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How My Active Income Complements My Passive Income (And Vice Versa)

November 7, 2017 by Jason Fieber 22 Comments

Financial freedom, as I see it, is an amazing lifestyle.

It’s indeed that freedom that allows one to see the whole world in a different light.

You become free from not just financial concerns (i.e., how will I pay rent or pay for food?); you become free from societal expectations, certain routines, jobs you don’t want to do, and what could be argued a somewhat mindless existence inside of a bubble.

Now, this freedom does not make you less than.

If anything, it makes you more than. You become more than you otherwise ever likely would have ever been. You become more than you.

That’s because that aforementioned freedom also allows you the freedom to become a bigger, better, stronger, faster, and smarter version of yourself. And through this process of personal evolution and growth, you become happier as you strive toward your potential as a human being.

However, as wonderful as financial freedom is – built upon the foundation of enough passive income to cover your basic needs/expenses in life – I believe there’s still a ton of value in earning active income (income you earn by exchanging your time/efforts/skills for money through work you passionately enjoy).

How Active Income Complements My Passive Income

First, I believe it’s almost automatic that someone is going to go on and continue earning active income well after financial independence is achieved.

This is why I also believe that the math behind early retirement (which way too many people obsess over) is largely moot.

In fact, one could argue the whole concept of “early retirement” (i.e, the steadfast and permanent stoppage of work altogether at a very early age) is unrealistic and unnecessary. While financial independence adds so much value to one’s life, I’m not sure the idea that you’re going to just never work again at, say, 35 years old (or some other silly number) provides any value at all. Nor do I think it’s appealing or realistic.

But what’s fantastic about this situation is that which is likely inevitable is also complementary in many ways.

The foundation upon which I’ve built my life is financial freedom.

I’m paid just to get up and go about my day.

The 100+ businesses I’m invested in are selling products and/or services to people all over the world, earning a lot of money in the process. Furthermore, these businesses tend to earn more and more money over the course of time (as they sell more products and/or services at increasing prices to more people). And since shareholders are truly the collective owners of any publicly traded company, these businesses share that growing profit with their shareholders in the form of growing dividends.

This situation has truly freed me.

Rent is covered. My food is paid for. I don’t have to check the couch cushions for money to pay my utilities. So on and so forth. It’s like a wealthy benefactor has offered to pay for my bills indefinitely. Moreover, this benefactor is almost surely going to send me more and more money every single year, likely increasing these payments at a rate faster than my expenses expand.

That means I’m free to concern myself with much larger and more important issues and pursuits. And there’s so much value in that.

But while my passive income covers my basic needs in life, that’s really all it covers.

If I want to continue my investing activities (which I enjoy), or give money away (which I also enjoy), or do any other multitude of activities (like, say, traveling), my passive income just isn’t there yet. It will be one day, but that day is not today.

This was partly by design, though, as I quit my day job at 32 years old, already understanding the basic tenets that I currently expound. I knew that continuing to show up at the job, earn, save, and invest would build a much larger portfolio, but I also realized that time is much more valuable than money. And I also knew that I’d likely go on to earn money anyway, except that I’d do it through working rather than jobbing.

That said, there’s still a ton of value in continuing to work on passionate projects and bring in income over and above my passive income (which is somewhere around $1,200 per month). And it’s not just the happiness that these projects will add to your life (because you’re enjoying them), but it’s also the income they will bring your way.

Would I be as happy as I am if I couldn’t continue to occasionally buy high-quality dividend growth stocks? Would I enjoy my situation as much if I couldn’t support organizations that mean something to me? Is having to make absolute certain that your spending is under a certain low threshold every month, with almost no variance, fun?

Of course not. 

But I work on things that matter to me. I find joy in my work. And when you add value to the world, value almost always comes back around to you. It’s like an equation that the universe must make right.

In addition, I find additional life satisfaction from the additional opportunities and flexibility that active income provides me. 

I’ve spent my first month in Chiang Mai, Thailand as a dividend expat living out my financial independence dreams.

