In order to truly understand how to live a comfortable life, you have to understand the 3 types of income. I will go over the 3 types of income and then go over why it is important to leverage all 3.
Earned Income: This is your daily, 9 – 5 style job. You do a certain amount of work and then receive a paycheck. When you don’t work you don’t get paid.
Business Income: This is the income you generate from creating a business. Usually, business income is heavily dependent on how much work you put into the business upfront. Then, over time, it starts to generate income as your workload decreases. Nowadays there are various ways to create businesses, from eBay and Amazon to opening a small nail salon in your home. The possibilities are endless.
Investment Income: This is the income you receive off of your investments such as stocks, bonds, and real estate. The income can come as interest payments, dividend distributions, or capital gains. This money is almost completely passive. For the most part, once invested, you will just have to manage your portfolio to ensure you are heading the direction you want.
The most important thing to remember is that you want to convert your earned income into the other forms of income. You don’t want to be stuck working for someone else until you retire. I call it “buying your freedom”. Even if you only have enough savings and investments to last you a few months, it is refreshing to know that you can change jobs or careers because you have the money to do it. We want to focus on becoming as stress-free and mentally healthy as possible.
Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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