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Active vs Passive Income – A Comparison

Active Income

Ideally could be considered as the money you receive for trading your time as an employee by working for someone else (or a company, institution, government jobs) or an area you spend maximum of your daily working life in exchange of salary.
The earning you make from this category, is enough to provide anyone with a relatively comfortable zone. That is, you are able to pay bills, rent, buy grocery, put gas in your car too. On the flop side, active income stream never provides you with enough money to lead a truly wealthy lifestyle.
Additionally, You have to work almost every weekday for you to earn the active income. Time spend everyday ends up limiting your capacity to pursue anything else apart from your daily job.

Passive Income

Also known as progressive passive income is income stream that requires you to add a little to almost no effort to gain it or maintain the income stream. Meaning. you as the earner, ought to gain more without necessarily participating in person.
In most cases, your active involvement on passive income stream is only needed when initial investment is being done.

Examples of passive income

Interest and Dividends

This income is earned as a result of you being a money lender and charging a slight interest rate on the loaned sum to your borrowers. Other examples of interest include lending multiple businesses or companies your money in terms of small bond, especially those that yield around 5% annually. Dividends are even better than interest. First, you become a shareholder of the company you’ve spend your money on. And should the company be smart enough to own valuable assets that appreciate on the market – you might have a better go for capital gains as a shareholder too.

Real Estate

This goes two ways. First, you have to acquire an asset, either a house or building or land. Then lease or rent it to tenants either for a specified monthly rate or yearly. The other option is ‘Real Estate Investment Trust’ This is ideal for them that cannot be able to directly acquire assets initially for the purpose of leasing to businesses or tenants. REIT are investment companies and services within institutions such as banks and insurance agencies that own multiple properties but you as an investor benefits from refinances or sale or property income from the REIT firms. With the second option, you’d need as little as $500 instead of investing tens of thousands or even hundreds of dollars to acquire assets initially.

Artist/Author and Digital Files

If this lies within your passion, writing a book or an eBook and selling both with the help of online stores such as Amazon is worth earning passive income. For authors, it’s not a must for you to be the owner of the content, instead working with someone who has a story, say biography or short stories – guarantees you of earning a share of royalty for every copy sold, as the writer. More groups that could benefit on this line include photographers who could sell their footage on photo stock websites. Others include tutors. As a professional on a given field, you could record course lessons for variety of subjects and upload them on platforms such as Udemy, for students and other professionals to purchase. Painters, graphic designers, have a shot at it too. The list is endless…….This stream might need you to heavily market your brand for the purpose of positioning your content well enough on the market prior to earning a good income.


royalty for music producers and artistes alike is another source of passive income. Online content creators constantly need great music to add on their content and they’d be willing to share the revenues with you as the music copyright owner. Furthermore, you could join streaming websites such as spotify and earn royalties whenever people listen to your music too

Selling Apps and software

This requires you to be a programmer or if not, consider hiring one. Together you can work on ideas that can be developed into an app that then can be sold on Playstore for Android users or Appstore for iOS.


This has become popular of late and is really giving hotels a tough time. How it works is: if you have an extra room in your house or apartment that you own, you could accommodate guests for some affordable prices. Though you should be ready to tidy up every time after the guest, in preparation for the next one. But it’s worth it

Others include: Laundromat, vending machines,

Opportunities available for passive income are always there, regardless of the location – as long as you are passionate and willing to do an upfront initial investment.

Update by Thomas Sommer:

Why not to start with passive income when you start your own business

if you already have an active income by a regular job or if you have plenty of financial resources then you can consider to start a passive income when you start your journey to your own business. But if you want to start with a passive income that’s not a good idea since you will need money to pay your bills, and a passive income, although it might become very lucrative, doesn’t return enough profit from the beginning due to its nature. Passive income takes sometimes several years till it generates a substantial income.

success chart

An example:

Let’s say you just did an education as a web developer. So you want to become successful now. In case that you want to start with a passive income you will beginn to develop an new software, like a web application or a mobile app. But if not wonders happen or you buy the development rights from someone else this might take you up to one year till you will be able to sell your masterpiece.

So it is much wiser to do some web design or programming tasks in the beginning till you are able to have enough money so that you can afford to develop your software as a side project. Or you could also outsource some tasks then. LIke this it will take you maybe a bit longer but your business won’t run out of money.


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