7 Income Streams

How many streams of income are you aware of? Are you generating money using only one stream? Which and how many streams do the wealthy millionaires apply? Which is the best stream for you? There is much more to earning money than what you are probably aware of.

Here are 7 Income streams for millionaires.

1. Earned Income
Earned Income is the money that you earn by doing something or by spending your time e.g. the money that you make in your job, the salary you get by working for someone else. Now, this is where your quality of life will suffer the most, because you will be trading your time for money.
Now, the reason why most people are not able to think beyond earning money through a job is because Job will provide you with a 'relatively' comfortable zone.

Unfortunately, this comfort zone will become your biggest enemy and will keep you away from leading an extraordinary life. You will spend the maximum time of your life in this income stream and still will never have enough money to lead a truly wealthy life.

"Comfort is your biggest trap and coming out of comfort zone your biggest enemy" ~ From the Rat Race to Financial Freedom

2. Profit Income
Money that you earn by selling something for more than it costs you to make. e.g. Businesses selling their goods at a profit, whether at the retail or wholesale level, as distributors or manufacturers. You need to be an entrepreneur for earning profits.

You might need huge investments or you could start a small business for profit with small investments too. But this will also take away a lot of your time, at least in the initial stages - until you learn to manage it really well and be able to make it churn of its own.
Entrepreneurship is a different kind of mindset and risk taking capability.

Most of the people who are in job and are used to the 'Earned Income' want to move to this category at some stage of their career or life, but find it difficult to make the move - primarily because of lack of guts to take additional risks. Most often, this lack of courage is justified because of the family constraints and needs.

To be an entrepreneur and start earning profits, you will need to identify a product or a service that you want to sell, and then sell and manage it well, and manage your clients equally well.
For most people, 'Earned Income' and 'Profit Income' are the only viable means to earn serious money but they often tend to forget that there are 5 other 'equally' viable and serious streams of wealth generation.

3. Interest Income
'Interest Income' money is the money you get as a result of lending your money to someone else to use, e.g. putting it in the bank, lending it to the government in the form of buying Treasury Bills etc.

This is a great source of passive income where your active involvement is not needed once the investment is done. Many doubt on the seriousness of wealth 'Interest Income' can generate, but when combined with the power of compounding, and the fact that this is a true passive income with least amount of risk, this can beat any of the first 2 sources of income generation hands down.

4. Dividend Income
This income gets even better than Interest Income. It is equally passive and not only that, it also makes you a shareholder of a company. This is the money that you get as a return on shares of a company you own. For e.g. the dividend that most companies announce at the year end. The better this stream of income sounds, the more ignored and neglected is this source of income.

If you invest smartly on ex-dividend dates of good blue chip companies, you can far exceed the returns from Dividend Income than what you get from the Interest Income, since you are also a party to the Capital Gains that the share price goes through.

This is one of the key instruments that we recommend for generating adequate Cash Flow and still get very good income.

5. Rental Income
This is the money that you get as a result of renting out an asset that you have, like a house, or a building. Now, this income is even better but there are inherent drawbacks of this kind of income over the above 4 types of incomes.

One of the biggest drawbacks is the amount of money required to create such an asset which can generate regular rental income. Since the money required is huge, you may not be able to create many such assets in your life time, unless you have other sources of income.

6. Capital Gains
This is the money that you get as a result of increase in value of an asset that you own. For e.g. when you buy shares at P10 and sell them at P11 - the P1 is capital gains, or if you buy your house for P200,000 and sell it for P220,000 the P20,000 is your capital gain.

7. Royalty Income
This is the money you get as a result of letting someone use your products, ideas, or processes. They make all the revenues, they do all the hard work and you get a small percentage of what ever they earn.

e.g. if you have a Foodcart Franchise - the royalty you send to Foodcart is using their processes, their logo, and marketing etc. is royalty income for them. If you are a writer, you get paid for every copy of the book sold.

The biggest challenge here is to create something unique and then make it repeatable. This will need special skills to create such an asset but once created, there is virtually no limit to the amount of money you can earn.

So focus on what you can do right now from one of these income streams. Then become the best you can in a small niche in that income stream.

So go on, chose your streams. The biggest risk to your financial life is being dependent on only one income stream where you are actively involved. Each of these streams are one step above the other. You just need to get into the details and understand them more. Try it out. It could well be life changing for you and your upcoming generations.

Robert Kiyosaki said - IF YOU WANT TO BE RICH, YOU NEED TO BE FINANCIALLY LITERATE.