The Three Different Types Of Income You Must Know

 

 

Everybody knows they want more income. But did you know that there is more than one kind? It sounds pretty self explanatory but there is a bit more to it than that. Let us take a look at the different types of income. They are as follows:

 

1. Earned Income

obtained from working for someone or a company.

 

2. Passive Income

income generated from business.

 

3. Portfolio Income

income generated from investments in paper assets.

 

Let´s have a closer look:

Earned Income comes from having a job in a company or in someone else’s business. You get paid for your time and services rendered. In the vast majority of these scenarios, workers work just hard enough not to get fired and employers pay just enough for workers not to quit. This alone indicates that the income an employee can generate from working for an employer is limited.

There is the possibility that an employee may devote extra effort thinking the employer will pay him/her more. It is a rare possibility particularly when business is difficult, but possible. And even if it happens, it is still limited. Whatever additional profit gained by the employer as a result of the employee’s extra effort, the employer will get the bigger “slice of the pie.” You are, in effect, making someone else rich through your added effort.

This however, should not necessarily be discouraged. It is a good act. This is just stating fact. It’s likely that you will be telling yourself mentally: “Hey, that’s not fair.” Fair or not, that’s the way life is, when you work for somebody else as an employee. If you are an employee, you get your money or paycheck after everything else. It is earned income, less taxes and everything else deductible, before money reaches your hand. And when the money ever does reach your hand, the next place it is bound to go is to pay your bills. If the amount is not enough, you are bound to borrow, which makes you debt-ridden if it accumulates.

Now, this is one big mistake. Don’t ever get debt-ridden. It is the quicksand to poverty. Earned Income is a safe way to generate an income. There is not much thinking to do. Except for a few high paying, high profile jobs, your work is mostly concentrated on a few things where you keep repeating the same functions. Unconsciously, this discourages creativity, so boredom starts to set in. It is because of this boredom that getting to work every morning is such a drag and you keep on looking forward to weekends, holidays, and vacations.

Unless you really love what you do without consideration to the income it generates, or unless you are highly paid, or unless there is a lot more to learn in your job, or unless financial security is of no importance to you, there is no reason for you to stay long in the “rat race.” The earlier it is to get out of the trap, the better chances you will attain financial success.

 

Passive income is generated from businesses. You can sell products or offer services, or a combination thereof. Examples are buying/selling real estate, trading merchandise as in wholesaling and retailing, etc. In many cases, you need not be physically present in your place of business. There are also small businesses like vending machines where you hardly require an employee to visit those machines for refill (since you can do it yourself). You can also go with franchising; either be a franchiser or a franchisee. The list is endless as long as you do what you love to do.

The beauty of going into your own business is that you work for you, not for someone else. You enrich yourself, not someone else. Your time is disciplined but more flexible because you can make your own schedule. Another advantage of going into business, especially in your own corporation, is that you earn and spend before tax is deducted, unlike being an employee where you are taxed before you spend.

 

Portfolio income is very much like passive income in that it is making money work for you. Portfolio income is generated from paper assets like bonds, stock market, certificate of deposits, and mutual funds. They are called paper assets because literally, they are businesses that revolve on papers. It is in portfolio income where financial knowledge is of vital importance. Your intellect interacting with creativity can either unmake or make you rich. Time for Action to make money work at home! Now that you know the different types of income, it’s time to take some action! Receiving earned income is fine, but your primary aim should be to get passive and portfolio income as much as possible. Utilize earned income to its fullest until you finally reach your goal of earning only passive and portfolio income.

 

 

These are just a few facts about different kinds of income that you might not have known. Hopefully you found these helpful. If you would like to learn even more about how you can increase the bottom line of your own business, then you are more than welcome to contact us and we will take a look at your unique situation and offer some sensible solutions that would work best for you!

 

“TITAN Financial Pros provide an informational service only and are not responsible for any investments made applying this information. The results described are not distinctive and are not guarantees of future income. Any assumption contains risk and is 100% the responsibility of the individual to assess the risks/rewards involved. We bear no liability assumed or implied for your application of the information shared from this content. This information is for educational and entertainment purposes only.”

 

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