The Quick and Dirty…
There are many differences, but traditionally, the main difference is that while you’re actively working to make money through your job or side business, you’re passively making money with your investments of money and time.
I personally define active income as any income that requires your constant physical presence to earn money. You have to be awake and present.
This is employment, reselling physical items over and over, or offering services like home repair, or creating websites for your customers.
Passive income is creating the ability to earn money while you’re asleep or while working on a completely different project.
Authors and artists are great examples of this.
They put all of the hard work and effort into their projects upfront and then are able to sell that work over and over again forever. If it’s digital, the process of sale and delivery will be automated, and the physical works can be printed and distributed by a third party.
Another great example of passive income is investing.
Money put into investment options like stocks or real estate can yield great interest earnings on long-term holdings without any further input once the investment is made. You get the idea, right?
So yes, you can turn an active income project into a passive one.
It’s been my experience that the most ideal way to achieve your financial goals and create multiple lines of new income, with the least amount of presence and stress, is to create a system that is automated, evergreen, and one that can become passive in the long run.
-Paul