Apparently, The Average Millionaire have 7 Different Types of Income Streams
Did you know there are many different types of income streams? Majority of people grow up working their life away until 65. You most likely started school at 5 years old until you graduate high school; all those years worked away to pursue one source of income known as employment income.
What if I told you that there was more than one way to make money? Would you believe it?
I didn’t at first because schools never taught me this! I only thought that there was one income stream known as a “job”!
Dangers of relying on one income stream
Many people rely on only one income stream to sustain their lifestyle and that is very dangerous because if something were to happen then you would be in the danger zone.
Let us take your job as an example, if your company goes bankrupt, performs employee layoffs, or worst of all, terminate your employment then you would need to live off your emergency fund until you find a new job!
Or you can bum off a friend until they kick you out.
The world is a tough place to live in and having multiple different types of income streams can really be a big cushion to help you when you fall!
Hopefully, you can see the risks in having only one type of income and if you’re looking to find different types of income streams then continue reading!
Like what you’re reading? Check out my other blog posts that can help you with your finances!
The 7 Different Types of Income Streams
- Employment Income – working at a job.
- Interest – from a variety of sources such as individuals, banks, businesses, government.
- peer to peer lending
- private notes
- CDs, Savings Account
- Treasury Bills
- Dividends – Payments from owning shares of a company.
- Capital gains – from the sale of investments or capital.
- Royalties – residual earnings from a book, music, movie that you made.
- Rental income – from rental properties such as a home, building, or equipment.
- Business income – from a service/product you offer. Can be passive depending on how you leverage your staff.
This is one of the 7 different types of income streams and this is the most common among all; Generally the first type of income that majority of people grow up working for. Employment Income is anything that requires you to trade your time for money. With one hour of work equals one hour of pay.
I.e.) Working at Starbucks, Trades Worker, Docter, etc.
Interest Income is gained from lending a person/business funds over time. This can be as simple as stashing away some cash away in a savings account at a bank or purchasing long-term government/corporate bonds.
Interest income is one of the different types of income streams that are completely passive, this income stream relies on the dollar figure lent out and the duration of the lending rather than the work by the hour basis.
Dividend Income is a source of income from owning shares of a particular company. For more information on this topic, check out my blog post here about Dividend Income.
Generally, owning shares of a company means that you will receive a small cut of the company’s earnings per quarter depending on the number of shares that you have. Similar to interest income, the amount of dividend income you will receive depends on how much you’ve invested and the duration of owning those shares.
One of the different types of income streams that stems from holding onto the company’s shares is capital gains. This source of income stream does not always come from shares, but can also come from other capital assets such as land, building, machinery, or equipment.
Capital gains are the difference between the amount that you purchased the capital asset and the selling price. The profit that you gained from the sale is considered a capital gain.
Royalty income comes from the use of copyrights, trademarks, patents, and even natural resources. An easy one to understand would be paying an artist for the use of his/her work. Using their work without permission can cause many issues concerning copyright.
If you are the composer or artist then you can gain royalty income from your work if other individuals decide to use it for any reason.
One of the different types of income streams that I love most is rental income. Investing in real estate can be one of the biggest sources of passive income if you decide to rent out the vacant rooms.
The only problem with rental income is that owning a home or property has a really high barrier to entry whereas investing in stocks only require as little as $100 to start.
Rental income does not just apply to homes, but can also apply to equipment too.
This is the last of the different types of income streams in this blog post. Business income comes from the service/product that you offer from your business. This can be completely passive depending on how you leverage your employees.
This is the type of income that many people dream to have because there is no limit on how much you can make from your business. Unfortunately the same can be said with how much money you can lose if your business does not turn out well.
The Different Types of Income Streams Conclusion
These are the 7 different types of income streams that you can make. Although it’s not neccessary to have all 7, having more than just employment income can come very handy when it comes to your daily living.
With more income streams and more cashflow coming in, it can help you feel more relieved and confident knowing that you have more funds to help you live your happy life!