Can you get rich without a job? The Truth About Passive Income

Contents:

·       Types of Income

·       Defining Active and Passive Income

·       Difference between the Active and Passive Income

·       Can one become wealthy without having a proper job?

Income is mainly categorized into three different types: 

1. Active Income

2. Passive Income

3. Portfolio Income

However, one must know that if  s/he is making money by investing in financial assets like crypto and stocks, it is portfolio income, not passive income. Passive income is slightly broader and includes earnings that require little to no active effort to maintain.

Active income happens when an individual puts in lots of effort and hard work, with the outcome directly related to their commitment and time invested.

Most professions that we encounter in our daily lives generate active income. Examples include doctors, engineers, civil servants, lawyers, politicians, teachers, and so on. 

Passive income, however, is produced when an individual earns without putting a lot of effort after the initial payment.

Landlords, investors, content creators, authors, filmmakers, musicians, and app developers are some examples.

One might argue that an author writing a book requires effort, just like a content creator making a video. Let us understand this with greater clarity with examples of an author and a surgeon. The author’s book is the first installment. The book can continue selling, and money will flow into the author’s account even if s/he decides NOT to publish another book. In stark contrast, a surgeon must continue performing surgeries to earn money.

Now, keep in mind that it is not guaranteed that the book’s sales will skyrocket and the author will become instantly wealthy. It may take decades for the book to demand attention, or it might never happen. Thus, we can certainly conclude that jobs offering active income are more reliable and stable than those providing passive income.

You might have seen the popular show called “Shark Tank.” These “Sharks” invest in start-ups and then receive dividends based on their shares in the company. Dividends are a portion of a company’s profits distributed to its shareholders as a reward for investing in the company. For example, if you hold 30 shares of a company that declares a dividend of ₹10 per share, you will receive ₹300 in dividends.

Now, we will tackle the main question. “Can you achieve financial freedom without having a job?”

You need some money to generate passive income. Logically speaking, one can’t invest money in a growing company if s/he doesn’t have money oneself. If not money, you need skills and a considerable amount of effort like an app developer or a content creator. This is known as “The Active Road to Passive Income.” Building wealth without a job isn’t a “get-rich-quick” scenario. It requires understanding risk, maintaining discipline, and sometimes stepping out of your comfort zone to make bold decisions. One can face tons of caveats when making money passively. In the end, the answer is yes, you can, but remember that there is NO direct road to passive income. Hence, it is advised that one must only try to generate passive income when his/her active income is way more than his/her expenses. This is the very basic formula that one must be aware of.