Income generally falls into three categories:
1. Active Income
2. Passive Income
3. Portfolio Income
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🔴 1. Active Income 🔴
Active income refers to earnings generated through direct effort and time investment. Examples include jobs, businesses, or any work where your income depends on the time and effort you dedicate. For instance, if you run a shop, you earn only as long as the shop is open. If you don't go to the shop, you don’t make money.
This type of income is often considered straightforward and quick to earn. Most people are familiar with this approach and tend to focus on active income sources such as getting a job, receiving a fixed monthly salary, or running a small business. However, active income is limited because you can only work so many hours a day, typically 10-12 hours at most.
No matter how skilled or successful you are as a doctor, engineer, or actor, there is a cap on how much you can earn through active income. It is not sufficient for building long-term wealth, as your earnings are restricted by time and effort.
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🔴 2. Passive Income 🔴
Passive income refers to earnings that continue to flow without requiring your constant effort. This means you can earn money even while you sleep or focus on other activities. People who build passive income streams often become wealthy because this type of income tends to grow over time and doesn’t stop.
For example, if you rent out a house, you receive monthly rent without needing much attention on your part. Other examples include writing a book, running a YouTube channel, earning from websites, making money through affiliate marketing, or CPA (Cost Per Action) marketing.
Starting passive income sources is not easy. It requires time, effort, and sometimes an initial investment. For example, if you start a YouTube channel, you may not earn much initially, but over time, as your videos gain popularity, your income will grow.
Most people shy away from passive income because it requires effort and planning at the beginning. As a result, they remain stuck in active income. However, those with passive income streams never face financial difficulties, as their income doesn’t stop. To achieve financial success, start saving money from your active income and invest it in creating passive income streams.
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🔴 3. Portfolio Income 🔴
Portfolio income comes from investments. Wealthy individuals invest their money in various opportunities and earn returns without much direct involvement.
For example, you can invest in the stock market or mutual funds. If you invest in a business venture, you can earn from its profits without being directly involved.
Wealthy people often prefer this type of income because money kept in a bank loses value over time due to inflation. However, investing that money in the stock market, mutual funds, or a good business can grow your wealth significantly.
Many people lack interest or knowledge about portfolio income, so they miss out on opportunities to grow their assets through investments.
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🔴 The 20-80 System and Your Future
If you don’t focus on passive income or portfolio income, you may fall into the "20-80 system," where 20% of people control the majority of wealth while 80% remain poor. Most of the world's wealth is concentrated in the hands of the top 20%.
To avoid this trap, no matter your profession, start working on passive income sources. If you rely solely on active income, your earnings will eventually stagnate. Without passive or portfolio income, you risk being part of the 80% who struggle financially throughout their lives.
Start planning today. Save a portion of your active income and use it to build passive or portfolio income streams. This will secure your future and help you achieve financial freedom.
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Examples of Passive Income:
Writing a Book: Publish a book, and every sale generates ongoing income.
Investments: Earn passive income by investing in the stock market, real estate, or cryptocurrency.
Creating Online Courses: If you are skilled in a specific field, create an online course. People will purchase it, providing you with a steady income.
To achieve financial success and become wealthy, focus not only on active income but also on developing passive income and portfolio income streams.