JUST WHAT YOU NEED TO KNOW ABOUT INCOME

JUST WHAT YOU NEED TO KNOW ABOUT INCOME

What if I tell you that COVID did some good! Yes, you read that right, the Global pandemic that turned the world upside down and brought it to a standstill did not do us only wrong but some good, as well!

The one good thing was to expose our weaknesses or areas of laxity that we never knew about. It brought us face to face with areas we failed to deal with, the knowledge we refused to acquire in different areas of our life, finance inclusive. So, when I said it did us some good, I know what I’m talking about. During the pandemic, people whose source of income was just salary felt the heat more—thereby forcing us into searching for other sources of income.

Did you know that there are different types of income? Whatever your answer is, follow me, still, as we go through my novel found knowledge together. In one of my searches, I discovered that income is categorized into three.

There are three types of income; the active income, the passive income, and the portfolio income.

Active Income

Active income is the money that you earn from while working, either as an employee or an entrepreneur. The unique thing about this income is that you are paid for the work you actively do. When you aren’t active or stop rendering services, then the income seizes. That’s the popular income we all know or have, and the typical examples that come to mind are examples are salaries from jobs and profits from businesses. Active income solves mostly short term problems.

Passive Income

A passive income is one in which money is usually received regularly (might not be daily though) basis, where no additional effort has taken place. Passive income flows to you or your family, whether you are sick, not in the country, or dead.

Oh, how I love passive income streams, but just that most passive income streams require significant efforts to acquire. A passive income stream grants you the luxury of making money without being there or mainly working. Passive income might not be passive initially; it might require a little time before it begins generating flowing in (patience is key here).

Examples of passive income are income derived from interest or income paid from bank deposits, rental income from real estate/property, royalties from writing a book, network marketing, etc.

Portfolio Income

Portfolio income is from investments, including dividends, interest, capital gains, and so on. It’s also the income that you make from selling an investment much higher than what you originally paid for. The con of this income is a large amount of money needed to start it. Most active income earners save up for this type of income, and you would need to do adequate research to ensure you don’t invest in liabilities. Also, you can’t determine how an investment turns out. There’s a level of risk involved (well, what doesn’t include risk in life?)

Now, we know the types of income. It’s time to work on expanding our means of income. Once bitten, twice shy. Don’t let the lessons from COVID- 19 become a waste.

It’s essential to know how money works and how we can get cash before going for any income type. It’s also important to know that not all avenues may be for you! There are options out there, and sure they might take some time to work, but the rewards can be unbelievably great when applied with wisdom and understanding.

Now you know, make a difference in your finance. I hope this was helpful?

Do you some other form of income you can share with us? Let us know in the comment session.