Statistics show that the average millionaire has at least 3 or 4 different streams of income. The importance of having different streams of income is to prevent disaster if any single-stream “dries up”. The Mississippi River is a mighty river with many tributaries that feed into it, but even if one started to slow down or stop, the Mississippi will still be mighty because the other tributaries continue to feed it.
The same is true for your income. Having more than one source of income allows your finances to grow and “stay mighty”. There are 8 types of income streams. Here I will try to explain and give examples of each of the 8 different types of income streams.
What are the 8 Types of Income Streams
- Earned Income
- Profit Income
- Interest Income
- Royalty Income
- Dividend Income
- Rental Income
- Capital Gain Income
- Residual Income
Earned Income
The most common well-known type of the 8 types of income streams is earned income. Earned income is income from working a job. It comes in three styles- wages, salary, or per job. Wages are the amount of money you are paid per hour. Most jobs like this have a time clock you punch in and out or a manager who oversees employees’ attendance and work production.
An example of this might be a worker at Walmart who is hired on a $/hour rate and then punches in and out on the time clock each day of work and the time card shows how many hours they worked total for the pay period. Most of these jobs might have a set number of hours you are expected to work and pay you a higher hourly rate if you are required to go over or work on certain special days.
Salaried is when you are paid an amount over a period of time regardless of how much you work in that period. Usually based on weekly, bi-weekly, or monthly salaries. An example of this might be a general manager of a Walmart who is paid a set salary each month, usually not affected by the number of days that the store is open that month compared to others. Usually, there is no overtime associated with this type of earned income.
Per job is when an independent contractor is hired to do a specific job. This person usually doesn’t work for just one person but is hired to do jobs as needs arise for various people over time. Here the person sets their pay per job and then the market decides if the price is agreeable. An example of this would be Walmart hiring an independent plumber to fix a leak in the pipes of a store.
Profit Income
Profit income is the second of the 8 types of income streams. It comes from buying and selling items. A product is bought for a price and the profit comes from selling for a higher price. This is often associated most with the retail business where a company buys products from a wholesaler and selling it in their store at (higher) retail prices. An example of this might be all the products on the shelves of a Walmart. Walmart buys products for a given price and then puts them on their shelves at a price higher than what they paid.
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Interest Income
Interest income is income from loaning money. This is most often associated with financial lending institutions like banks, credit unions, and mortgage institutions. A business or person with money will loan it to another business or individual with the promise to pay the money back at given intervals at a given interest rate. An example of this might be a Walmart is being built and a bank loans the franchise owner enough money to purchase the land and the cost of construction with the agreement that the franchise owner will be paying back the money at a given interest rate.
You also can find crowdsourcing sites that allow users to pool their money and the business loans money or makes investments that the users share interest payments.
Royalty Income
Royalty income is income from others using your ideas or creations. This is most associated with art like songwriting or commercial acting or creations like software or patented drug elements. The usual royalty setup is the owner is paid a given amount each time their creation is used by others.
An example of this might be if a commercial for Walmart is shot and an actor in the commercial agrees to be paid a set amount each time the commercial is shown.
Dividend Income
Dividend income is income from owning stock in a company. Several companies pay dividends to the individuals that own stock in the company in yearly, quarterly, or monthly payments. As long as you owned the stock by a given ex-dividend date published by the company, you will receive a predetermined percentage of the stock’s value. An example of this might be a person owning stock in Walmart getting paid quarterly payments by Walmart on the scheduled payment months.
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Rental Income
Rental income comes from having property and allowing it to be rented. Most often associated with real estate and heavy equipment. An example of this might be often franchise businesses like Walmart own the property that the stores are built on and the franchisees pay a rental amount to the corporate business for use of the property.
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Capital Gain Income
Capital gain income comes from the increase in value of an asset from time of purchase to time of sale. This is most associated with assets like real estate, stocks, and bonds, collectibles, etc. where the value of the product itself increases in value. An example of this is the Walmart corporate office selling the property of a closed franchisee that is worth more now than it was at the time of purchase.
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Residual Income
The last of the 8 types of income streams is residual income. Residual income comes from being paid continuously after the job is done. You do the job once, but you could get paid over and over for the job. As an example, let’s say Walmart starts to allow ads on their website for something they don’t sell like car insurance on the auto parts section of the website. They would only place the ad once, but every time someone clicks the ad and gets insurance, Walmart is paid a commission for sending them to that company.
Affiliate marketing is often a good way to get started as many programs have a reoccurring (residual) payment offer. You promote a product once to someone who purchases, but each time they purchase more, you still get a commission with no other work.
Conclusion
Obviously, most people will not have income from all 8 types of income streams, but having more than one type of income protects you from “trickles” that a stream could turn into or the complete “drying up” of that stream.
Which of the 8 types of income streams do you have? Which of the 8 types of income streams are you interested in starting?
Probably the best training I have seen on several of these streams is Robert Kiyosaki’s Rich Dad Summit that you can sign up for just $1. Click the link to learn more about what it teaches and how to get the training.