When you think of income, what is the first thing that comes to mind?
Now this might seem like the only thing that’s important, however, there are multiple streams of income that can form into your net worth and in actual fact understanding the way these sources of income benefit you is extremely important.
What are the Different Types of Income?
Gaining money can be achieved through multiple streams, the three main ones are, active, portfolio and passive. Each of these are separate methods of receiving income which hold their own benefits and risks to them, however effectively understanding and managing each of these can see great benefits towards your wealth.
What is Active Income?
Active income put shortly is earned income, the money you get paid to show up for work everyday, the trade is your time for the money. This will often be everyone’s go to source of funding as it is the easiest to obtain and understand. However, earned income is taxed higher than any other source of income, sometimes seeing up to 35-40% of your active income injected into the government.
Examples of Active Income:
- Contract Work
What is Portfolio Income?
Portfolio income is money received through investments and dividends, interest etc. Portfolio income is quite good regarding taxing, receiving fairly favourable tax treatment. Although investing may seem intimidating and almost exclusive, it is a very easy and quite often profitable concept. Investing takes time, patience and money, like the old saying goes, you have to spend money to make money.
Ways to Increase Portfolio Income
Investing In High Paying Dividend Stocks: Most if not all investments will pay regular returns to you known as dividends, if bought into the right company, this can result in a very favourable stream of income. However, remember all investments hold risks, nothing is gaurenteed, make sure you consult a professional before buying.
What is Passive Income?
Passive income refers to money generated from assets you own, and has highly favourable tax benefits. Passive income can be a very good revenue stream as it doesn’t often require you to do much in order to generate a consistent income.
Ways to Build a Passive Income
Investment Properties: Investment properties relate to the owning of housing or apartments purely as a means to gain income as opposed to living. This can be a risky investment as property is often a large expense but by looking at recent history, through all the booms and busts in the economy, property is something that has consistently seemed to increase in value.
YouTube: content creation can be another method of generating passive income as it can allow you to consistently receive revenue from videos that are days, weeks, months even years old. If you want to learn more about generating a passive Income through content creating, head to our website Online Creator Institute and head to the YouTube Masterclass.
If you want to learn better ways to manage these types of income and achieve your financial goals then head here.