don't have to wait for retirement to earn a passive income though. There are many other ways for you to do this. Writing for Hub Pages generates passive income for many people each month via the ad programs available on this site. If you own the royalties for something such as a book or music then once you have done the active part of that work, you will enjoy passive income from it for years to come. The internet and the blogosphere have opened up a world of opportunities for people to earn passive incomes. Get creative and start figuring out ways that you can earn money - even when you are not working.

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    • profile image

      mikel 

      7 years ago

      Read and Help me a lot

    • lex123 profile image

      lex123 

      7 years ago

      Very well written hub showing what is active income and passive income. It will be very useful for many who do not know what a passive income is. Thanks for writing this hub.

    • Pamela99 profile image

      Pamela Oglesby 

      7 years ago from Sunny Florida

      Jennifer, A simple concept well explained.

    • daydreamer13 profile image

      daydreamer13 

      7 years ago

      Thanks for the good advice. Voted up.

    • Rajnil profile image

      Rajnil 

      7 years ago from Ahmedabad, India

      Hey Jennifer,,i really liked this article of yours. These days people generally follow the rat race,getting employed by a good company and work laboriously day n night to earn. There should be a way to earn money and be with family members simultaneously. This is the way..passive income.

    • charlesroring profile image

      charlesroring 

      7 years ago

      I personally have enjoyed writing as my profession. Every month, I go to the post office in my town to withdraw some money earned from revenue sharing given by Google through its Adsense program.

    • phildeeze profile image

      phildeeze 

      7 years ago from california

      Great hub! I am only 24 years old and have managed to build a passive income online. It is a great dream that takes dedication to achieve.

    • kosanya profile image

      kosanya 

      7 years ago

      These days I do not think my retirement will ever come. yeah, we need the passive income for sure.

    • earnestshub profile image

      earnestshub 

      7 years ago from Melbourne Australia

      Very well written and informative hub Jennifer, I have a few sources of passive income including hubpages.

      I have a friend who sold life assurance and insurance as well. He gets paid again and again when his customers renew their insurance Bill. After 35 years of work that he loves he is retired on a massive income from all the insurance renewals he gets each year.

    • KoffeeKlatch Gals profile image

      Susan Hazelton 

      7 years ago from Sunny Florida

      Good advice. It is possible to make the passive income here on hubpages but you have to work hard to get to the passive.

    • Hello, hello, profile image

      Hello, hello, 

      7 years ago from London, UK

      Great hub and good advice but how?. Thank you.

    • profile image

      David Swan 

      7 years ago

      I believe a passive income is possible and it shouldn't take too much tweaking and if it does you can always outsource the tweaking to someone in India as long as you are making enough from your passive income

    • HealthyHanna profile image

      HealthyHanna 

      7 years ago from Utah

      This is a good hub. I totally agree with the concept. But, I might add a piece of advice of my own... don't plan on it for long-term. Even 10 years ago, this concept was somewhat realistic, in today's world things, products, companies, employees are changing so fast, that it takes a constant effort to maintain your 'passive income stream(s)'. Your responsibilities may change, (from being a salesman, to being a motivator) but the time and effort it takes remains pretty much the same. Bottom line is... Passive Income Is All In The W ay We Look At WORK. What is work to one, is play to another.

    • Karanda profile image

      Karen Wilton 

      7 years ago from Australia

      Good, commonsense in this article Jennifer. Early retirement is something I am aiming for, so putting in the hours now to earn the passive income later seems like the way to go.

    • fucsia profile image

      fucsia 

      7 years ago

      Good Hub. Very useful.. Have a passive income is difficult but not impossible. I am working for it!

    • vocalcoach profile image

      Audrey Hunt 

      7 years ago from Idyllwild Ca.

      Good hub, Jennifer. I always learn something new and exciting with your articles. Thanks so much.

    • TheSenior profile image

      TheSenior 

      7 years ago

      With me I am an investor into stocks and the risky ones at that - why because the risky ones are better posied to make it.

    • akirlew profile image

      akirlew 

      7 years ago from Phoenix, AZ

      Jennifer, great hub. I once was talking to someone who said "wealth can be measured in months." He was obviously trying to get my attention and he did. He went on to say the true measure of wealth is how many months you can survive without bringing in income.

      The power of passive income is that if you build it to a month income level to exceed your monthly expenses, you are "perpetually wealthy." Of course, you need to watch those income streams to make sure they don't go away (as I have seen in the past with several).

      I recommend that people build diverse passive income streams so that if one industry takes a hit, you still have others and time to build news ones. when the mortgage industry took a hit a few years back, I have 2 very well running affiliate sites that generated leads. I don't need to tell you what happened in light of where the mortgage industry went and the impact is still felt today.

      Another way to ensure the longevity of the benefits of passive income is to set up an Infinite Banking system. I wrote a hub on Infinite Banking and encourage everyone to learn what it is about and how it can help them protect their passive income while building long terms wealth. Here is a link to the hub:

      https://hubpages.com/money/What-is-the-Infinite-Ba...

    • GALAXY 59 profile image

      Galaxy Harvey 

      7 years ago from United Kingdom

      Thanks for this, Jennifer. Very helpful advice, I know that most people would love to be able to sit back and enjoy the good things in life at the same time know that they were earning a passive income.I do believe that it is possible to earn money here on hub pages, people like yourself prove that every day. It is hard, though, without some help and advice and great hubs, such as this one, provide just that.

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