Know the Difference: Active Income vs. Passive Income

Written by Bloom Investment Counsel, Inc. on July 17, 2023. Posted in Financial Literacy.

Active income and passive income are two different types of income that can have a major impact on your financial well-being. Active income is income you generate through activities such as working, running a business, or providing services. Passive income is income generated by something that you own or have invested in such as savings accounts, real estate, stocks, or rights to something you have created.

This article will discuss the differences between active and passive income sources and how understanding them can help you make better financial decisions.

Active Income

Active income is a form of income that requires you to be actively involved in order to earn it. This means that you are actively using your time and energy to make money. Active income requires more effort and time to generate than passive income, but it can still be rewarding in the long run.

Types of Active Income

Examples of active income sources include:

Income you earn from employment.
Tips or commissions from services provided by you.
Money you earn from being self-employed or running a business.

Passive Income

Passive income refers to the money earned from sources that require you to put in little to no ongoing effort. This type of income is usually generated through investments, rental properties, and other passive activities.

It is important to understand the different types of passive income so that you can make the best decisions for your financial situation. With careful planning and research, passive income can be used to supplement your active income and achieve financial freedom. Passive income can be used to help build wealth over time and can be a great way to supplement your retirement savings.

Types of Passive Income

Passive income can come in many forms such as:

Royalties from books or music
Returns made from rental properties
Interest earned on savings accounts
Dividends from stocks and bonds

Is One Form of Income Better Than the Other?

Active income and passive income both have their own advantages and disadvantages, so it’s important to understand the differences between them. Both types of income can play a role in your financial success. Ultimately, it would be ideal to earn both forms of income, for instance by earning active income from your daily job while also earning passive income from investing in dividend-paying equities.

How Bloom Can Help You Attain Passive Income

For over 25 years, Bloom Investment Counsel has specialized in investing in income-generating investments, specifically dividend-paying stocks, which can help you generate income if needed, and growth as a secondary income stream. For more information, contact us today. Call us at +1-416-861-9941 or email us at info@bloominvestmentcounsel.com

This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this content should consult with his or her financial partner or advisor.