I’ve also found myself wondering about how people become and stay wealthy and what we can learn from their financial habits. Many of the articles I read suggested that most wealthy people have multiple streams of income (Taylor, 2022). This is helpful because if one income stream ends you still have income from other sources.
Times are difficult financially! The cost of everything is going up and many of us are looking for additional income! This post is all about various types of income and creating income streams! There are four types of income that we will look at today.
There are four types of income streams (Matthews, 2017):
- Earned Income
- Passive Income
- Residual Income
- Investment Income
Earned income is the most common. It is income we get from working at a job. This could be employment for someone else or for yourself. Typically payment is given based on an hourly schedule and yearly salary. If you are looking for additional income through your job or career here are some ideas to consider:
- Looking into open positions in the company you are with or other agencies that have higher paying jobs.
- Seek promotions in your current work.
- Working extra shifts or hours.
The best thing about earned income is that it is fairly predictable and you can count on payments on a regular basis. This may be more uncertain if your pay depends on tips, commission, or sales.
Passive income is typically slow to grow, but for some can become a significant source of income. These days there are many opportunities to make passive income and can allow you to make income with less effort then earned income. The great thing about this type of income is that it can grow without you having to do a ton of work. Here are some ideas of ways to make passive income:
- Start and monetize a blog!
- Sell digital or printable products
- Make an online course (Matthews, 2021)
- Start an online shop. You could possibly sell items you have made, bought wholesale, or through drop-shipping.
- Affiliate marketing for other businesses
Residual income is the money that continues to flow after an initial investment of time and resources has been completed”Will Kenton, 2022
This has similar benefits as passive income in that there is initial effort to get the income started and then it generates itself ongoing. Here are some examples of residual income sources (Matthews, 2021):
- Rent received from properties
- Network Marketing, also known as direct sales or multi-level marketing
- Providing a service that clients can subscribe to, for example coaching or subscription boxes
This income comes from money that is invested that in turn makes you a return.
Just like Passive income, your money is working for you. The income from these types of investments include, interest, dividends, and capital gains.”Erica Matthews, 2021
This list includes sources of investment income (Matthews, 2021):
- Mutual Funds
Kenton, W. (2022). “Residual Income: What It Is, Types, and How to Make It” https://www.investopedia.com/terms/r/residualincome.asp
Matthews, E. (2021). “4 Types Of Income You Can Generate” https://ericamathews.com/4-types-of-income/
Taylor, J. (2022). “6 Things the Rich Do To Stay Rich” https://www.gobankingrates.com/money/wealth/reasons-rich-stay-rich/amp/