What Are Your Sources of Income?

There are many different sources of income, but only a few people grab multiple opportunities. If you are really interested in building your personal wealth, you need to have a deeper understanding of each type of income stream that may be available to you. Once you have understood and become aware of the underlying principles, risks and benefits of each income source, you will have a better chance of choosing the types that will best suit you.

Earned Income

Also known as linear income, this is one of the most common and simplest sources of income because it is generated through work or employment. Here, your ability to earn money is directly proportional to the time and effort that you spend working. The best example of this kind of income is the wage or salary. Aside from working or maintaining a job, other activities that will enable you to earn this type of income include consulting, owning or operating a small business, freelancing, and even gambling. Although you do not need to have a big startup capital in order to get earned income, this type of income stream offer limited benefits. Once you have stop working, you will not earn anything at all.

Leveraged Income

This type of income is usually generated via group effort. People who enjoy this type of earning are usually involved in affiliate marketing, networking, multi-level marketing or similar types of business activities. Still, even if your income potential is multiplied or leveraged, you still need to spend a lot of time and effort before you can truly earn a big sum. Furthermore, this type of income stream is not ideal for everybody. Those who want immediate results from the time, effort and resources that they have invested may find leveraging difficult.

Passive Income

If you have the money to spare, aiming for passive income can be very viable. In essence, you generate passive earnings from the assets that you have created or acquired. The most common manner of earning this type of income is by renting out properties. Having a business that has been highly successful and no longer requires your direct management will also result in passive income through royalties or franchise fees. Writers and inventors are some of the typical passive earners via royalties. But, although you will generate recurring profits from this income source without really increasing work hours, you will need huge capital or a specialization in order to reap substantial benefits.

Portfolio Income or Investing

Of all the sources of income, portfolio earnings offer the highest earning potential for a relatively small input. The amount of money that you will earn from this income stream is not dependent on the number of hours you spend working. You can enjoy portfolio income via capital gains from the sale of real properties, trading assets, stock dividends and other types of investments. The reason why this income source is very popular, especially among people who already have big money in their pockets, is that it offers a consistent stream of compounded earnings. What’s more, many types of portfolio assets also have favorable tax implications that can further benefit owners and investors.

 

 

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