𝐓𝐡𝐫𝐞𝐞 𝐓𝐲𝐩𝐞𝐬 𝐨𝐟 𝐈𝐧𝐜𝐨𝐦𝐞
How many types of income do you have and what are day?
1. Earned income
If you have a job and receive a paycheck, you make your money through earned income.When you earn money through a paycheck, you are exchanging time for money.
For example, when you work as an employee as a web designer, a grocery store cashier, or a police officer, you are getting paid a predetermined amount of money (X) to do that job for a certain amount of time (Y).
2. Portfolio income
Where earned income is acquired by exchanging time for money, portfolio income is made through capital gains.
As an example, when someone buys stock in a corporation at a given price, they plan on selling that same stock at a higher price in the future. So, if they buy a stock at $10 today, and the price goes up to $40 when they sell that stock, they make $30 in capital gains. That capital gains is their profit.
3. Passive income
Make money by acquiring assets. An asset puts money in your pocket regardless of whether you work or not.
Let’s consider your home. Even if you own your house, you still have upkeep, property taxes and utilities to pay for. If your house was an asset, it would make money for you, not take money from you.
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Most people earn a living based on the work that they produce — every day they perform work and then every few weeks or so they get a paycheck. When they stop working the paychecks stop and they are left with whatever money they may have saved during that time. This is called active income.
Some people are fortunate enough to create residual income streams. Residual income (also known as passive or recurring income) refers to income that you continue to earn even after the work required is done.
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