It is not an overstatement that the average rich men have several stream of income. There are different ways of generate a cash flow or stream of income. Some are active, some passive while some are combined.
Today I will highlight different ways to generate a stream of income.
1. Earned income: This is the popular way of generating an income from the average worker up to a CEO. Many CEO are still workers of a company. Other professions like Doctor, Accountants are also included in this category. Earned income is when you exchange time for money and this is called Active Income. This also include freelancing and this is typically the starting point for the self- made millionaires.
This category of income allows you to provide for yourself and family but it is the most dangerous part of income category. This type of income will not allow you to leverage your limited time. You only have 24hours per day like every one else and there is a seal to the level of amount one can make in this category.
2. Profit Income: This is the income produced by selling product or services for more than a cost to make or buy them. This is when we move from employees to entrepreneur. In the past starting a business requires significant amount of investment to buy or make a product but now it has become easier with the help of the internet.
When you sell a physical or digital product, the product is sold for higher price than it takes to make or buy them, then you are earning a profit income. This kind of income can be both active or passive depending on your business map. If you make things yourself and sell them, it is noting more than an active income and a little more difficult to scale. But if you create the design of the product service and you have someone working it out for you, then it becomes a passive income.
3. Divided Income: This is when you invest in a company that pays part of it's profit to the shareholders. When you buy a stock in a company, you become a shareholder wherever the company you invest in records profit, they send your own part to you typical every quarter, As a shareholder you are the owner of a small part of the company and any time divided is shared, you get a portion of the company's profit.
4. Rental Income: This typically comes from buying real estate properties and renting them out to other people. it is not necessarily here to be real estate, this can be other properties like households items. Rental income is landing a property to someone else in exchange for money.
5. Residual & Royalty Income: This type of income is when you continue to get paid after your work is done. This happens in book publications, online courses, magazine etc. Royalty income is when you allow people to use your idea or properties to make a money. As long as people are buying the idea or making use of the property, you get paid and this can be a lifetime earning.
6. Capital gain: This is when an asset that has value is sold. The most common one is real estate and stock. For instance, if you buy a real estate property for ₦20million and you sell it for ₦25million, you have made a capital gain of ₦5million. This is different from profit income because you are not buying/making a product in other to selling it for profit. Here, you are having asset that appreciate in the market value and you have a larger control over the value increase.
When building an income, most of us only know one or two ways of doing this but knowing the different types of income and how you can benefit from them gives you a better opportunity of adding series of income into your lives.
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