Active Income Vs. Passive Income: Which Is Better for You?

Active Income..!

We can understand the value of money well from the proverbs that say that money makes even the dead open their mouths, and money flows to the underworld.

Most people who have acquired such special wealth go to work and earn monthly wages. This method of earning money using the labor of an individual is called Active Income. No capital is required to earn active income. If you join a job using the necessary education, physical labor, etc., your salary will come on the first day of every month. There is no chance of making a loss in this type of income like in a business.

One can live a comfortable life. But this type of active income is available to us only as long as we give our physical labor. If unfortunate events such as dismissal, permanent damage to physical health, or death of an individual occur, active income will stop.

Wage growth may not increase beyond a certain point. Therefore, a person who relies only on active income is likely to stagnate in his standard of living.

Passive Income..!

On the contrary, the wealthy, rather than using their time and physical labor to earn money, will show their efforts in creating passive income. Creating passive income requires a significant pool of funds. The wealthy will create passive income through business, financial management, etc., by adding pooled funds from their own money or borrowing from others.

There is a lot of risk in creating this type of income. Although there is a possibility of losing capital in this type, it is possible to get permanent income through proper financial planning. If someone needs fruit, buying fruit at the store and eating it is active income. On the contrary, planting a fruit seed, growing it into a plant, waiting for it to grow into a tree and getting the fruit it bears is passive income. Although it takes a long time, labor, and money to get the fruit, after a long wait, additional fruits will be available in passive income. Those fruits will benefit not only the person who planted the plant but also all his descendants.

Here we are not saying that active income is right or wrong. Active income is the first opportunity for one to get money in the initial stage. Although active income provides immediate financial benefits and is very important for the security of the family, one should plan for passive income from the very beginning through proper planning and long-term perspective rather than stagnating with active income. Only by planning properly and accumulating wealth can one achieve financial freedom.

What is financial freedom?

Financial freedom is when one gets the wealth needed to run their family from passive income. In the current era, the number of people earning salaries in lakhs has also increased at the initial stage. Therefore, one can easily achieve financial freedom by saving significantly from active income and creating passive income.

When there is no income earner in the family, the family can continue to have financial freedom by taking a term life insurance policy for an amount of at least 10 to 15 times the annual salary. 

 

It is better for this insurance amount to be as much as the amount of lump sum fund that one has determined is required to achieve financial freedom. This is the first step to achieving financial freedom. We should also take out the necessary medical insurance for ourselves and our family. In this era of increasing medical expenses, only medical insurance will provide protection for ourselves and our family in unexpected moments.

We must have read about the Akshaya Patra in the Puranas. It is also called Amudasurabi. It is said that this pot was given to Draupadi by Krishna in the Mahabharata. The Manimegalai Kappiyam, composed after the Kannagi story, says that this pot later came into the hands of Manimegalai. It is said that even if food is taken from this pot, the amount in the pot does not decrease.

The savings that we create through financial freedom should also be like the Akshaya Patra. No matter how many months we take the money required for the month from that pot, the savings should not decrease. The goal of financial freedom is to create a savings fund like the Akshaya Patra by planning in such a way.

We have learned well about the Akshaya Patra, which is financial freedom. We will see how to achieve it in the coming sections.