What is Active Income and Passive Income?

By: Bankbychoice.com0 comments

Most people will have single source of income, which might be from the source of salary credit, revenue from business and so on. This in financial terms referred as “active” income. While we are in the process of earning our active income, we can also create an addition source of income which is called as “passive” income.

Let’s put this in context, active income means you work for money and passive income means money works for you. It might be from various sources like rentals from owned properties, interests on savings funds, dividends from stock investments, royalty for singing, patent right royalty and so on.

When we start our professional life most of us will be dependent only on active income and passive income in most cases will be zero. When years pass by, we should create multiple avenues which can create passive income. If you fail to do so, after retirement it will be very difficult for you to sustain. So be smart and think ahead, make budgets and create pockets of investments on monthly basis which can start giving return to you in the long run.

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