Search

Leveraging the 4 Types of Income


What is the attraction towards money?

  • People work extremely hard all their lives to accumulate wealth, and there are an infinite amount of ways to do it. Is the motivation to be wealthy derived from a natural attraction towards green pieces of paper? No. People are drawn to the power and freedom that money possesses. It gives people the option to do things that they have always wanted to do, but more importantly the ability to not do things they don't want to do. By creating multiple revenue streams, you can leverage your time to maximize income.

4 Types of Income:

  • Linear: Getting paid for time worked. Examples include consultants, landscapers, accountants, electricians, and speakers. Whether you are on a salary or get paid by the hour, linear incomes are by far the most common. This type of income is ingrained in our heads starting at a young age. We are repeatedly told by parents and teachers we should go to college or a tech school to obtain a marketable skill. We will then use this skill to perform a service in exchange for money. It is a great model if you enjoy what you do; however, when the economy is down it can be dangerous if it is relied on as the sole source of income.

  • Leveraged: Work once and get paid repeatedly. Examples include authors, musicians, and content producers. The work is completed once and the creator gets paid repeatedly. It differs from the linear model in that a barber can't trim someone's hair and get paid more than once for one cut. Leveraged income streams generate revenue without physically working for it after it has been published, meaning someone can make money in their sleep.

  • Passive: Income generated from personal assets or products. Examples include landlords, manufacturers, and investors. People purchase assets in order to make a return on investment in the future. Once the asset or property is purchased, revenue can be generated using its value. Landlords collect rent money at the end of every month from their tenants by trading an asset for monetary value. The landlord does not have to keep purchasing the house to rent it out, once the property is owned it can be used to generate income.

  • Windfall: Unexpected gain without creating any real value. Perhaps the most fortunate type of income. Examples include wealthy inheritance and winning the lottery.

Utilizing multiple forms of income to your advantage:

  • As previously stated, linear income is the most popular way to make a living. Even those who rely heavily on passive and leveraged incomes most likely also generate linear incomes. Some of these people include CEO's or other business leaders. The most practical way to earn multiple revenue streams is to develop a side hustle. When the secondary source is mature enough to sustain itself, you can work your day job while your passive or leveraged income works on its own time. When successfully completed, you can make money from multiple sources simultaneously which will ultimately maximize your time and income.

Article Written by: Jim Toth

Reference: www.danlok.com

  • Dan Lok: Successful business owner and speaker. Dan Lok is an inspirational business leader who produces outstanding and insightful content. You can find his bestselling book on his website called F.U. Money which bluntly dives deeper into how to manage your finances and take control of your life.

44 views