But I’ve also not held back in terms of visiting the local attractions, meeting up with fellow entrepreneurs over dinner and/or coffee, and taking in the experience of living somewhere so new and wonderful. And I haven’t had to sacrifice some of my larger and long-term visions, either.

I don’t have to worry about paying for the entrance fee into a large park. I don’t have to fret over whether or not a coffee meetup will push me over some predetermined coffee budget. I don’t have to worry if some Uber ride to a faraway location will ruin my life. If I see a high-quality dividend growth stock I want to invest in, I can do so (within financial reason). If there’s an organization that needs my help, I’m free to lend a hand.

So on and so forth.

The active income I earn has afforded me the opportunities and flexibility to approach my life this way – and it’s wonderful. I don’t believe I’d enjoy life as much otherwise.

So while the work I engage in is ultimately about the fulfillment it provides my life, the value that comes my way when I add value also adds additional happiness to my life via the financial compensation I earn from my joyful work.

It’s a multifaceted reward system that one can understand only when they personally experience it and put it all together.

How Passive Income Complements My Active Income

While my active income complements my passive income in so many ways, this dynamic is only possible because I first built a foundation of passive income that has freed me from basic and essential financial concerns in life, rendering me free – in financial and non-financial terms.

See, I’m able to pursue my joyful work without concern or worry precisely because I know that my life is already paid for by the growing dividends that more than 100 of the world’s best businesses are sending my way. 

I’m free to write from the heart. I’m free to work with clients I absolutely love working with. I’m free to work on projects that truly bring about joy and happiness. I don’t have to push products/services that I don’t personally use and believe in just for the sake of making a buck.

There’s no pressure. There’s no stress.

As such, the active income comes about in this totally organic and fantastic manner. As I noted earlier, adding value to the world adds value back to your life. It’s like an inescapable destiny. And I’m free to add so much value – value that I love and completely believe in – because I’m free to, which only increases and improves the value that comes back around to me.

If for any reason a pursuit or project doesn’t totally make me happy and joyful, I can just cut it.

But I only have the freedom to do that because I’m financially free. Otherwise, I’d have to work on something for the money it would provide me, almost regardless of total satisfaction derived from the work.

When your rent has to be paid, and you don’t have it covered just by waking up, you have to go out and make a buck – putting the idea of “satisfaction” on the back burner. That’s just how life works.

But financial independence is the foundation upon which one has to build their life. That’s the only way a new dynamic is possible. 

Said another way, my active income is able to complement my passive income in such an organic and healthy manner because the passive income was first built to a financially freeing level in the first place.

That complementary relationship allows me to explore new ideas and grow as a writer and entrepreneur in ways that probably wouldn’t happen if money were this massive priority in my life.

Conclusion

So I enjoy what I do. The freedom to enjoy makes the enjoyment much deeper. The enjoyment allows me to work with passion, which delivers value to my life commensurate with the value I add. And this provides a ton of flexibility and opportunities in my life and spending.

Achieving financial independence should be one chapter of an otherwise amazing book. A wonderful chapter, no doubt. But just one chapter.

Once you’re done with that chapter, though, you’ll realize that there’s so much more.

You’ll see that you’re finally free to become more than you. And when this transition happens, the traditional work-life-money dynamic completely changes, with both active and passive income complementing each other in a holistic, organic, and wonderful manner.

At that point, you’ll find that you don’t (or at least shouldn’t) think about money very much. Instead, you’ll be busy adding and receiving value, pursuing passions, becoming a better you, and enjoying your life without worrying about whether or not the $2.00 coffee is going to exceed your passive income allotment for the month.

There’s a ton of value in knowing your basic expenses in life are covered. But there’s also value in generating money on top of the passive income that renders you financially independent (both in terms of adding personal fulfillment and financial flexibility). There’s real value (and happiness) in being able to invest, give away, and spend money beyond your base passive income and expenses.

Finally, just to clear up any confusion, my active is allocated out across the following areas: business expenses, business taxes, philanthropy, extraordinary personal expenses, cash, investing.

Are you financially independent? Have you found that active and passive income complement one another? What have your experiences shown you?

Thanks for reading.

