Linear vs. Exponential Income: Which Would You Choose?

Many people who are looking for work often consider the interview an integral part of the process. During the interview stage, the panel considers several things before they offer you the job. They could ask you to choose one of these two options:

Option 1: Earn P30,000 a month for three years.

Option 2: Earn one centavo in the first month, but the owner doubles it every month for 36 months. So, you’ll earn one centavo on month one, two cents in month two, four cents on month three, and so on.

Which option would you choose?

Linear Income

If you chose the first option, you just went for a linear or active income. Think of it as a piece of bread. It’s gone after you eat it. Then, you have to look for another piece so that you don’t go hungry.

Regular jobs are a perfect example of linear income, and many Filipinos today rely solely on regular employment. Additionally, those who are self-employed and run small businesses also have a linear income. They won’t earn unless they work.

Exponential Income

If you went with option two, it means that you have the desire to earn exponential or passive income. People with exponential income are those who earn:

1. Royalty for every book or album sold.

2. Commissions from referrals.

3. Income from a rental property.

4. Commissions from the Google ads on websites.

When you earn exponential income, you’re earning from work you began from the start. It’s like setting up the equipment, pushing the start button, and letting the machine do the rest.

Transitioning from Linear to Exponential

You need to find a way to earn passive income if you want to be rich. One thing you can do is to invest your active income to allow you to earn passive income.

How do you do that? Through investing. Once you pay off your debts and establish an emergency fund, you should set a portion of your salary on stocks, bonds, mutual funds, and other investment instruments.

Remember that an investment is only the beginning and it is just one way to earn passive income. Take the time to explore other ways to earn money while you sleep with something that fits your expertise, experience, and passion.

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