Thread by @MoneyRehab_

Active & Passive income X FIRE

(A thread)

Active income:
Direct compensation that an individual receives for services rendered. Comes in the form of salary, wages, tips, commissions, etc.

E.g. your 9 to 5 job

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Passive income: Income that does not come from actively rendering a service
E.g. Dividends, interest earned from savings

Passive income to 1 person can b active income to another, & vice versa
E.g a store employee earns an active income while the shareholders earns passively

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Sm activities/Investments/incomes r a hybrid of active & passive income

E.g
-A singer records an album, later earns passively from sales & royalties
-An actively managed Investment Portfolio
-Rental income - owner engages in maintenance, repairs & upgrades, if not outsourced

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My internal model for classifying activities - Effort required vs how income is earned;
-Active/Active
-Active/Passive
-Passive/Active
-Passive/Passive

A pure passiv(passiv/passiv) income offers d greatest freedom; a pure active(Activ/Activ)income requires the most effort

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The capital requirements of a passive income stream are greater than those of an active income stream

Income expectations of stream: passive income stream < active income stream

This explains why the FIRE(Financial Independence Retire Early) number always looks daunting

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E.g. you can easily earn R1 000 from your day job, however, earning the same income from a passive stream tends to need more effort/capital, and takes longer to generate the same amount of income

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FIRE is based on the idea that your passive income is able to cover your living expenses FOREVER; having a day job optional. Or at least, you are able 2 do what you love, & not what u have to do to survive

Some FIRE Rule-of-thumbs:
-monthly expenses*300
-annual expenses*25

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Achieving FIRE centers around:
-minimising expenses
-maximising income & Investments,
to achieve yr FIRE number

Are you on a FIRE journey?
What does your idea of FIRE look like?
What's yr fire number?
What r u doing 2 achieve yr target in the shortest time possible?

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