Types of Income

Types of Income

How many different jobs have you had in your life?  And how many different jobs have your friends and family held?  I’m sure you can think of hundreds of different jobs and professions.  There are a nearly infinite number of different ways of making money.  But regardless of how many different methods there are, there are actually only three Types of Income: Earned Income, Portfolio Income, and Passive Income.  Every method of making money can be classified into one of these three categories, and it is important to understand each one in order to maximize your earning potential and to begin generating significant wealth.

The first, Earned Income, is the most common form of Income.  It is the money you gain from your job, your profession.  Generally speaking, Earned Income is your paycheck.  Whether you earn an hourly rate, a yearly salary, or work on commission, the money you make from your career, job or jobs, or even from odd-jobs, is all Earned Income.  Most people earn the vast majority of their money from Earned Income.  Now, on the one hand, there is nothing wrong with this—it is, after all, the standard method.  However, if you want to attain real wealth, to truly become successful, then you need to move beyond Earned Income.  You need to start focusing on the other two forms, Portfolio Income and Passive Income.  For only these other two forms of Income allow you to attain a nearly unlimited amount of money, since they do not depend upon your physical, minute-to-minute work.  With Earned Income, you will always reach a limit to how much money you can make.  After all, there are only so many hours in a day, days in a year.  Even if you were to work three times as much as you currently are, you’d still hit a final limit.  And whenever there is a limit to your possible potential, you need to look elsewhere to achieve true success.

Portfolio Income is one of those places you should look.  Portfolio Income includes money earned through stocks, bonds, mutual funds, futures, and so on.  Essentially, as the name suggestions, Portfolio Income is money you make through the investments in your portfolio.  The huge advantage which Portfolio Income has over Earned Income is that it requires no active effort on your part—once you’ve made your investments, the money begins to work for you, generating more money without your work.  Of course, you need to do significant research beforehand, to ensure that you are investing your money wisely, but once that is done there is no limit to how much you may make.  There is no maximum return.

However, that being said, there is still a practical limit to how much you can hope to gain through Portfolio Income.  Unless you are fortunate enough to invest heavily in the next Microsoft or Google, or happen to have the savvy of Warren Buffet, you are unlikely to be able to achieve true wealth through Portfolio Income alone.  It’s possible, certainly—but it’s unlikely.

That is why Passive Income is the key to financial success.  Passive Income is money that you gain without any risk or effort after a certain point.  Examples of Passive Income include membership fees, royalties, or rent money (so long as you are not actively maintaining the properties).  With these examples, you do not actually have to exert any effort whatsoever to continue receiving payment, and the amount you earn is truly limitless.  The hard part, of course, is creating the initial idea, product, or service which allows you to receive this Passive Income.

That’s why you must work to achieve.  Always be on the lookout for ideas which may ultimately generate Passive Income.  Do you have an idea for a unique product which will fill a niche in the market?  Or a website which can offer members valuable, exclusive information or services?  Once you come up with that one, brilliant idea, you’ll be able to start generating Passive Income.  And then you’ll be on your way to true financial success.