What is passive income? How is it differs from an active one?
This was asked by FRANCIE MCWILLIAMS- JEFFERS.
See my answer on this live Instagram video. Have a question about personal finance and financial freedom? Add your question in the comments and you might be featured in the next video.
Here is the full text of the video:
Hello everybody! How are you? Welcome! This time I’m broadcasting from the US. Last week was Israel. And I’m in the US in Maryland. Next week is Manhattan. So, great having you.
It’s the first time I’m actually doing it at a proper time I think for the US.
So, glad to have people here. And we are on a Q&A session for Financial Freedom and Personal Finance for entrepreneurs. This time I have a question from FRANCIE MCWILLIAMS- JEFFERS.
And she’s asking me about Passive income and Active income. That’s a following question.
“What is a passive income? How’s it differs from an active one?”
So Francie, this is a really good question.
Passive income is anything that is not traded for your time 1 to 1. And this is versus your Active income which is actually your salary. So once you stop working the salary stops coming to your bank versus passive income where you set it up once or maybe that’s a relatively low maintenance. And then it just runs.
Now, a few examples for that would be, stock portfolio.
That’s one example. Or you get dividends for that or the stock goes up. You didn’t really put the same time. I mean, you bought it once and then it just runs. Of course, you can lose – there are other risks for stocks but this is one example. Another example would be buying a house – renting it out! You’re buying it once and then it keeps running or very low maintenance. You don’t need to do some management. It’s not a 1 hour traded for one hour of whatever or just like your salary.
Another example given is,
You build a business and you have a team running it at some point. And you’re able not to work fulltime. The team runs that and you get a dividend from that business. That’s another example So all these are passive income versus an active one,- as I said, this would be your salary, your work either for monthly one.
So, this could be your salary or this could be,- if you worked by the hour, so by the hour. But definitely, anything that you’re creating time for money- is an active one. And you definitely wanna go and prefer to have passive incomes.
“So you set it up once and then it runs very low maintenance”.
So now, if you have any more questions about personal finance and financial freedom, I invite you to ask.
I’m gonna put you online here on the screen so you can ask this through video or if you feel more comfortable, I will just offer you to just put this on the comments.
Please join next time.