Active income is income earned as a direct result of a specific effort. In other words, input is correlated to output. The majority of Americans support themselves from active income.

By contrast, residual income (also known as passive income) is income that continues to be earned even after the work is done. Residual income comes from building an asset that continues to pay long after the work has been done.

Active Income Examples

Active income is commonly earned in the form of wages, salaries, tips, commissions, and income from businesses in which you materially participate.

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