We often encounter 1 situation, My salary RM 5000 per month, but passive income only RM 100 per month, then why should we invest instead of focus on my career to boost the active income?
Before answer this question, let understand what is Active income and Passive Income? Majority think that the differentiate between Passive and Active income is by time you spend to gain the income. Example, I working as programmer 9 - 6pm, then this is an active income, while I rent my property to a tenant, then this is passive income. I like the idea, but i don't think is accurate. Even Passive income like Rental, Investment, we still need time to maintain the property or study and monitor out investment portfolio. So instead, I used the concept of Scalable to differentiate Active and Passive Income.
What is Scalable Income?
All kind of income will required time & effort. Scalable income refer to those Income which can Growth even though we using same or similar time & effort. Working as Programmer from 9am - 6pm is not a scalable income, because you spend 9 hour effort and getting a fix salary paid. Yes, you can promote, but 20k (Malaysia Market) will be the cap for you as a programmer, after that you either need more time or need higher position to reach another cap.
Similar Effort , Unlimited Gain.
So, is Passive Income a Scalable income?
Not all, but i would say 90% passive income are scalable income. Take Investment as example, I spend 2 day to study a company portfolio, but my gain is depend on how much capital that I invested. If i invest 100k , 10% gain = 10k, if invest 1 million, same 10% = 100k. So Investment is a kind of passive income that can scale up. Same concept apply to property rental, we can start with 1 house, after have capital gain by selling it, then we can buy 2 house to earn rental and repeat the process.
Income that applied Compounding Rule are Scalable Income.
Is there any Active Income which is Scalable?
Yes, it depends on your creativity. Let take back Programmer as an example. I have the knowledge, so instead of working with a company as programmer, I can host a Youtube or conduct Programming Seminar to teach people programming. Same effort you required, let say 9 hour to prepare material and conduct seminar, but your income can scale when audience increase. This is not easy, but possible way to make your active income scalable. The thing that compound here are "your audience". If you have a good and attractive content, the social network effect is a booster for you.
Application of Scalable income in an Organization.
If you all follow blog, you will realize some of my portfolio are company with Scalable Income (mostly tech company). Example Alibaba, to setup a physical retail shop in real world, we need 200k or not for rental, renovation, maintenance and so on. But to setup 2000 retail shop in Alibaba, we just need 1 server and 1 admin. This is a typical good example scalable income because the Income can grow drastically even though the cost is around the same.
Summary, Active income or Passive Income for me not really important, the most important thing is whether the income is scalable or not. If you Salary is RM 5000, but investment income only RM 100, you still need to invest, because Investment are scalable, it can grow until a level that your Salary cannot achieved.