Image courtesy of: olovedog at FreeDigitalPhotos.net.

P.S. If you’re not yet financially independent, this article might be a bit hard to comprehend. That said, there’s nothing stopping you from starting your journey toward financial independence. Check out some of my resources that are designed to help you get there. In addition, blogging can serve as a great way to get you to financial independence faster, which can also serve as an active income source I described above. Moreover, I’m even offering FREE coaching sessions to those who sign up for hosting using my link. Check out that offer!



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Filed Under: Financial Freedom

About Jason Fieber

Jason Fieber became financially free at 33 years old through a combination of hard work, frugal living, strategic entrepreneurship, intelligent investing, and geographic arbitrage. He currently lives his early retirement dream life in Thailand. Jason has authored two best-selling books: The Dividend Mantra Way and 5 Steps To Retire In 5 Years (also available in paperback).

 

Jason recommends Personal Capital for portfolio management, Mint for budgeting, Schwab for the brokerage account, and Seeking Alpha, Daily Trade Alert, and Motley Fool for stock ideas. He uses TunnelBear VPN service while living abroad. Traveling Mailbox handles his US mail. This blog is hosted by Bluehost. If you'd like to start your own blog, Jason offers free coaching when you use our Bluehost affiliate link.

 

Jason's writing and/or story has been featured across international media like USA Today, Business Insider, and CNBC.

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Reader Interactions

Comments

  1. Mike H says

    November 7, 2017 at 2:32 am

    Nice post. I think the mix of passive and active income makes life more interesting. It’s fun to earn active income and all the more so when you enjoy what you are doing. Also to get to having passive income in the first place one would have to shown that they can be a saver for an extended period of time and then deploy that surplus into productive investments. Well having active income allows for a surplus as well that can be used when compelling investment opportunities arise.

    Giving a portion away to those who need it is also worthwhile, but the active income component makes the money flow seem more tangible based on work put in to earn. Passive income along starts to feel like being on a trust fund somewhat so it’s good to mix it up.

    -Mike

    Reply
    • Jason Fieber says

      November 7, 2017 at 2:42 am

      Mike,

      Absolutely. I think they complement each other in an interesting, holistic, and wonderful way. Having my level of passive income allows me to focus on the right opportunities for active income. And the active income flows in the way it does because of those right-sized opportunities, which only adds to the passive income, freedom, and ability to pick and choose the right opportunities. Success begets success. It’s circular. I really enjoy it. 🙂

      Thanks for dropping by!

      Best regards.

      Reply
  2. Team CF says

    November 7, 2017 at 4:50 am

    Not yet FI, but working hard to get there and we are getting closer (few years left)! Been debating the option to have some form of side hustle when FI for the fun and human interactions. Not sure how I’m going to implement, but I’m some time to think about it. Enjoy the time abroad!

    Reply
    • Jason Fieber says

      November 7, 2017 at 5:34 am

      Team CF,

      I’m sure you’ll be there before you know it! 🙂

      Someone could write me a check for $1 billion tomorrow, yet I’d still get up and write and do most of everything else I do. I don’t do it purely for the money. Likewise, Buffett doesn’t show up to the office because he has to. I think the concept of “early retirement” (as I described it) isn’t appealing or realistic. But what’s wonderful is that which is likely inevitable (active income via purposeful and enjoyable work) is incredibly complementary.

      Cheers!

      Reply
  3. Tom @ dividendsdiversify says

    November 7, 2017 at 9:04 am

    Couldn’t agree more. I quit my corporate day job and became a part time college teacher. My passive income allowed me to do it. The active income from teaching supplements my passive income and I have much more time to pursue new and different things that interest me. Tom

    Reply
    • Jason Fieber says

      November 7, 2017 at 10:29 am

      Tom,

      That’s where it’s at. Good stuff! 🙂

      Glad you were able to move right into something that’s more passionate for you. If the money isn’t to bring about opportunities to be more happy and improve your quality of life, I’m not sure what the point is. The best thing is that a little passive income goes a long way, complementing active income in a way that becomes circular and holistic.

      Thanks for sharing.

