Time is the most valuable commodity on the planet today and that is exactly why passive income is so important to our financial freedom.
We can work extra hours if we desire more money, but nobody can acquire more time. Everyone has the same 24 hours per day. So how we spend our precious time is very important. You have to spend this time wisely, since you have so little of it . Which is the reason that time is much more valuable than money.
Unfortunately for most of us, we need to trade some of our valuable time in exchange for money to be able to afford to live and buy the things we want in our lives. If we consider the average workday is 8 hours and we allow 8 more hours per day for sleeping. So as a result you trade half of your waking hours trying to earn money.
Doesn’t sound very good does it?
So the big question is how do we balance work to allow us the money we want while still being able to have the free time in our lives to do all the things we want to accomplish?
Did you know that earning money and making money are two totally different things?Click To TweetWhen most people think about wanting more money, we consider working longer hours the way to earn the money.
Is this the way you look at it?
Let’s look further at the difference between earning and making money.
How to Earn Money
Earning money or also known as active income is when you exchange your time and skills for money. This is how 95% of us earn a living today. Receiving pay on an hourly or salary basis for the hours you work. Being dependent on a company or person to earn a living. Limiting your earnings to the amount of hours you work.
Examples of Active Income
- full or part time job
- subcontracting your services to others
- managing your own business
Your hourly or salary rate only have a certain amount of growth potential based on your expertise or training. You could increase your hourly net worth by going back to school, college or university for further training. But this is usually not an viable option for people currently in the work force as they usually already have financial commitments that make doing this extremely hard. So for most of us the only way to increase our earnings is to work longer hours.
Trading even more or our valuable time.
There is nothing wrong with active income except that it limits your earning potential. Causing you to trade a lot of your precious time for the money. A big downside to active income is if you stop working or get hurt and can no longer continue to work, your income will stop.
How to Make Money
Making money or also known as passive income is income that requires you to devote the time to establish it, but from that point forward requires very little of your time and effort to support.
Examples of Passive Income
- make money blogging
- online courses you created
- profits from investments
- royalties from songs you either wrote or recorded
- royalties from a book you wrote
- rental property income
- owning a company that you do not work at
Using passive income streams allows you to continue making money long after the work is complete. Allowing your income potential to not be limited by the hours you work.
Why is Passive Income the Key to Financial Freedom?
For new bloggers starting out it is very important to have both types of income streams. Active income is a steady source of funds you can count on to pay your monthly bills and living expenses while you work on building up a steady passive income.
The reason passive income is so important to your financial freedom is that as it grows over time, it will surpass your active income. Allowing you to trade less and less of your valued time seeking money through active income.
What's the point of making money if you have no time to enjoy it?Click To TweetSo your goal going forward should be to establish and nurture multiple passive income streams to provide a platform for financial stability and growth giving you the ability to live and work from anywhere.
Share your thoughts and experiences in the comments below.
Like this post? Don’t forget to share it!
Doug Paulson
Latest posts by Doug Paulson (see all)
- Are You Financially Ready For Retirement? - September 30, 2018
- The Key to Financial Freedom is Passive Income - January 14, 2018
- Can I Really Make Money Blogging? - November 25, 2017
Thank you for all of the great information. Definitely saving this for tips for my own blogging.
Glad you found it helpful Shannon
Yes, having a passive income on the side can help save or invest money for future use. With the internet technology everyone can have a passive income set up easily either by working online part-time or doing an online business.
Yes, making money from home used to be almost impossible for technology. Thanks for the comment John.
Absolutely right Doug, well said and written. Your post is actually food for thoughts. Thanks. It has ignited some ideas in my mind. I am glad I came across your post.
Thanks Saniya! I’m glad you liked it.
Hi Doug,
Great article. I completely agree with you on passive income being the way for financial freedom. I love how blogs can be that source of your passive income (I do know you need a lot of hard work to bring a blog to that level).
I think creating a course or an eBook or any digital product these days is easy and a good source of passive income too.
-Swadhin
Creating passive income thru blogging is a great way for gaining financial freedom. Thanks for sharing Swadhin.
I’ve got some passive income and it’s always great to see because it’s always so easy to make. However I definitely don’t live off of that, active income is certainly where it’s at.
Creating passive income should be everybody’s goal. Thanks for the comment Gigi!
I had no idea there was a difference between earning money and making money. This is awesome! I learned something today 😀 Hahaa. Hey you got a great blog. I am so glad that you won’t ever stop because I love your blog 😀
The difference passive and active income is huge. Thanks for the comments, I really appreciate it!
I am definitely looking forward to the day that I master affiliate marketing and can make passive income. I know it will happen with time and practice. Learning the tricks of the trade are key too. I am truly hoping that all of the time I put into past blog posts will regenerate into income for years to come.
Keep blogging and learning and it will come. Thanks for commenting Christine.
Great article, Doug! I too am on the path to “making money” and want to break free from the 9-5. Thank you!
Glad to hear you are on the same path! Thanks for commenting Sasha.