WEALTH MANAGEMENT

The Basic Types of Incomes

Active income is money earned by actively engaging in a specific task for money. Active income sources include working at a regular job or providing services as a freelancer.

Passive income comes from work that is done once but continues to earn money without further action. Passive income may come from royalties, patents, and investments in real estate rentals (providing the owner is not actively engaged in maintaining the properties).

Portfolio income is derived from dividends earned through investments such as stocks, bonds, and mutual funds. Unlike real estate investments, financial market investments are not considered to be passive income as the stockholder should remain actively engaged in studying the market.
1. Active Income: Jobs and Business.
Traditional Jobs. Jobs are the traditional method for making money. The advantage of having a job is receiving a steady and predictable income. There are no financial risks associated with jobs – an hour worked is an hour paid.

Although some companies do offer a comfortable retirement after twenty or thirty years, a regular job is not a great wealth builder. For the most part, a traditional job is simply a ticket to the middle class, if even that.
Freelance Jobs. Freelance work is becoming more common place today. Numerous positions are being filled by freelancers including computer professionals, virtual assistants, and business consultants. The downside to freelance work is that the freelancer is almost constantly marketing for the next gig or job.

Unlike a regular job, there is no guaranteed retirement fund. However, money earned from both jobs and freelance work can be used as seed money for investments or entrepreneurial endeavors.

Entrepreneur/Business. Entrepreneurs take the greatest risks but are also more likely to reap the greatest rewards. As true modern-day mavericks, entrepreneurs explore and develop various business ventures while maintaining control of their ideas and ventures. In the long run entrepreneurs stand to make the greatest strides in wealth building. One truly innovative idea can lead to a multi-million dollar industry.
2. Portfolio Income: Investing and Speculation.

Investing is great way to build a financial portfolio which is the hallmark of wealth building. There are numerous types of investments and some are safer than others. There is some risk involved with investing. Potential investors should develop a sound strategy. The higher the risk, the greater the return – if all goes well.

Ways of speculation investing would be with an ETF, mutual fund, savings account, growth stocks, gold and silver, real estate flipping, as well as pretty much any other traditional investment.
3. Passive Income: Making Money Automatically.

The best income is a passive income. Passive income is money you make automatically without working for every paycheck. Dividend investing, rental properties, multi-level marketing, outsourced business — these are the three main passive income sources.

Dividend Investing. I recently launched a dividend investing website that covers the basic case for dividend investing. Dividend investing is essentially buying stocks that pay consistent and high dividends. This way you can live off your investments without ever needing to sell them off — it’s a truly passive investing income.

Rental Property. Renting homes and businesses is a fantastic way to generate a full-time income with a relatively small amount of up-front investment. For example, a friend of mine lives in a home that cost no more than $50,000 to build, and is being rented out for $750 per month. Building 5 of these homes takes a $250,000 investment, and turns it into a passive 45k a year income. Not bad.

Multi-Level Marketing. This is something that I’m not a fan of, because it’s so filled with scams and gimmicks that it’s almost a waste of time to research — research time could be better spent looking at strong dividend stocks. Still, it’s popular and can’t be overlooked. I won’t waste time going into details here, though.

Outsourced Business. This is my favorite business model, and one I use constantly. The model includes figuring out a way to build a business, and then outsource all of the work to employees or another agency. It sounds simple, because, well, it is. I do this. It’s amazing. I won’t go into details here, but I will in my future newsletter updates.
Last Thoughts About Wealth Building

Making money is kind of essential to pay for day-to-day living expenses. While a traditional may pay the bills, it often takes more time, creativity, and resources to build wealth. A combination of all three types of income (active income, portfolio income, and passive income) strategically planned is critical in order to build a strong financial foundation.

My personal business model includes running an almost-completely outsourced web publishing business and a variety of dividend stocks. This gives me a steady income, a business project I can expand as I see fit, and a continually increasing steady passive income through dividend investing.

One of the above incomes is great; two of the above incomes is better; mixing all of the above incomes with a debt free financial situation, and you have found a beautiful union between financial freedom and financial security.