Broke people and rich people approach the
same amount of money differently and here's
why: broke people think that money making lies in the amount of money they earn, but rich people know it's about how much of your income you are able to keep and convert into assets that can provide you with an income in the future.
The fundamental difference is that wealthy
people understand the relationship between
how we earn and how we spend and they
know where the balance is and they are willing to spend the possible minimum and make as much as they can in order to increase their balance and consequently, their net worth.
Active income is the income you get from
services rendered, it is usually your income
from your job or business. For example, if
you work at a bank and you make three
hundred thousand a month as your salary,
that's your active income. Or, if you run a
catering business and you make three
hundred thousand in profits every month
that's your active income.
Passive income in simple terms is money
that you make while you are sleeping. It is
the income you get regularly from
investments you've already made. Good
examples are dividends from a stock
portfolio, or rental income from a property
you own.
When passive income exceeds your
expenses.
Ideally, the goal is to get to a point where the
assets you've accumulated can pay you
enough of an income to pay for your
lifestyle. For example, rental income from a
property you own can buy you a car or a
holiday to the South of France. Or, the
dividend cheques from your stock portfolio
can buy you a Chanel bag.
