Why Invest?

Two Types of Income:

1. Active Income
->  Income acquired as a direct exchange for services rendered, wherein the services rendered are the result of physical and/or mental inputs exerted by the income recipient.
2. Passive Income
->  Income acquired without any direct physical and/or mental input exerted by the income recipient.

Active Income  VS  Passive Income Comparison Table:

Active Income
Passive Income
  • YOU working to make money.
  • YOUR MONEY working to make money.
  • Employment Income:
    • Salaries
    • Commission
    • Professional Fee
  • Investment Income:
    • Rental Income
    • Royalty Income
    • Income from Stocks, Bonds, Mutual Funds, Trust Funds, etc.
  • Income which requires your active, physical effort and time.
  • Living the Rat Race.
    • No Work, No Pay
    • No Sale, No Commission
    • No Client, No Fee
  • Income which does not require your active, physical effort and time.
    • Income that keeps coming even when you are not working.
  • Cannot make you Financially Independent.
  • Can make you Financially Independent.

Questions to ponder:
  • What type of Income are you generating right now?
  • If currently you only have Active Income, do you intend to continually depend on your Active Income throughout your remaining life?
  • Would it be harmful or beneficial if you try to develop Passive Income during the time that you still have your Active Income?

Income  VS  Quality of Life Comparison:

Important points from the above illustration:

->  The SIZE of the Income determines the Quality of Life for the Family.
->  The Type of Income (Active or Passive) determines how secure the Quality of Life is for the Family.

Questions to ponder:
  • How secure is the Quality of Life of your family?
  • Is the Quality of Life of your family being supported by Active Income alone?

Income  VS  Effort - 3 Classes of Income Earners:

Class I    ->  High Effort, Low Income . . . . . . . . . . . . Active Income
Class II   ->  Effort = Income . . . . . . . . . . . . . . . . . . Active Income 
Class III  ->  Low Effort, High Income . . . . . . . . . . . .Passive Income

Questions to ponder:
  • Under which Class of Income Earners do you belong? Class I, Class II or Class III? (Clue: More than 90% of Filipinos belong under Class I and Class II).
  • If you fall under the Class I and Class II, do you intend to remain in that category for the remainder of your life?