The 3 Types of Income - Active Income, Leveraged Income, & Passive Income

Passive Income, Passive Income, Passive Income. It's become a buzz word online, especially in the online Entrepreneurship space.

I've always said I think passive income is incredibly rare and quite possibly doesn't even exist aside from possibly just passive investments.

When I think about truly passive income one of the people I think about is the guy who wrote the song or jingle for the television show "That 70's Show". Did you know everytime a re-run plays that guy gets $70?

He literally sat down one time, wrote a song and will forever get paid anytime a rerun plays. He actually calls the show "That $70 Show". Must be nice right.

Well to me there's 3 types of incomes. You have active income which is trading your time for money. Even in very high paid professions like being a doctor or attourney, at the end of the day they are trading time for money. A lawyer may have a $700 per hour billable hour which is great money, but ultimately he's still trading time for money.

Next we have leveraged income. Warren Buffet has that famous quote about how until you learn how to make money in your sleep you'll never be wealthy and you'll always be working.

Leveraged income is the process of seperating your time from money. You can put in a bunch of work at the beginning, but that effort and continue to make money even when you're not actively working on it. Examples of this could be something like Amazon Merch or Amazon KDP publishing. You put a few hours in to creating a book or a shirt and that can continue to sell even when you're not actively at the computer.

Most things however are not truly passive. You may write a great book but as soon as you stop promoting it on social media, stop running ads, etc the sales are going to slowly die down. Leveraged income isn't meant to be completely passive, but the idea behind leveraged income is you can do one thing that you can stop doing while it continues to bring in money and then move on to do another thing that will do the same. Sure you may have to check back in on your projects, but they can run passively without you for some period of time.

Then we have truly passive income which I suppose could be your money sitting in a CD or money market account making interest. If you make enough leveraged income eventually that is the goal to gain passive income. But keep in mind even having money in the markets or in real estate means your going to have to rebalance your portfolio, your going to some day have to find new tenants or replace a broken AC. Almost nothing is truly passive.

I'd love to hear your thoughts on different types of income streams your invovled with as well as your definition of passive income. Drop a comment below..

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