Not all income is the same, but what are the different types of income streams? Click here to learn all you need to know.

What is the best way to get wealthy?

Most people think the best way to get rich is by getting a high-paying job, work 9 to 5, and trade your time for money.

However, there are more ways of earning income without having to trade your time for money.

And if you keep reading, I’ll show you the 3 different types of income streams so you can decide which one is best for you.

Earned Income

The most common type of income is earned income. You receive this income in exchange for a service you provide for someone else.

When you first graduate, this will probably be the first type of income you will earn. It is where most people start their financial journey.

Examples of earned income include:

  • Work as an employee (paid hourly)
  • Work as an employee with a salary
  • Work as a consultant for clients or companies
  • Work as a freelancer for clients or companies

Essentially, anywhere you trade your time for money would fall under the category of ‘earned income’.

The big sacrifice to earned income, however, is time. In order to receive earned income, you need to trade it for your time, which means you gain in personal finances but lose out on life freedom.

It’s also the most taxed form of income.

Capital Gains Income

Another type of income you may be interested in is called capital gains income. You earn this income through the sale of an investment for more than the investment cost you.

A really good example of this is real estate. If you purchase a property at $250,00 and sell it for $320,000, you’ve earned $70,000 in capital gains income.

One huge benefit to capital gains income is it’s mainly passive income. Any income you earn through capital gains doesn’t require you to work in order to increase that income.

This is often known as ‘unearned income’, which you can learn more about here.

However, this type of income needs upfront cash in order to invest in assets like stocks, and properties, etc.

Passive Income

The final type of income you can make is passive income. Passive income is often most people’s favorite form of income as it allows them to earn money ‘passively’ without having to work extra for that money.

With passive money, you do the hard work once and reap from it almost on autopilot.

A good example of passive income is rental properties. Owning a property that you can rent out is a fantastic way to earn monthly income from your tenants.

If your mortgage is $1,000 per month and your tenants are paying you $1,500 a month to live there, you are earning $500 per month of active income without having to do anything.

The biggest benefit of passive income is the fact that you won’t have to sacrifice your time in order to earn it. Your assets will earn income for you while you enjoy your life.

However, like capital gains, passive income can require an initial investment to get started, that’s the only downside to this type of income.

Want More Info On Different Types Of Income Streams?

There is a lot of information regarding types of income streams and making money, and it can get overwhelming very quickly.

That’s why we hope that this article has helped make sense of the different types of incomes, and helped to simplify your options for you.

Did you find the answers you were searching for? If so check out some of the articles on this topic in the finance section of the website.

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