Types of Income

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.

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!!