Active vs. Passive Income: What’s the difference and how to make the shift
Let’s be real —living off passive income is the ultimate goal.
Waking up when your kids do (not an alarm), taking the time to enjoy your coffee, and knowing that while you’re doing school drop-off or planning your next vacation, your bank account is growing without you lifting a finger? Yes, that’s the goal.
That dream life sounds great but for most people, it’s exactly that, just a dream because most people have no idea how to actually get there. And even if they do, they quickly realize that passive income doesn’t just pour in like magic.
True passive income exists, yes. But it usually doesn’t pay a ton—unless you have a stack of cash to invest up front.
That’s where a lot of people give up, stay stuck in jobs they hate, and write the dream life off as just a dream for someday.
But I refused to do that. And honestly? So should you.
I’ve been building my passive income streams since 2020—slowly, consistently, with real life (and three kids) happening right alongside it. Now, I’m looking ahead at the next five years and planning to make things even more passive.
So how am I doing it? What’s working? What’s not?
That’s exactly what I’m going to share with you. Step-by-step, real mom style. But let’s start with the basics.
Active Income: Where You Work for the Money
Most of us start our financial journey with active income. It's reliable and straightforward—you work, you get paid. But there's a limit to how much you can earn because there's only so much time in a day. With active income, you’re trading your time for money.
Examples of active income:
Salaried jobs
Hourly wages
Freelance projects
Consulting work
While active income is essential, relying solely on it can be limiting, especially if you're aiming for financial freedom.
Passive Income: Where Money Works for You
Passive income allows you to earn money without constant effort. It's about setting up income streams that, after an initial investment of time or money, require little to no daily involvement. With passive income, you no longer trade your time for money.
Examples of passive income:
Rental property income
Dividends from investments
Earnings from digital products (like eBooks or online courses)
Affiliate marketing revenue
Building passive income streams can provide financial stability and freedom, allowing you to focus on what matters most to you.
Passive income isn’t always 100% passive.
Not all passive income is created equal—and that’s something people don’t talk about enough.
Some streams take way more upfront work (like building a digital product or buying a rental property), while others are truly hands-off but might earn way less (like dividends from stocks).
The truth is, “passive” doesn’t always mean easy or instant or. Some passive income streams require time, money, or brainpower to set up—and some still need occasional check-ins to keep things running smoothly. But regardless of which one it is, it’s still way less work than a 9 to 5 job and that’s the whole point.
You won’t be able transition from active income to passive income overnight but if you don’t start working towards it, you’ll never get there.
So our goal is to be aware of passive income and start moving in that direction slowly but always consistently. The tortoise beat the hare for one reason alone, consistency.
Think twice before ditching your W2 - it’s the fuel for passive income.
I know this sounds completely opposite of our dream life & passive income goals but I plan to keep my W2 for as long as they’ll let me stay. Here’s why.
Your W2 job might be what you’re trying to escape from but it’s actually one of your most powerful tools for building passive income. Why? Because it provides the steady cash flow and financial stability you need to invest in long-term wealth-building moves—like buying rental properties, investing in stocks, or building online income. Lenders also love seeing that consistent W2 income when you’re applying for a mortgage or business credit. Think of your 9-to-5 as the fuel: it funds your freedom strategy until your passive income can take over the wheel.
3 kinds of passive income I’m focussing on.
There’s a few different ways to generate passive income but the 3 big buckets are: real estate, stock premiums/dividends, and online income. Those are the ones I’ve focussed on and I’ll also give you my opinion on the cost to enter. No matter where you’re starting—zero dollars, a little stash, or a big pile—there’s a passive income path for you.
Let’s start with the one that requires zero dollars to enter.
#1 Online Income ($0 to start)
Cost to start: Low
Effort to start: High
If you’re strapped for cash, online income is the way to start your passive income journey.
This is where I started my passive income journey in 2012 (but I didn’t know it back then!) and it’s a source that I will keep alive forever because once you set it up, it really does become true passive income.
In 2012 I was fresh out of law school with a minimum paying legal job and a lot of free time so I started a fashion blog. Around my 2nd or 3rd year of blogging, I made $7,000 in income from a combination of sources: affiliate marketing, advertising, brand collabs. $7,000 per year wasn’t much but it was great considering I spent only about 1-2 hours per week blogging and it was a hobby and a creative outlet - so I was going to do it regardless of whether I was getting paid or not.
Now the online passive income space has grown a lot and there a lot more ways to make passive income. Here are a few ways I’m currently making passive income online and that I would absolutely recommend to anyone who’s just getting started on their passive income journey.
I’ll go more in depth into each one in future posts & newsletters!
