5 Reasons Why Passive Income is Important

If you’re still getting familiar with passive income, you might be wondering why it’s so important. After all, if you’re working a job and making a decent income with a job aka “Active Income”, then you might curious why people may have said it’s a good thing. Overall, passive income is important because, it is scalable and overcomes many issues that relate to its counterpart, “Active Income”. Let’s dive a little deep on passive income and why it’s so crucial to those who aim for income.

1. Passive Income is Better than Active Income

To start, let’s give our definition of passive income and active income. Passive income is money you make with little or no time involvement and money can consistently come in. This means after you have the income system in place,  you will not require a significant amount of time to get paid over and over again. On the other hand, active income is money you make only be trading your time. If you stop trading your time, you stop making money.

Example of Passive Income

As a quick example of passive income, you can use your credit card every month to accrue cash rewards for every qualifying purchase. Everyone spends money but, you can get paid to spend money if you use a credit card. Although the rewards percentage conversion rate can seem small, if your credit card is used as your primary form of payment, your cash rewards can become pretty significant when measured on a yearly basis. This is especially true if you consider everyone who uses cash and debit get no money back. To learn more about this, check out our article on how often to use your credit card to build credit.

Example of Active Income

Active income should be what everyone is most familiar with. An active income example would be a typical job. When you work eight hours a day, you get paid only for eight hours. If you somehow could manage to work 24 hours a day, you have hit your maximum potential income for any given day. For anyone who wants to make a lot of money, you might see how this physical, mental and time constraint could be a problem. This is why passive income is better than active income.

2. Passive Income Creates New Revenue

Now, if you’re the person who only relies on active income, and has financial stability through it, we have some great news for you! You are now ready to start making more money by activating your new income stream; passive income! Unfortunately, most people get a job and depend on a job their whole life to make money, however, since we have explain why active income is problematic, you can now focus on getting your new passive income stream working for you. At cloudofwisdom.com, we love internet passive income so, be sure to check out some of these passive income systems to get your new source of income started fast!

3. Passive Income Replaces Your Job

If you haven’t noticed already, since passive income creates additional revenue streams, you can eventually replace your active income or job with the new income. Although this may not have been your goal in the past, I’m willing to bet most people would love to leave their jobs or work less. Since passive income can have nearly an infinite income growth, it is very realistic to believe and work towards replacing your job. Just set the goal and start your journey towards being an entrepreneur. If you do set a new goal, be sure to check out our post on how to accomplish your goals to help increase your chances of success.

Side Passive Income Not Side Job

Although you may require more than one asset to replace your job, it is ideal to have multiple income streams. This is because if one were to fail, you have a backup income source bringing you money. Moreover, doesn’t having a backup income source sound more reassuring? This is much better than getting a second job since you have a limited number of hours per day so, it’s only a matter of time before you crash mentally or physically. Take it easy on yourself and build your new stream of income after you get off work. Stay consistent learn from your mistakes and learn from others. After honing your new skills, you’ll so proud of what you’ve created because you’ve taken the first step towards building wealth.

4. Passive Income Builds Wealth

The next reason why passive income is important is because it is a major wealth builder. Once you have your job replaced, time invested and money invested into income-producing assets, you simply become wealthy. This is especially true if you are not very materialist and can continue to invest time and money into building passive income.

Passing Down Wealth

Eventually, you’d get to a point where you will have enough money to do anything within reason you want. Not to mention, since the work is already done and the systems have been built, you can pass the assets down from to your family creating generational wealth. Then, the next person won’t have to work as hard or invest as much time as you to reach their goals. As a result, this brings us to our next topic and favorite goal; time freedom.

5. Passive Income Creates Time Freedom

Lastly, passive income is truly important because it creates time freedom. We think of time freedom as have the ability to not need an alarm clock and do what you want when you’re ready. Unlike working a job where you may have to work 40 hours a week fulltime whether you like it or not, passive income gives you control over your life. No more waiting for vacation, working on holidays or wishing it was Friday or the weekend. You get to work when you feel like it and enjoy life in the way that you used to dream of.

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