We all need some income to survive and afford essential goods and services. However, having a single income stream is dangerous since the loss of income can lead to financial ruin.
What Is Income?Income is money generated through the exchange of labor, goods, and services or by investing capital. Individuals usually earn wages and salaries, while businesses profit by selling their products and services.
Active or Earned IncomeEarned income is relatively straightforward to understand compared to other types of income. In addition, it is also what you typically use for purchasing assets that will provide you with passive or portfolio income in the future.
The vast majority of people will earn money via their primary source of income. In most cases, this is a traditional job. People will work a job, earn a salary, and get paid for their work.
Passive IncomePassive income comes in two forms. The most effortless form of passive income is due to owning assets. Typical examples are real estate passive income due to owning a rental property or investing in an apartment building.
The other type of passive income, though it sounds effortless, does require significant upfront work. You must put in the hours initially to later enjoy your profits passively.
Setting up a passive income stream can help you generate additional money. Passive income streams can also add to your overall average net worth, creating even more passive income streams.