Passive Vs. Non Passive Income – The Definition and Differences

Do you know what the difference between passive vs. non passive income is and what the definitions of both are? There are distinct differences between both and it’s important to understand them. I feel it is important to diversify your sources of income to be safe in today’s economy. Having multiple sources of income will provide a big safety net for you if you ever get laid off or fired from a job. Also, passive income allows you to literally earn money when you are not there – you can make money while you sleep or go on vacation! With some learning and hard work, I do think the average person will benefit from creating alternative, passive sources of income.

What is the Definition of Regular Non Passive Income? – This is simply money that you make from your regular job and it requires your effort and physical prescence. It’s important to understand, however, that some forms of passive income actually are non-passive in the beginning but then turn to passive. I’ll explain in more detail below.

What is the Definition of Passive Income? – This is money that you make passively that doesn’t require your presence or effort.

Some Forms of Passive Income – An example of the easiest form of this type of earnings with no effort would be investing in a bond, an exchange traded fund or a dividend stock which pays a high yield. This requires the least amount of effort.

– Another example is investing in peer to peer lending for yield. This website basically allows you to loan money to regular people and earn good interest on that money. You cut out the banks and go directly from borrower to lender. I go into more details here in this article on Investing in Peer to Peer Lending. You can earn 7-10 percent annual yield with little risk if you do it right.

– Like I said above, there are forms that actually require your effort in the beginning to build but then turn passive later. An example is blogging online and starting a niche blog or just starting your own business.

– Investing in real estate that cash flows is another good way to earn money passively. Although you definitely need money to start. The difference between the rent your property brings in and the amount of expenses is the money you make each month. I think if you have the money it’s definitely something to consider.

Other Great Passive Income Ideas

The best thing I think you can do is try to create as many sources of income as you can and work on building them over time.

Here I list some of the greatest passive income ideas for doing this. I think this will inspire you to at least get started.

While it may take effort to begin, I feel that building multiple streams and sources of passive income is a great idea.

Thanks for reading this article on the difference between passive vs. non passive income!