The average millionaire has about seven streams of income, whereas, the average person only has one, usually from their job. People in general are not wired to become millionaires because they only focus on active income. Active income is when you do work and are paid for it (e.g. paid by the hour or monthly salary income). Passive income is when payment is not directly tied to active work. This is where the millionaires make their fortunes.
Here are the 7 types of income you need to be pursuing if you want to be a millionaire:
1: Earned Income
This is the most common source of income, also known as active income, which we discussed briefly above.
2: Profit Income
This is income produced by selling goods or services for more than it costs to make or buy them.
3: Interest Income
Interest income is a passive way to earn money by lending your money out to somebody (e.g. interest from savings from a bank account)
4: Dividend Income
Dividend income is a form of income you earn by owning shares in a company. This is also known as dividend stocks.
5: Rental Income
Rental income is a result of you owning something and renting it out to someone else. This can include home, commercial or industrial properties. Even renting things such as cars or music equipment is considered rental income.
6: Residual and Royalty Income
This type of income is when you continue to get paid after your work is done. (e.g. author whose book continues to be bought)
7: Capital Gains
Capital gains income is when an asset that has appreciated in value is sold. The most common types of capital gains are real estate and stocks, but there are many other assets.
These are the 7 income streams of millionaires. Rich people get rich by having multiple streams of income, allowing them to efficiently trade their time for money. They use their brain and their financial knowledge to think of alternative ways to do less work, while generating more income.
Sven Franssen