I’ve building my wealth for the past couple of years and I’ve been trying to understand the fastest and also safest way to do it and I’ve found out that a balance between all kind of income is the best way to achieve my goal. I’ve realised that are six different kinds of income and that a portfolio that has these different types is a portfolio destined to perform well even when the economy is shaking.
So today I’ll give you a list of incomes and examples from my own portfolio as well. Feel free to get inspired by it and to adapt it to your own needs.
This is the most common source of income. People usually study and later find a work to pay their bills. For many people around the world, this is the only source of income they have available and it barely covers the bare minimum of bills at the end of the month.
Ex: 9 to 5 job.
Interest income is the ideal option if you already have some money you can borrow. Interest income is what makes banks work and profit. They give you, for example, $10000 and you’ll pay them in the end $12000. They’ve profited $2000 from lending you money.
Ex: Credit, money lending.
Following the interest income, we have dividend income, that is the money that companies pay you back for each stock that you own by said company. Dividend can come from stocks or specific index funds and you can benefit from it as well.
Ex: Stocks and Index Funds.
I’ve talked about in other posts about assets VS liabilities and the example that I always use is buying a house. If you bought a house for your family to live, you’ve spent money on a liability. Now, if you bought a house to rent it, you are generating rental income every month (and paying the property cost, of course).
Ex: property renting.
For many people, this is the first kind of income other than the earned income that they earn! Let’s imagine you buy a good for $100 and after a few years its value is $300. You’ve generated $200 throughout a period of time and you can later benefit from it.
Ex: Houses, stock, crypto.
Imagine you’ve developed a high quality product and a big company decides to buy your idea. You consult with someone with good knowledge of product manufacturing and decide to ask for a small part of each product the bigger company sells after you providing the patent. That s a royalty that you earned for the sales of your product under the name of another company.
Ex: Affiliate selling, several offers on Shark Tank.
These are the six different ways of income that anyone can have and I recommend you develop them in your portfolio!
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