active income
Money earned directly from working — wages, salaries, tips, and self-employment income.
Example
“His active income from consulting supplemented his passive dividend income.”
Memory Tip
ACTIVE — you have to be doing something to earn it.
Why It Matters
Active income is the primary way most people build wealth and cover their living expenses. Understanding how to maximize your active income through career development, negotiation, and skill-building is fundamental to achieving financial stability and reaching long-term goals.
Common Misconception
Many people believe that active income is the only way to become wealthy, but this overlooks the power of passive income and investments. Building wealth efficiently often requires combining active income with passive income sources like dividends, rental properties, or business ownership.
In Practice
A software developer earning a $95,000 annual salary plus $5,000 in annual bonuses has $100,000 in active income each year. If they also receive $2,000 annually from stock dividends, only the $100,000 from their job counts as active income, while the $2,000 is passive income from their investments.
Etymology
From Latin 'activus' meaning doing — income requiring your direct activity.
Common Misspellings
Build a budget and track your spending
Related Terms
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See Also
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