In order to understand
more about Money, you must first understand the different types of Income. It’s
really better to understand the below 3 basic types of income, so that you can decide better in which way
you want to Make Your Money.
1) Earned Income:
Earned income
includes all the taxable income and wages that a person receives for work they
have done. There are two ways to get earned income: You work for
someone who pays you or You work in a business you own.
someone who pays you or You work in a business you own.
Taxable earned
income includes: Wages, Salaries, Bonus, Net earnings from
self-employment.
By contrast,
things like rents received, interest, capital gains, and dividends are unearned
income.
2) Portfolio Income:
Portfolio income
is any income generated by buying an investment/trading asset at a lower price
& selling the same at a higher price than you paid for it.
Portfolio income
is a Income from trading paper assets/investment such as stocks, bonds, mutual
funds, ETFs, CDs, T-bills, currencies or other types of futures/derivatives, including
dividends, interest and capital gains. Adding portfolio income streams is one
way to build multiple streams of income that will diversify your earnings and
reduce financial risks.
Here are a few
sources that can be classified as portfolio income.
Capital Gains – A profit that results from the sale of
an asset for a gain. The assets could include investments such as stocks,
mutual funds, Forex, Derivatives.
Dividends – Distribution of excess profit earned
after tax & reserves by the company to the shareholders.
Interests – Income that is earned as a result of
lending money to borrowers. Interest income could be earned by savings
accounts, purchasing bonds, certificate of deposits etc.
3) Passive Income:
Passive Income
is any type of income that doesn't require your time (or very little of it) in
order to sustain. Examples: Search engine optimization, viral marketing,
legitimate network marketing, product developed and sold through automated
system, your own affiliate program managed by a third party....(residual income
also falls in this category. Passive & Residual Incomes are most often used
interchangeably).
Music, movie,
television, book and screenplay royalties, patent royalties, rental income,
click-through income, and online advertising revenue are just some examples of
different types of passive/residual income.
By now you may have
a better understanding about the different types of income & chosen your
preference of income for making money- Go ahead and Make Your Money!!
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