Firstly, I do not believe that there is true PASSIVE INCOME. (Reasons will be given later).

ACTIVE INCOME, as it implies, means that you have to expend your ENERGY and EFFORTS … which are REWARDED for … but only AFTER  EACH EFFORT.

It can consist of the sub-categories of:

• EARNED Income
• TRANSACTIONAL Income

——————————————————

EARNED INCOME (from EMPLOYMENT)

Its Active Income; because if you do not do the WORK; you do not get the PAY.

“No Work; No Pay”

Achievements in the prior month are reset to “ZERO” and the counter starts yet again.

The proverbial “Hamster Wheel” or “RAT RACE” – you get NOWHERE in terms of BUILDING WEALTH.

EFFORT has to be constantly REPEATED in order to be REWARDED with EARNED INCOME.

There is NO RESIDUAL component, unless you include company SHARE OPTION awards.

EARNINGS are LIMITED within industry pay “bands”.

It is IMPOSSIBLE to become WEALTHY working for EARNED INCOME – it is CAPPED within ‘BUDGETS”.

The only possible exceptions are the C-SUITE EXECUTIVES and the SALES team who have a variable component linked to their performance.

It can also be thought of as “LINEAR INCOME”... because you receive (more or less) the EXACT same PAY at the end of EACH and EVERY month.

We will talk more about this under “The Maths of Money” elsewhere in the website. The other matching topic that will accompany this is that of “EXPONENTIAL INCOME”.

As the name implies, this is where over time, 1+1 = 3 rather that 2 as it does under the concept of “LINEAR INCOME”.

—————————————————-

TRANSACTIONAL INCOME (from TRADE)

So if I sell a food item at a farmers market, I only make a sale IF

• I am at the market
• the customer is there
• the customer wants to buy
• the customer has money
• the customer has money with them
• the customer can carry the goods
• the customer actually comes back on their way out
• etc.

The ONLY way that I can make money the following weekend is

• if I am at the market
• there are customers
• I pitch a customer in an inviting and enticing manner
• I am respectful
• I serve and meet the customers needs
• etc.

Once I have attracted a customer and they are happy with my products in terms of suitability, quality, packaging, hygiene, price and my service …

The only way that I will get another sale to them is if we are once again in the same place at the same time … with ALL of the other preconditions applying.

The point is that the EFFORT has to be mage OVER and OVER to new customers, as few of the same customers are likely to come to the market just for my products.

I would have to have a sufficient range and there would have to be other vendors with products that they want; to make it WORTHWHILE for them to make the EFFORT and spend the TIME and MONEY to come to me.

Essentially, it is a bit of LUCK to get a repeat sale.

In addition, because I have CONSUMABLE food items for sale, once they have been eaten; I would need to resupply with a PHYSICAL product.

Thus, EVERY SALE has almost an EQUAL EFFORT to achieve the INCOME.

Thus, it is IRREGULAR and it is UNCERTAIN.

And it must be REPEATED every single DAY or WEEKEND.

——————————————————-

PASSIVE INCOME implies that you DO NOTHING … that the income flows like water, electricity or data … without any effort!

The truth is that there is an  INITIAL EFFORT that THEN facilitates and leverages this effort with a monthly RECURRING income.

Let’s call that “PIPELINE INCOME“… as I heard Toby Mathis call it.

After an initial effort and or investment … then a ‘rental’ comes in … for the USE of this infrastructure or what it DELIVERS …

• Water (Litres)
• Electricity (KiloWatts)
• data connectivity (MegaBytes)

It can be thought of as a NETWORK.

• Water pipeline
• electricity grid
• Telecoms network

Take a Telecoms Network … once a customer is acquired, they are activated to USE the NETWORK and they PAY for that.

Due to the nature of the product, there is customer CONTINUITY OF USE  every month.

So there are not the same REPEATABILITY and UNCERTAINTY caused by the IRREGULAR sales issues of TRANSACTIONAL income.