      Best wishes.

      Reply
  4. Reverse the Crush says

    November 7, 2017 at 9:46 am

    Great post, Jason! I totally get what you’re saying. I’m haven’t reached FI yet, but I could definitely see myself thinking similarly about active and passive income once I get there. I’ve stated that my goal is to earn $2,000 per month in dividend income on my blog. However, it’s more than likely that I’ll retire once my passive income even reaches $1,000 to $1,500 if I have other active income opportunities available that I enjoy. Thanks for sharing!

    Reply
    • Jason Fieber says

      November 7, 2017 at 10:36 am

      Graham,

      Yeah, I really believe the whole concept of “early retirement” is silly and unrealistic. To each their own, of course, but I think financial independence should be looked at as a platform that can allow you to become so much more. And it just so happens that becoming more means adding value, which then results in value being added back to your life. It’s organic. It’s holistic. It’s circular. It’s rewarding. And the active income and passive income can work in this complementary and synergistic way that’s just wonderful when it’s done right.

      Best regards!

      Reply
  5. FreeInFIRE says

    November 7, 2017 at 11:12 am

    Hi Jason,

    Inspiring, but a hard pill to take. We’re at the point (about $17,500 per year) where we could survive and even probably upgrade our standard of living a little bit on just passive income if we were willing to take the plunge, but a combination of fear and preset goals is slowing us down.

    My wife makes about $12,000 in active income from her side job, working about 1 hour per day, and that money would be a huge help to cover any passive income downturns, but we are still holding out to get our net worth closer to $750,000 before we pull the plug. A lot of it is margin of safety and some of it is what you mention–we have other things we want to pursue, but unfortunately some of them cost money.

    It’s uplifting to read all of this from you, but I think we’re going to have to wait to experience it ourselves before it feels “real”. That said, our passive income has given me the confidence to consider alternate careers when otherwise I wouldn’t think of taking on the risk of leaving steady employment.

    Can’t wait to hear more from you!

    Reply
    • Jason Fieber says

      November 7, 2017 at 11:25 am

      Free,

      I only aim to inspire. So if you took away some inspiration from this, my job is done. 🙂

      Cheers!

      Reply
  6. Fred says

    November 7, 2017 at 2:32 pm

    Too often people work extra years in the pursuit of a passive income that will cover absolutely everything for the rest of their life. An early retirement with the expectation of a little, convenient, active income is much more realistic.

    Reply
    • Jason Fieber says

      November 7, 2017 at 9:39 pm

      Fred,

      Couldn’t agree more. Time is far more valuable than money. And that which is inevitable will not only be complementary, but it will speed things along rather significantly. Once you see the big picture, it’s pretty easy to pull the chute and move on to a more enjoyable life. 🙂

      Best regards.

      Reply
  7. sendaiben says

    November 7, 2017 at 8:51 pm

    Great stuff. I agree. My savings and investments, to all intents and purposes, are just numbers on a screen. They merely provide peace of mind.

    But that peace of mind allows me to think about reducing ‘work for money’ and put more time and effort into ‘work for joy’.

    The mix of day job, investment portfolio, and fun side gigs is a powerful one. I am a bit cautious and want to have two sources of income that will cover my expenses. Right now that is day job and investments, but I want to get the side gigs up there before pulling the plug on the day job.

    I think it will be another 2-3 years 🙂

    Reply
    • Jason Fieber says

      November 7, 2017 at 9:44 pm

      sendaiben,

      I’m with you 100%. If I could list my portfolio in time terms rather than money terms, I would. The dividend income is time/freedom to me. That’s pretty much how I look at it.

      2-3 years isn’t that long. Hope it’s smooth sailing for you. 🙂

      Cheers!

      Reply
  8. Jeff says

    November 7, 2017 at 9:18 pm

    Good stuff Jason. I’m not on track to retire as early as you but going to pull the plug on my corporate job in a year when I’m 59-1/2 and have access to my 401k and IRA’s.
    Have you thought about moving back to the U.S. someday and pay cash for a house to lower your expenses, or do you figure that you can get a better return with that money being invested in the market?
    How did you convince your wife to make the move to Thailand?

