In The UK, the richest 25% of the population own approximately 85% of the wealth (according to HMRC in 2003). The distribution of wealth all around the world has always been more favourably split to a smaller percentage of people, leaving some people who may work just as hard during the day, struggling to put food on the table, whilst others who seemingly live a life of leisure are never in short supply of cash. Learning about the three types of income can give you a real insight into how they do it, the wealth it can bring in and more importantly, how you can do it too!
Work
This first method of bringing in an income is the most popular and seemingly the first option when looking at revenue streams. You trade hours of your day for a wage or salary that's determined on your skills and education... or work.
The problem with work is that the amount of income you can bring in is completely dependable on the amount of hours or clients you have in a week and the amount of time in a day. The vast majority of people, when looking to bringing in more income, either take on more hours at work or look for better employment. Unfortunately there is a finite amount of hours you can work in a day. Even if you get to higher management or director levels, there is a limit to your salary and you have to spend a lot of your hours in the office working.
Whilst you can be successful at work and it can bring in a level of financial freedom, it is not an easy or sensible option when you are looking to bring in that extra cash and doesn't allow freedom of time.
Investment
People who have created a successful business or perhaps have come across inheritance often choose to invest in other peoples business ventures. Successful investors can see their stocks and shares increase dramatically in the good years and when they sell, can often have a lump sum of money that is far greater than what they put in initially. This can be then used to invest in other opportunities or used to buy the dream house/car/holiday etc.
Investment can be incredibly risky. Although every care should be taken to make sure that all investments are done with the least amount of risk possible and the businesses they invest in have solid business plans, every investor should know that there is a good possibility they will lose the money they invested. On top of this, once you have invested the money, that cash is tied into the business for a few years, and whilst the odd cash dividend can help boost your income, you have to be in it for the long term and can't count it as a regular income. Investment is gambling, and gambling is never a sure way to bring in income.
Passive Income
The people who make serious money, tend to be the people who have a lot of passive income. Passive income is money coming in that doesn't cost any time or extra money after the initial set up. Imagine being able to wake up in the morning, check your balance sheets or bank account and find that you made a thousand pounds or dollars whilst you were asleep.
Passive income can come from lots of revenue sources. It could be a second home that you rent out, it could be advertisement on a website you own or it could be a book you have written that is steadily being sold. Many musicians live on a passive income once their touring days have finished through copyright ownership, many top bloggers live on the income generated from advertising on their blogs and anyone that creates a successful TV show can almost be guaranteed passive income through the selling of show ideas to other countries and TV companies.
Passive income may take a few months to set up, and sometimes can take years to generate income but successfully creating many passive income sources can be your ticket to financial freedom with little effort.
When you're next thinking about creating a different income stream, try to imagine how you could generate money whilst you sleep. Try to visualise something that you could do that people would pay for, making you money for no extra effort. Perhaps there's a book you've written that is just sitting on your hard drive, perhaps your savings could be invested into a second house or flat that you can rent out, perhaps you have a website that is getting thousands of hits a day but there are no adverts on it that could give you an extra income for no extra work.
Thinking in these terms, rather than trading time for money is a rich way of thinking. Being Rich doesn't mean sacrificing time. Time is our most precious commodity and any time spent working, should be done creating more free time and financial freedom for the future.
FM
