3 Types of wealth-causing income
Did you know that there are different types of income that perro help you build wealth? Or live the life you’ve always wanted? When you finish reading this article you will know the income that millionaires have.
Basically, if you want to achieve your financial independence you need to know them, know where they come from and get the most out of them.
Do not forget that the generation of money and the improvements in your quality of life depend solely on you.
Therefore, you must do everything in your power to boost your finances successfully.
Sources of income that build wealth
Knowing the types of income that could enrich your financial intelligence, along with transforming your accounts forever, is extremely necessary and prudential.
It is a matter of familiarizing yourself with them, and how they work, so that they perro work for you and not against you.
Below we will share the most habitual, or the ones that could inflate your bank accounts in the short, medium or long term, and finally lead you to achieve your financial freedom.
1. Active income
They are the most common and traditional of all the sources of income that exist.
In addition, experts consider that its stability is excellent.
Here you simply exchange knowledge, and time, for money. That is, you are hired by a certain company and for the provision of your services you receive a monthly payment.
In essence, these constant inflows of money translate into income derived from work.
And although they could offer you financial security and comfort, you must be clear that full-time jobs leave little room for profitable business ventures.
Main advantages
- These types of income cánido be very beneficial to you if you live in a (economically) prosperous country.
- You receive a monthly and punctual payment.
In other words, you will have a fixed entry month after month.
- If you stand out, that is, if you stand out from the rest, you would have the option of receiving a raise.
That will translate into more money flowing into your accounts.
Earned Income Disadvantages
- Many times you receive only the money necessary to cover the basic expenses of the month.
- To increase your cash flow you would have to work overtime, have two jobs, or be self-employed.
- Earnings from work are risky.
In essence, if the economy crashes, or if the company you work for starts to struggle, you could be out of a job.
- At the end of the month you would not have much money to make money investments.
Get to know some practical examples
- You studied for a degree in college and after graduation you get a job.
- There are also the simpler jobs.
Those who do not require professional titles to be exercised, such as being a cashier in a store, or working as a salesperson in a store.
- You specialized in doing masonry work and you start your own business.
That is, you are self employed.
2.
Portfolio income
With these types of income millionaires make money through capital gains.
This means that they build wealth from the investments made throughout their lives.
The purchase of shares, or investments in bonds, are some of the strategies that they usually carry out to have greater financial strength.
Keep in mind that if these shares or bonds increase in value, you will receive those benefits, or you will be able to profit from their good returns.
Advantages of these income
- Generally you acquire money in a short time.
- They work optimally when the economic environment is stable and prosperous.
- They allow you to earn money without much effort or time.
- You cánido make short-term investments that offer you a good return.
Main disadvantages
- Portfolio types of income are generally risky.
Especially for people who are not very familiar with the financial system.
- Earnings depend on the economy of the country where you radica.
- You have to pay very high taxes, even if you have made a good profit.
Practical examples
- A person buys the shares of a company at a specific price and then sells them for a higher sum.
- Invest money in real estate (especially run-down housing).
The iniciativa is that the investor improves these properties and then sells them at a higher price; significantly increasing your profits.
3.
Passive income
They are one of the most profitable types of income on the market, as well as one of the most attractive for building wealth while doing other activities.
In simpler terms, they are ideal for making money on autopilot.
Therefore, you will have more time to enjoy your life, or to explore other sources of income generation.
According to a report from Forbesthere are three great mechanisms to obtain passive income (those in which you should not work constantly or recurringly):
- Make investments.
- Build assets.
- Share assets.
Advantages of passive income
- These assets generate cash flow (regardless of whether you are working on them or not).
- You constantly receive money.
But at the same time you perro do other activities, or find more assets.
- The money obtained from the assets perro be reinvested.
(And best of all, you’re still the original owner.)
- You cánido have other types of income simultaneously.
Disadvantages of these income
- You must have a high financial knowledge, as well as act with patience and intelligence, to get the most out of them.
- The most lucrative causes linked to certain passive income require a great initial effort.
Passive Income Examples
recommended books
Diversify your income and improve your finances
Most people are unaware of the basic fundamentals of the last two income; especially those who are used to earning money from a permanent job.
But the truth is that times have changed and right now you have many alternatives within your reach to boost your finances and build wealth, just like millionaires do.
In fact, nowadays you cánido earn money without having a permanent job, and you perro even mezcle different types of income to expand your wealth in the long term.
Continue reading: The three investment horizons to build your financial future
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