Different Types of Income
There are three different types of income: Earned Income; Passive Income; and Portfolio Income. You must know what kind of income to work hard for, how to keep it and how to protect it from loss. This is the key to great wealth.
Earned Income
Earned income is income derived from your job. It is linear in nature. You work for an hour and get paid only one time for that one hour’s work, and that’s it. Your income stops when you stops working.
The rich don’t work for money, they have their money work for them. This is achieve through portfolio income and passive income.
Portfolio Income
Portfolio income is the income you receive from interest, dividends, royalties and gains you get from investments in paper assets.
Passive Income Generators
Passive income is when you work once but continue to get paid over and over again from work you’re no longer doing. Passive income, in most cases is income earned from real estate investments or true businesses owned and operated independent of your personal involvement. Investing in or creating true assets that provide passive income for you is your ticket to wealth. To gain financial freedom you need this cash flow from ‘Passive Income’.
You can get Passive Income from investments or businesses, dividend income, interest on notes receivable, capital gains, trademark payments, rents and royalties.
But note the definition of a business!
Owning a business that provides passive income means the business works without you having to be there. You have a business if you can leave it for a year or more and then return to find it more profitable and running better than when you left. But if your business would falter without you then it’s more like a ‘job’ than a business.
So you can think of earned income as coming from something you do. Passive income comes from businesses or real estate that work for you. And portfolio income comes from paper assets that work for you.
Everyone has income, but not everyone maximizes the use of that income. Of the four income patterns, the one to shoot for is that of the rich. And one myth you can dispose of is “It takes money to make money.” Regardless of your income you can begin to acquire assets that return an income every year — passive income that comes in, rain or shine, whether you work or not. This is money working for you, not you working for money.
Passive Income versus Earned Income
Unlike passive income, earned income or linear income requires that you work for your money. You are basically exchanging your time and effort for money. You get paid when you work. The moment you stop working, you don’t get paid.