    Reply
    • Jason Fieber says

      November 7, 2017 at 9:47 pm

      Jeff,

      https://www.mrfreeat33.com/reverse-culture-shock-in-thailand/

      https://www.mrfreeat33.com/its-not-about-the-money-rent-versus-buy/

      https://www.mrfreeat33.com/year-three-a-d-three-lessons-about-life-and-money-ive-learned-after-retiring-from-the-auto-industry-three-years-ago-at-age-32/

      Cheers.

      Reply
  9. ARB says

    November 9, 2017 at 7:24 am

    One thing I have to wonder is if that foundation of passive income would cause us to hate those stressful jobs significantly less. If I were financially free right now, would my job still be a source of stress and anxiety if I so decided to remain a little longer? In a world where I can just ignore my sales quotas, ignore or tell off customers who are rude, and call out my boss on his BS when he tells me I’m working too slowly, would working at my job continue to be such a bad experience?

    Eh, I’d probably just quit. I could do so much better for myself.

    Sincerely,
    ARB–Angry Retail Banker

    Reply
    • Jason Fieber says

      November 9, 2017 at 8:38 am

      ARB,

      I suppose it depends on the situation. It doesn’t exist in a vacuum. Occupational enjoyment exists along a spectrum, and I’m sure even the day-to-day reflection (if one asks oneself how much they’re enjoying things) will vary constantly.

      That all said, I see no reason why someone would stay at a job they actively dislike (such as yourself, as your writing would strongly indicate) when there are so many other opportunities out there once one is freed of the shackles that go along with having to use up a lot of valuable resources to earn a buck. I couldn’t even imagine still being at the dealership. But to each their own on that one. 🙂

      Best regards.

      Reply
  10. David M says

    November 10, 2017 at 3:55 pm

    Jason
    Another great post. You are an inspiration. I enjoy your blog. I keep asking myself why do I not live some place else. Corporate cell is getting old.

    Reply
    • Jason Fieber says

      November 10, 2017 at 11:45 pm

      David,

      Thank you so much. Glad you enjoy the content. I only aim to inspire others and provide some food for thought.

      Sounds like mission accomplished. 🙂

      Cheers!

      Reply
  11. Andy says

    November 10, 2017 at 6:34 pm

    Jason,

    My wife and I are FI at 39 and 41. Though it took me awhile to realize it. We were saving so much early on. I got sick which lasted a few years. We are living on one income and it was super easy because we are debt free including mortgage and my wife is still maxing her 401k and Roth while we are on one income. During my suffering I found out about FI through blogs and articles. Our Vanguard index fund portfolio based on the 4% rule exceeds our yearly spending. To make a long story short we’re trying to get into the mindset you’re talking about. I am trying to figure out where to work in the IT field that would bring me joy. I will ask the same of my wife. I guess you could say we’re in the discovery phase of FI. It’s like the stress just falls off once you know you’re done with the rat race. Now the challenge is what should I do with my new found freedom. I don’t know yet but I’ll let you know. I will ask my wife this also. What job will bring her joy. Thanks for the article.

    Reply
    • Jason Fieber says

      November 10, 2017 at 11:48 pm

      Andy,

      That’s a great place to be in. There’s a spectrum of freedom. It’s not an all-or-nothing proposition, where you’re either completely free or completely not free. Even just being halfway there can mean you’re in a position to totally change your life for the better. Flexibility goes a long way in this life.

      This is part of the fun – figuring out what makes you guys happy. I think it’s hard to know the answers to some of these questions when you’re so busy racing in the rat race. Once you have time to really sit down and ponder your life, things start to become far more clear. 🙂

      Fun times ahead…

      Best wishes!

      Reply

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I'm Jason Fieber, Mr. Free At 33. I became financially free at 33 years old by working really hard, living well below my means, engaging in strategic entrepreneurship, intelligently investing, and using geographic arbitrage to my advantage. I currently live in Thailand, where I'm making my early retirement dreams come true. I write and coach so that I can help others make their early retirement dreams come true.

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