7 Types of Income - How Rich People Make Money

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Have you ever been driving around and meandered your way into a wealthy neighborhood of manicured lawns, huge homes and opulence, and wondered "how in the world do these people make their money"?

Well, the truth is, rich people bring in income from various sources that differ from the average person.

Rich people have figured out two things about money: first, money is supposed to make more money, and secondly, their time is way too valuable to waste it on simply working a job to earn more money.

In this quick article I want to share the 7 types of income rich and wealthy people have. Nowadays with social media and all of the money gurus out here selling dreams of wealth, everyone wants to be a millionaire overnight. However, it really doesn't work like that. Building wealth is a process that takes time and it requires the ability to gather income from various sources.

Take a look at the breakdown of each of the 7 types of income below and figure out which ones you have and which ones you want to add to your streams of income on your wealth building journey.

Check out the video on YouTube - click HERE and scroll down to find 7 Types of Income Rich People Have | How Millionaires Make Their Money.

7 Types of Income - How Wealthy People Make Their Money

1. Earned Income - This is the most common type of income stream and it is the highest taxed income stream. Earned income includes wages from a job, self-employment, commissions, bonuses, or tips. With earned income you are trading your time, labor, and efforts, for money. For most people, this is unfortunately the extent of their income sources. We know that time is an unlimited resource, but YOUR time isn't. If you are trading your time for money, there will always be a cap on the amount of earned income you can receive, based on the cap of your time and your skillset. Because it is the highest taxed type of income, most wealthy people do not rely solely on earned income.
2. Profit Income - Income from buying low and selling at a higher price, thus earning yourself a profit. Profit income is the income left over after all expenses are paid. If you own a business, you can fully appreciate this type of income stream. Profit income is not an easy sure-fire way to make money. According to the Bureau of Labor Statistics around 20% of new businesses fail in the first two years, 45% fail during the first five years, and 65% fail during the first 10 years. Only 25% of all new businesses make it to 15 years or more. So starting and running a successful business for profit income, isn't easy, but it is certainly an income stream worth pursuing.
3. Royalty Income - This income stream is from someone using your name or your work. Royalty income can come from others using your trademarks, patents, brand rights, name image and likeness, music, or intellectual property. If you write a book and sell your book, then you will receive royalty income. If you simply create or produce something that others are willing to pay for the right to use, then you are in the ballgame when it comes to royalty income. Many athletes, entertainers, authors, and inventors make a large amount of their money through royalty income.
4. Interest Income - Interest income is when you make money from the compounding interest on money you save, invest, or loan out to other people or businesses. If you have a high-yield savings account, money market account, bonds, loans to investors, or loans to individuals where you collect interest, then you are receiving interest income. Interest income is one of the most lucrative sources of passive income that allows your money to make more money for you.
5. Dividend Income - Dividend income is the income you get from owning stocks. It is the distribution of a company's earnings to shareholders. When you buy shares of a company you become part-owner and entitled to dividend payments without being required to sell the stock. Many companies pay quarterly dividends and as the stocks appreciate in value over time, the dividend payments get bigger and bigger. Many wealthy people choose to reinvest dividend income back into the purchase of more company stock, which compounds over time, adding to their investment portfolio. Dividend income is an amazing source of passive income that rich people use to grow their wealth.
6. Rental Income - As an owner of rental real estate for the last 22 years, this is one of my absolute favorite sources of income. This is income you receive from renting out your property, land, buildings, or equipment. People pay to use stuff you own. This is an excellent way to add to your sources of income and build your wealth. The most common sources of rental income include real estate, which appreciates in value over time, thus adding to your wealth more. Most millionaires have a significant portion of their wealth tied up in real estate because of cash flow, appreciation, monthly payments, tax benefits, leverage, and demand, due to the fact that everyone will always need a roof over their head.
7. Capital Gains Income - The buying and selling of assets, such as real estate, can provide you with capital gains income. This is income your receive from the rise in value of an appreciating asset that has a higher value than the purchase price. Owning a home, land, commercial buildings, stocks, bonds, or any other type of investment property, will net you income from capital gains at the time of the sale of that asset. Of course with capital gains income comes capital gains taxes to be aware of, but income from the buying and selling of assets is a great way to add to your income streams.

So now you know the 7 types of income the rich and wealthy use to make money make more money. Developing multiple streams of income, other than just earned income, is a critical part of the wealth building process. The question for you is which ones do you currently have, and which ones do you want to add to your streams of income on your wealth building journey?

Visit us on our?YouTube channel?to binge watch our personal finance videos.?I provide information and transparency into my own financial situation, while offering suggestions and help for others.

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Take care of yourself and take care of other people.

Sincerely,

Eric C. Bowie?(Smart Money Bro)

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