What type of income the majority of us earn? Most of the people would not have any answer because they are unemployed. We don’t know how many people earn money via which source. But it is a fact that millionaires do generate wealth because they use more than one source to sustain their wealth. If we see their history than found all of them have started with an active source of income. It means initially they fully employed themselves after they grabbed the various types of income source which lead them to be millionaires and billionaires.
It means if remaining people follow these types of income source wisely then they can easily have a wealthy life.
Let’s understand those various types of income source to be wealthy:
This is a kind of income which is earned by deploying full time and energy. It is where the people have to engage themselves to earn money.
This is earned in the form of salary, commission bonus etc.
Tax Implications: This is the category which has been trapped by higher tax bracket under the income tax act. Simply means the individuals have to pay a higher tax on the income earned which ranges 5% to 30%. It would be 40% to 45% if cesses, surcharges, etc are included.
Therefore it indicates that solely with this source of income we can not reach to the wealthy stage
But as to reach the level of wealthy one may require to start earning from this source of income then gradually move to all other sources.
This is more favourable income source to reach the next level of wealth because it possesses fewer tax implications. It initially requires more time & energy then gradually require less time & energy somewhere equal to zero requirements of these factors.
The main and foremost thing which makes this revenue source great is that it keeps on generating income without deploying full and consistent time but generates money consistently.
The wealthiest person on this planet Warren Buffett says “If you don’t find a way to make money while sleep, you will work until you die”
That’s the one main dominant factor why people don’t able to take retirement in their lives and keeps on working till the last stage of life.
This income includes rental interest in positive cash flow, affiliate marketing, dividend income, royalty on books, purchase of REIT ( Real Estate Investment Trust), writing blog etc.
It’s the source which will money make your work more for you.
Portfolio means a bucket of Investment, which contains various types of physical and non-physical assets. It could be shares, bonds, mutual funds, and real assets etc.
It requires comparatively high capital investment to create wealth via portfolio income. The revenue is earned via the sale of Investment at a higher value than initial capital deployed (called capital gain).
The tax bracket in this ranges between 10% to 20% which is comparatively lower than that of active source of income.
As it requires capital engagement under this source of income, one has to start with active source which helps in bringing the capital source to spread that money to different sources to create wealth.
Therefore these are all different sources of income which together make an individual reach wealthy life if chosen wisely all the sources. But here one problem arises when somebody is not able to create wealth and manage than must get a personal financial consultant who with good knowledge can take you reach the wealthy stage.