Use The Dollar

Your Salary Isn’t So Great…

As I hope that all of you realize, you will never get rich off of your day job. Now, I’m not saying that through disciplined saving and investing you may not retire wealthy, but a salary will never make you wealthy on its own.

Your active income alone will not build wealth. If you want a healthy income, you should focus on both active and passive income.

In this post we’ll be covering Active Income and Passive Income — a way to assist you in a journey for a wealthy retirement. Along the way, I’ll cover a few ideas for generating increased earnings from each of them.

Your Active Income is any income that you exchange work or time on a regular basis for money. An example of this would be working 40 hours a week at Walmart as a cashier for a preset salary of $7.00 an hour.

Your Passive Income is any income that does not require work and time on a regular basis, yet still continually feeds your income. An example of Passive income can be anything from interest yielded from a bank account or mutual fund to a small business that “practically runs itself”. We’ll get into more examples soon.

Which is Which? And How Do I Improve My Income?

We run into a few problems with these definitions, and in all honesty you will need to define for yourself what each of your income streams should be classified as.

After analyzing your income streams, if you’re as novice as I often find myself to be, I’m sure that you’ll find two things.

1. I only have three(or fewer) seperate income streams.
2. Almost all of my income is active.

So how can we go about increasing Active Income? This is a much simpler sector of your income to grow than your passive income. You can go about doing this by getting a new job, starting a new business, or investing in the stock market. Why do I include investing in the stock market in Active Income? What work does that involve? It’s outside the scope of this post, but to answer in short Jim Cramer (a stock Guru) does a good job summarizing by saying you should be spending a minimum of one hour per week per stock you own. Definitely active in my book.
So a few very simple Active Income Ideas:

1. Get a second or third job
2. Start a small fundraising business
3. Start selling cold water bottles at large outdoor events (braves game, etc.)

How About Increasing my Passive Income?

How can we increase Passive Income? This becomes a bit more difficult, only because it takes more creativity. Passive income, in my book, is sort of the epitome of the American Dream. Earning money with little or no work.

This includes things like mututal fund yields, bank account interest, a guy who is afraid of you and pays you $40 a week not to beat him up (this is a financial idea, not a moral one…)

So then what are some realistic ideas to increase my Passive Income?

1. Start a blog and sell advertising on it with Google Adsense or others (Which could also be defined as Active in a sense).
2. Invest in Mutual Funds or Index Funds.
3. Purchase real estate and rent it.

You will never truly begin to accumulate wealth until you’ve increased your Passive Income. This is how the rich get richer. The ideas on here are decent, but excellent ones are to be made by the entrepreneur (you). That’s how you get rich — Passive income is an idea game.

Real World Analysis

We covered what Active Income and Passive Income are and we went through a few methods of increasing them.  So now it’s time to apply it to ourselves.  I’ll show you my personal analysis of my Active and Passive income and you can go about doing the same for yourself

So first lets list my current income streams:

I have a total of six very limited income streams.  I do want to make a note that I am ONLY including Regular income.  I own several small businesses that bring in intermittent income, but I cannot include those for valid planning purposes.

The next step then would be to outline ideas for increases in both sides of the chart:

Now I will say — You’re not going to see all of my ideas.  You’ll hear about them once they’re already in place.  But this is the majority of them.

You’ll notice that there is much more listed on the Passive side than the Active side.  I am ALWAYS looking for ways to increase the side of the chart that takes no regular work or time from me.  I’m busy enough as it is, and chances are, you’re in the same boat if you’re attending college full time like me.  I want and need to make money in ways that take the least out of my agenda.

What are you doing to generate Active and Passive Income?

Tags: active income, discipline, income, income streams, jim cramer, passive income