When it comes to growing into financial freedom, it’s hard to beat the simple truth of generating these typical streams of income.
This is a good place to start when talking about typical streams of income. There are many ways to earn money. Some of them are passive, and some are active. Passive income is simply money that is generated from a source that doesn’t require much of your time or energy. Passive income can be created in many ways, including real estate, online businesses, and other ventures.
Here’s a quick look at what a typical stream of income looks like. You’ll get a better idea of what you’re up against when you review each of these streams.
Earned Income
Earned income is the money earned from working, either as an employee or as a self-employed individual. It includes wages, salaries, tips, commissions, and bonuses. Earned income is the compensation received in exchange for work or services performed, and it is usually reported on a W-2 form for employees or a 1099 form for self-employed individuals. Earned income can come from various sources, such as full-time or part-time employment, freelance work, or running a business. Earned income is subject to federal and state income taxes, as well as payroll taxes, such as Social Security and Medicare taxes. These are usually taken out by your employer or if you are self-employed you will most likely pay a quarterly tax.
Most of us have had a job (I call these Just Over Broke) and earned a paycheck for our work. This is usually where we start out in life. I actually started in the Celery Field when I was 13 years old. Late winter we transplanted the stalks in the greenhouse and then early spring we headed to the muck field to transplant there and set up our rows of paper covers. I learned some valuable life skills planting and harvesting celery. Take a look below at what I put into practice with the money I made while working a J.O.B. These are more of the typical income streams.
Capital Gains
Capital gains arise when you sell a capital asset, such as stocks, real estate, or art, for a higher price than you originally paid for it. The difference between the sale price and the purchase price is the capital gain. Capital gains can be either short-term or long-term, depending on how long you held the asset before selling it. Short-term capital gains are taxed at higher rates than long-term capital gains.
I have sold three houses over my lifetime and I am living in the fourth. All of my capital gains where used to upgrade each house. Now, my wife and I, are very comfortable in our home.
Interest Income
Interest income is the money earned from interest payments received on loans or investments. When you lend money to someone or invest in a bond or a fixed deposit, you earn interest income on the amount you have lent or invested. Interest income is usually calculated as a percentage of the principal amount and is paid out periodically, such as monthly or annually. The amount of interest income you earn depends on the interest rate, the amount of money you have invested or lent, and the length of the investment or loan term. Interest income is taxable and must be reported on your tax return.
I am always paying attention to high interest rates when i see them. They are hard to find now days but there are still some out there. I keep a small amount in my local bank, for the quick liquidity, but the interest is pretty low. Keep your eye open for higher rate money market funds or bonds. I am really enjoying my newest online savings account, called Yotta Savings App. I have fun checking each night at 9:00PM to see how much I win. Don’t go overboard with this but it is cool to put a few dollars in to play with it. It is FDIC insured for $250,000.
Dividend Income
Dividend income is the money received from a company’s distribution of profits to its shareholders. When a company generates profits, it may choose to distribute a portion of those profits to its shareholders in the form of dividends. Dividends are usually paid out in cash, but they can also be paid out in the form of additional shares of stock. Dividend income is usually paid out periodically, such as quarterly or annually. The amount of dividend income you receive depends on the number of shares you own and the dividend payout per share. Dividend income is taxable and must be reported on your tax return.
I do own stocks and every one that I do own is a dividend stock. I don’t earn a small fortune but it does all add up over time. Not all stocks pay dividends so do your research.
Rental Income
Rental income is the money earned from renting out a property to tenants. Rental income can come from various types of properties, including apartments, houses, commercial buildings, and vacation homes. The amount of rental income you earn depends on the rental rate you charge, the occupancy rate of the property, and the expenses associated with maintaining and managing the property. Rental income is usually paid out monthly, but it can also be paid out weekly or annually. Rental income is taxable and must be reported on your tax return. However, you can deduct certain expenses associated with the rental property, such as property taxes, mortgage interest, repairs, and maintenance costs, from your taxable rental income.
We moved around every 5 to 10 years when I was working full-time sometimes we rented out our former house. The rent we received always paid the house payment and all property taxes and we made a decent cash return every month. I did not really care about being a landlord but that is just me. You can make some sizable income as a landlord, either with long term or short term rentals.
Business Income
Business income is the money earned by a business from its operations. It includes revenue from the sale of goods or services, as well as any other income generated by the business, such as interest income or rental income. Business income is calculated by subtracting the expenses associated with running the business from the total revenue generated by the business. The expenses can include the cost of goods sold, salaries and wages, rent, utilities, and other operating expenses. The resulting amount is the net income or profit of the business. Business income is taxable and must be reported on the business’s tax return. However, businesses can deduct certain expenses, such as depreciation, advertising, and employee benefits, from their taxable income, which can reduce their tax liability.
This is where the majority of my money comes from. I have three small business that I have set-up and all three are, for all practical purposes, passive income. Don’t get me wrong it took some hard work to get them to where they are today. However, as I worked mysef out of a business, I started another. Now, besides spend quality time with my lovely wife, I play golf and fish most of the time.
Royalty Income
Royalty income is the money earned by a person or company for the use of their intellectual property, such as patents, copyrights, trademarks, or trade secrets. When a person or company owns the rights to a particular intellectual property, they can license it to others for a fee, which is known as royalty income. For example, a musician can earn royalty income from the use of their music in movies, commercials, or TV shows. Similarly, an author can earn royalty income from the sale of their books or eBooks. Royalty income can also come from the use of software, technology, or other proprietary products. Royalty income is taxable and must be reported on the individual or company’s tax return.
Royalty is another typical stream of income. Most people don’t think much about this one because they don’t think they will ever see any. I was the same way, “What can I get royalties on?” Then I sat down an wrote a book, then another and now have seven. All published for free on Amazon, Every time a book sells I make a small royalty. Granted, I don’t sell a lot of books but every dollar begins with a penny. And I like turning cents into dollars. I have both fiction and non-fiction books listed here.
7 Typical Streams of Income Finale
What typical streams of income fit for you. The answer to this question depends on a number of factors: what your financial goals are, where you live, what your current financial situation is, how much time and money you have available, etc. In other words, it all depends. But, if you are interested in earning more income, then at least a few of these, typical streams of income, should be investigated.
In order to become fanancially free you will need multiple streams of income and some need to be very passive.
Disclaimer
Information provided on InflationCents.com is for informational/entertainment purposes only. This information should not be considered as professional advice. Please seek a certified professional financial advisor if you need assistance. Rates and offers provided by advertisers can change frequently and without notice. We attempt to provide up to date information, but it could differ from actual numbers. Inflationcents.com may be compensated by 3rd party companies that are mentioned either through advertising, reviews, affiliate programs, or otherwise. All reviews and articles are based on objective analysis and no compensation will tilt our opinion.