Digital products - create and sell printables, eBooks, templates, or guides on platforms like Etsy, Gumroad, or your own website (like me!).
Create once, sell forever. Great for moms with a creative side or niche knowledge.
Affiliate marketing - share links to products you use or love and earn a commission when people buy. You can use a blog, Instagram, TikTok, or Pinterest to promote.
Low startup cost and can scale fast with content or an email list
Blogging - write content around a topic you love, monetize with ads (Google AdSense, Mediavine), affiliate links, or your own products.
Takes time to build, but can generate income 24/7 once traffic grows.
Youtube - post videos around a specific niche (finance, lifestyle, reviews). Monetize with ad revenue, affiliate links, sponsorships, and digital products.
💡 Evergreen videos can earn for years with no extra effort.
#2 Real Estate (requires about $20K min to enter)
Cost to start: Medium
Effort to start: Medium
It’s no secret that I love real estate. My passive income journey didn’t start with real estate but it has quickly become my favorite. Why? SO many reasons but to name a few:
you can force appreciation and after refinance, basically get a cash-flowing property for free
you collect monthly rent you can use towards your current expenses now AND you hold an appreciating asset for long term wealth
unlike other assets (stocks, crypto) real estate is tangible and physical - you actually own something
Depending on whether or not you decide to get a property manager, real estate investing may require a bit more work (but still less than your W2!).
Cash flowing properties are hard to find in a lot of places now but unleveraged returns in cash-flowing Midwest markets (like Detroit!) are still producing 10-12% cash-on-cash returns - which is amazing especially since you also benefit from the annual appreciation of the property itself!
Here’s a post I wrote about how to find up and coming markets before they become hot! Investing in markets before they come hot markets allows you to catapult your wealth!
And if you’re willing to take on some rehab work and do a BRRRR, the returns are even better.
I’ve been investing in out-of-state real estate since 2023 and I only invest out-of-state because it doesn’t make sense to invest in California real estate. The prices are too high, the cash flow is negative, and I can get way more for my money out-of-state.
In my opinion, there’s no better/more secure way to build wealth than through real estate because of the cash flow for short term expenses, appreciation for long term wealth, and the fact that you can force appreciation.
Shameless plug: If you’re not sure how to get started, I have a guide that shares the exact steps I used to buy my first out-of-state property without ever seeing it or setting foot in the state! Check it out here: The 5 Step Guide to Out-of-State Real Estate Investing
#3 Stock Premiums/Dividends (cost to enter is high - min $100K - if you want actual passive income that will make a difference)
Cost to start: Depends. It can be low cost to start because you can as little shares of stock as you want but you won’t make meaningful money. To make meaningful money from premiums and dividends, you really need a pile of cash.
Effort to start: Low
My passive income journey with stock premiums/dividends started in 2020.
Dividend stocks are one of the simplest and most reliable ways to earn passive income. When you own shares of companies that pay dividends, you get a payout (usually quarterly) just for holding onto those shares.
It’s like getting a mini paycheck for simply investing in strong, stable companies. Think of big names like Coca-Cola, Johnson & Johnson, or ETFs like SCHD, JEPI—they reward you regularly, whether the stock goes up or down.
Over time, those dividend payments can grow, especially if you reinvest them, making dividend investing a powerful tool for building long-term, low-maintenance income.
You can literally put your money in, set it and forget it. But the downside to dividend investing is that it’s more of a slow and steady wealth-builder. You're not going to get rich overnight. While the income is consistent, it takes time (and a decent portfolio size) for it to really feel life-changing.
That’s why I like to balance my portfolio and also hold stock where I can make premiums (aka upfront cash for agreeing to buy or sell stocks under certain conditions) from covered calls/cash-secured puts. These are another way to earn passive income through the stock market but they do require more effort (still less than a W2!).
Covered calls and cash-secured puts are smart strategies that let you earn premiums. Think of it like renting out your stocks for extra income. I’ve been using these two strategies since 2020 and these two combined are my second favorite source of passive income after real estate.
When you combine premiums with dividends (those quarterly payouts you get just for holding certain stocks), you’ve got a powerful combo of passive income streams that can add up fast. It’s like your money is putting in work—even when you’re not.
Final Thoughts
Building passive income online isn’t just for tech bros or finance nerds—it’s for busy moms, creative women, and anyone who’s ready to stop trading time for money. Whether you’re starting with zero dollars or a little extra to invest, there’s a path for you.
The key is picking one strategy that fits your lifestyle right now and sticking with it long enough to see it grow.
Remember: slow and steady stacks the wins.
Your future freedom doesn’t require perfection—it just requires you to start.
