Active income

Active income is money you earn by actively doing the work. The simple test is: if you stop showing up, it stops coming.

Common examples

• Salary / wages
• Hourly work
• Freelancing and contracting
• Many small businesses where the owner is part of day-to-day delivery

The purpose of active income

For most people, active income has three jobs:

• Fund today: pay for essentials and a stable baseline (see Basic needs budget).
• Buy safety: build a buffer so you can handle surprises without panic.
• Buy options: invest in skills, health, and assets that can reduce future pressure.

How most people use it (typical pattern)

• Short-term spending: the majority goes to housing, food, transport, bills, and lifestyle.
• Some saving (sometimes): what’s left becomes savings—often inconsistently, because life is noisy.
• Debt servicing: for many, a fixed slice goes to loans/credit, which reduces flexibility.

The key trade-off

Active income is powerful because it’s predictable and immediate—but it’s limited by time and energy. You can increase it (skills, leverage, better job, business), but you can’t work infinite hours.

How this connects to other concepts

• TVM (time value of money) explains why saving earlier matters: Time value of money.
• “Passive income” is often built using surplus active income: Passive income.