We must admit that income is important. From paying bills… to purchasing food and housing… to fun time and entertainment. Income is needed in order to survive and enjoy life. But, most people only pursue one source of income.
When working with my clients, I am often asked, “What are the different types of income I can create?” As, there are many different ways to make money, in this blog post, I will focus on 4 Types Of Income.
Here Are 4 Types Of Income You Can Generate
1. Passive Income
My most favorite income type is Passive income streams. Income is generated from assets you have purchased or created…. (businesses or investments)…. without you actively working for it. To generate passive income, most of the work is done at the beginning. Income will continue to come in month-after-month or year-after-year, with little additional work by you. Making money while you sleep!
- Rentals (realestate)
- Online Digital Products: (online courses, ebooks, printables)
- Creating and Selling Intellectual Property: (books, online content, apps)
- Affiliate Marketing
- Multi-level marketing / Network Marketing: (leveraged income)
2. Active Income (Earned Income)
Earned income is money you actively work for. This is income generated from trading your time for money. “Employee” and “Self-Employed” is the most heavily taxed income. Earned income is the most common ways of making money. But, the risk is, once you stop working you stop making money. Wages from a job and income from a business that you actively participate in are examples of earned income.
- Working a job (the money you receive as an employee)
- Salaries
- Wages
- Commissions
- Service Based Business: (consulations, 1-on-1 coaching, dentist, lawyer, freelancers)
Self-employed is when people work form themselves independently. They may also hire others to help. Earned income and self employed income are active income.
3. Residual Income
A residual income stream will earn you money even when you’re not on the clock. A lot like passive income, you generate income from assets you have purchased or created…. (businesses or investments)…. without you actively working for it. Having residual income allows you to do more important things with your time. Getting paid over and over.
- Rental properties
- Network Marketing (compensation plan model)
- Subscriptions
- A savings and investment program that earns interest
4. Portfolio Income (Investment Income)
Portfolio income is income from stocks, bonds, and mutual funds. Just like Passive income, your money is working for you. The income from these types of investments include, interest, dividends, and capital gains. Royalties from property held for investment are also portfolio income. Portfolio & Passive income is the least taxed.
- Stocks
- Bonds
- Mutual Funds
- Real Estate
- Collectibles
- Currency Exchange
It is wise to create multiple sources of income.
Read: 20 Online Business Ideas You Can Start From Home
Erica Mathews
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