What’s the difference between Recurring income and active income?
Recurring Income, also referred to as Residual or Passive income is money earned on an investment, or work completed in the past, that continues to make money without any additional effort. Active income, on the other hand, is money earned in exchange for performing a service. For example, hourly wages, salaries, commissions, and tips, are all examples of active income.
So, which form of income is better? Well, you be the judge…
I have heard Recurring income called the holy grail of income streams, and it’s pretty easy to understand why:
- Up front effort into something that will generate income for years, or even decades!
Recurring income still requires work. In fact, oftentimes, the upfront work required to generate Recurring income can take years.
So, what are some ways you can make Recurring income? Well, that’s exactly what I’m about to cover.
Examples of Recurring Income
Interest Earned from Investments
Earning interest on investments is probably the original form of Recurring income.
Regardless, if you were to invest consistently, and aggressively enough to build up a sizable nest egg you can create an recurring annual income — living off the interest, alone!
This money would be a result of your disciplined investing throughout your life.
Another way to earn residual income is through Affiliate Income
Affiliate income, it’s basically money you receive as a referral commission when users click-through a specially-coded link on your website, and make a purchase.
If you build a large audience online, and monetize your website with relevant affiliate links, you can generate affiliate income.
Rental Income
If you have the money to buy a rental property, you could spend years pulling in monthly rent checks as Recurring income.
In my estimation, this is one of the higher-risk forms of Recurring income, because it requires a typically large upfront investment, and if you can’t find a tenant to pay you rent, then you won’t make any money.
The other thing about rental income, is that you have to maintain the property; which, at times, can make rental income feel more like active income.
Online Course Sales and Info Products
Many people make great money, some make six or even seven-figures a year from this Recurring income stream, alone. The key (or hard part) to this, once again, is to build a large online audience — which, yes, can take years. But, if you have an audience, and you launch a course that teaches a valuable skill, then you could potentially make tens of thousands of dollars per month.
I’ll stop with just those few examples for today for time’s sake however I left off several more including one of my favorites which is Network Marketing done right!
Check out the Power Shift trailer and movie. and download my free e-book so you can read about the additional sources and have a good reference guide. Download my e-book on the 8 Ways to Build a Residual Income
So why Is Recurring Income Important?
Because your physical presence and effort isn’t continually required in order to make money.
But, here’s the thing, Recurring income, in most cases, takes years to build. But if you are willing to put in that kind of effort, you could end up literally making money while you sleep. And that’s the goal of Recurring income.
Active Income
If you’ve ever earned a salary or hourly wage, then you have earned an active income. And while active income might not be called the holy grail of income streams, it is still extremely important
Think about it, if you want to earn Recurring income from investments, then you need to first invest the money you earn from your active income stream. Or, if you want to build a Blog or Podcast with a big enough audience that you make money through affiliate marketing, display advertising, or online course sales, then you need to work hard to make active in order to sustain your life while you build it.
In most cases, Recurring income wouldn’t come to fruition without first earning active income. Sure, active income won’t make you money while you sleep. What it will do, however, is pay for the bed you sleep on while you work to build your Recurring income.
Here’s a few Examples of Active Income
- Salary
- Hourly Wage
- Commissions
- Tips
- Consulting and Freelance Services
So which Is Better: Active Income or Recurring Income?
Let’s be honest, recurring income seems better than active income. Think about it, if you have a Recurring income stream that generates money for you when you aren’t working, then you can take a vacation and come home to a bigger bank account. You can fall asleep and make money while you dream. Pretty awesome!
That said, active income is, more often than not, the foundation for you to make recurring income, so don’t dismiss it. Whether you want to make money from investments, a Podcast or a Blog, or anything else, you need to earn an income while you build your Recurring income streams. So, active income plays an extremely important role.
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