What type of income are you currently earning? Do you wish you had more than one source of income? Then consider different types of income and earn more money.

With today’s gig economy in our globalized world, a regular paycheck is only one source of income.

If you want to make more money, know the different types of income and how they can help you build long-term wealth.

3 Main Types of Income

1. Income earned

For individuals, earned income is the most common type of income they receive in exchange for their time and services. This income is typically earned through self-employment, working for a company, or in your own business. It refers to wages, commissions, salaries, or profits.

Many people confuse this income as if it only includes income from the office, which is not true. The income you receive from surveys and side activities like proofreading or product testing, as well as the performance of services or sell products online, is part of earned income.

2. Passive income

Passive income is income you earn through investments. This can be from owning assets or other commodities. Investment income does not require you to actively work like you do for earned income. Instead, you invest your hard-earned income into long-term investments and earn a return.

Most people get into passive investing after spending money saved from their income. Passive income can be riskier because you need to spend your money wisely in the right place to generate a perfect cash flow.

3. Portfolio income

Portfolio income is the income you receive when an asset or other investment is sold.

In this type of income, you don’t actively generate money over time, but you get it back in one go when you sell your investment for a profit. For example, if you bought a stock for $150 and sold it for $200 after a few months, then the $50 profit would be considered portfolio income.

Anything in your possession (portfolio) that increases in value over time would be considered capital, and making a profit by selling it would be called capital income or portfolio income.

The most common portfolio items include:

• Actions
• Real estate or Real estate investment fund
• Dividends
• Obligations
• Currency (USD, Crypto, etc.)

Advantages and Disadvantages of Income Types

Income earned

Passive income

Portfolio income

What are the 7 most common types of income sources?

Make money by selling products or services

The first and most common source of income is the sale of a product or service, which is, by far, the most used option by people around the world.

Such income is an example of earned income, where you run your own business and invest time and effort in exchange for money.

Interest income

Interest income is a great example of passive income.

If you have a lot of money saved up in your bank account, why not use it for something more profitable? Many entrepreneurs use this money to convert it into a passive income stream by investing in a savings plan.

One of the most popular ways is to buy a government bond, which is safer than other investment methods.

Income from dividends

Dividends are an example of portfolio income. Once you buy shares in a company, the company is entitled to pay you dividends. These investments can help you generate a good amount of money over time.

We highly recommend investing in dividend stocks as they offer a more consistent cash flow with lower risk since you receive money at regular intervals.

Income from shares

Stocks are another good example of portfolio income. Consider researching the best companies in the market and investing in their stocks to generate good income over time. The value of stocks changes based on supply and demand.

The simple rule applies: if demand increases, price increases, and vice versa.

We strongly recommend that you diversify your stock portfolio to reduce overall risk.

Income from real estate rental services

If you own real estate, you can always rent it out to earn passive income. The U.S. Internal Revenue Service (IRS) noted that an annual average of $97,000 in rental income from about 17.7 million properties was reported by 10.6 million landlords.

According to Statista, 34% of U.S. households rent nearly 44 million homes in 2021. With the average U.S. household size being 2.6 people, 35% of the population, or about 114.4 million, live in rented homes.

Royalty income

Royalties are a great source of passive income. When you charge someone for the use of a unique product or item, you have created it from your imagination and it becomes a royalty. Music, books, and artwork are great examples of creations that generate royalties.

In 2020, annual revenues generated from creators’ intellectual property rights (IPR) in songs and original recordings owned by record labels reached $40 billion, with a forecast of continued annual growth of 9% through 2030.

Job Salaries

According to the Bureau of Labor Statistics (BLS), 120.2 million full-time salaried workers earned a median weekly income of $1,070 in 2022.

Professional salaries are the most common example of earned income and are generally considered a safer option that many prefer over other sources of income.

How can you increase your income?

The best way to increase your income is to participate in passive investments. As we have seen before, passive income does not require active work, so you can easily manage your passive investments while doing your conventional job.

Some of the best passive investments currently available on the market include:

• Actions
• Real estate
• Affiliate Marketing
• Network Marketing
• Peer-to-peer lending

What is the ideal income range?

According to CNBC, the ideal income for a life assessment is $95,000. However, if you want to live an emotionally healthy life, an amount between $60,000 and $75,000 would be suitable.

In the United States, there are many jobs that pay between $60,000 and $75,000 per year. These jobs include:

• Truck’s driver
• Police Sergeant
• Agricultural specialist
• Environmental specialist
• Distribution Manager
• Research Director

Frequently Asked Questions (FAQ) – Income Types

What is considered income?

Any amount of money you receive in exchange for your services will be considered income. This may include salaries, commissions, profits, etc.

What is the main source of income in the United States?

Wages and salaries are the primary sources of income. Most Americans work as employees rather than as entrepreneurs.

Why is income source important?

Income source plays a vital role in your overall income growth. A diversified portfolio of your income sources would help you generate more cash per month.

Does income include tax?

Gross annual income is your income before taxes. The total amount of income tax on your income depends on the overall tax rate in your area.

Conclusion – Types of Income

Some of the types of income mentioned above may not be right for you. However, the fact that these options exist can be both reassuring and motivating.

Learn how to diversify your income into multiple sources and get inspired. Earning more money will help you get on the right path to financial independence.

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This article was previously published on Radical Fire.

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The article A Simple Guide to 3 Types of Income – Pros and Cons appeared first on The Good Men Project.