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The first step in learning how to make more money is deciding if you will use active income (also called earned income) or passive income to do it?  Until I read a book called,Rich Dad, Poor Dadby Robert Kiyosaki my financial literacy was very low, so I didn’t understand the difference or why it mattered so much.  Here’s what they mean…

Active Income vs. Passive Income:

Before I explain the difference, it’s important to point out that I am not saying anything negative about active income or jobs. They are important and so are the people who work them.  Active income requires your personal time to earn money.  Basically that means if someone doesn’t trade their time and talents for an hourly rate or salary in, they won’t get paid.

On the flip side, passive income is money you earn whether you work or not.  Both types of income require hard work, but passive income gives you a chance to leverage the time, talents, and skills of others to make money to create cashflow or money without requiring your personal time.  Understanding this difference was a life-changing distinction for me because it was a way to work smarter and make more money.

Active Income Pros, Cons, and Options:

Pros:  You can create additional and consistent income quickly.  This option is great for people who need steady income.

Cons: With active income, you have no chance to create true financial freedom because this option requires more of your personal time, which only adds to stress, fatigue, and frustration Also, if you don’t want to work or can’t work in the future, then all your income goes away too.

Options to earn more money with active income:  Get a 2nd job, switch to a higher paying job in the same field of work, get additional education to increase your pay in your current work, or make a career chance to a new and higher paying type of work.  Active income is a “work harder” strategy, which is good for some, but not a good long-term strategy for those who prefer to work smarter.

Passive Income Pros, Cons, and Options:

Pros:  You can create short-term and long-term income.  This is a great option for someone who wants to create money that comes to them whether they work or not.

Cons: This option requires up-front work without the guarantee of short-term income.  Some passive income options require financial investment as little as $20 or much more depending on the type of asset you are building or purchasing.

Options to earn more money with passive income: Start a traditional brick-and-mortar business, start an online business, join a network marketing company, become an affiliate (or referral) marketer where you recommend other products/services, or invest in stocks or real-estate.

Why I Chose Passive Income:

Hope for a better tomorrow: Before I learned about passive income, I was working as a high school art teacher and at a group home helping teenagers through some of their challenges.  I loved what I was doing, but there always seemed to be more bills than money at the end of the month.  Even worse, when I looked at how long it would take me to give my family some the things they wanted, I didn’t see a way that would ever happen with my active income options.

One day a friend asked me if I’d be open to an option to make some extra money if it didn’t interfere with my schedule?  Thankfully I said “Yes”


I did the work and it worked

A short time later, I received a check for about $90 and it was the first time I’d ever earned money without having to do the work myself and the direction of my life was changed forever.  Another great thing I experienced, was that I kept getting paid over-and-over for the work I did one time and I also got paid repeatedly for the work other people did with me.  I built a money making team and it is awesome.

Valentine Commission(1)

The picture above is a recent picture of a repeat sale where I earned $210 on Valentine’s Day because I did the work one time and I get paid over-and-over. Passive income works IF you do the up-front work!

Tom Dad DK Christmas 2011

Unexpected Benefit

Priceless time with my dad – About 6 months after I started earning passive income with my home business, I received a call that my dad was diagnosed with cancer from asbestos exposure while working in the steel mills in northwest Indiana.  I had no idea he was sick when I said “Yes” to my friend’s question.  About a year after starting my business, I quit my jobs to focus and the timing was perfect because I got a call that my dad was in a coma and that I should come because he wasn’t expected pull through.

Thankfully he did, but he needed someone to take care of him full-time (24/7) and because I started working on passive income about year earlier – I was able to take care of him every day for the last 3 months of his life.  I’ll always be grateful for the money I earn passively, but I’m most grateful for the time freedom of being there for my dad when he needed me the most.

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