When looking at bringing in money, there are two ways that you can initiate an income stream. It will either be passive or active. These are not unheard of terms for most people,but they are not always clear to those who are outside the world of business and investment. Before deciding which is the best way to make your money, understanding what each term means is important so you are able to build the most profitable financial scenario possible for your particular life situation.
The basic definitions of passive and active income are straightforward. Traditionally, passive income has been making money through stocks, bonds, and real estate that all require capital gain income you already own. However, passive income can also be defined as creating an online business or obtaining an investment that requires little capital and the work(sweat equity) that has been done beforehand. Passive income is an income stream that needs very little ongoing effort to continue to draw a consistent income and show promising results for financial freedom. Active income is different. It is income that you get for doing something such as performing a service or selling goods. Wages, salary, bonuses and tips are all different types of active income. These require something to be done in a specific time period for payment and can provide a steady cash flow based on the amount of work you do.