When someone asks you “what do you do for a living?”, they generally expect to hear and understand what type of income you receive. While the most common is, of course, the usual 9 to 5, there are many other types of income that you can earn.
In this article, I will cover 10 different types of income that you should be aware of, and what type of tasks enables you to earn them.
Hi, I’m Ovini Nishadi, the founder of Smartiac – a website for creativepreneurs who want to learn how to start, market, and grow their own passive income businesses.
Disclaimer: This article is a guest post contribution to The Cash Foundry. I am not a financial advisor. The information and content in this article are for educational purposes only and I merely cite my own personal opinions with my personal knowledge on the topic.
What are the 10 types of Income?
- Allowance
- Earned Income
- Profit
- Capital Gains
- Interest
- Rental Income
- Dividend Income
- Royalties
- Passive Income
- Inherited Income
1. Allowance
This type of allowance is the first type of income everyone usually gets in their lifetime. Rather than it being an earning, it’s money that’s usually given by your parents for school, or by companies for your daily needs.
2. Earned Income
Earned income is the most common type of income that most people receive. It’s earned by doing an active job on a daily basis. This type of income is usually fixed and comes with a contract for a specific period of time. If you’re a freelancer on a site like Fiverr, it still falls under earned income as you will have to actively work in order to earn money.
3. Profit
Profit income is usually earned by buying a product/service and selling it at a higher price. The difference is called the profit. This type of income is not fixed and generally depends on how many products/ services you manage to sell.
4. Capital Gains
Capital gains refer to profit earned by investing in and selling stocks or assets at a profit after a period of time. They are usually large amounts of money that are earned
5. Interest
Interest refers to any sort of money you accumulate due to storing your money elsewhere. For example, interest can be accumulated at the bank for placing your money at the bank for long periods of time. Interest can also be earned by lending money to someone else and collecting it back with an additional amount of money depending on how long they kept it.
6. Rental Income
Rental income refers to income you earn by renting rooms, houses, apartments or any type of shelter for living/ storage purposes. The most popular form of rental income in recent days is by listing their own properties on sites like Airbnb. This type of income is also usually fixed and is earned on a monthly basis.
7. Dividend Income
Dividend Income is earned by investing your money in stocks and earning a percentage of money based on the amount of money you have invested in it. This type of income is also fixed, and the percentage is specifically stated on the companies’ websites for investors’ reference.
8. Royalties
A royalty is a small percentage (usually between 2% to 10%) that’s paid to the creator, original owner, or anyone who was involved in the creation of a product/ service – long after they’re been created. They’re paid whenever a sale goes through or their product/service has been used by their audience. Royalties are very common amongst movie stars, as they get paid in royalties for their creations long after the release of the production.
9. Passive Income
Most of the types of income I mentioned in the previous points come under this umbrella. Passive Income is money that is earned without having to actively work on anything. Initial work paves the way toward earning passive income in the future. Passive income is usually not a fixed number, but rather, fluctuates every now and then. This is the best type of income for anyone as it allows you to earn money while you work on other tasks or businesses. (You can earn passive income even while you’re fast asleep)
10. Inherited Income
Inherited income is money that you receive from your family. It is usually passed down from generation to generation to fulfill their business activities and involve in other ventures. While this type of income is most common among the wealthier families, inherited income does not always come in the form of money- it can also come in the form of an asset.
Conclusion
Different types of income require different amounts of effort to be put into them. Another factor that should be taken into consideration is the initial amount of money that will be required in order to earn the specific streams of income. The streams of income you generate for yourself will heavily affect the type of lifestyle you’ll be able to pave for your future self.
While there are many different types of income mentioned here in this article, the best ones, in my personal opinion, are the ones that generate passive income. Passive income allows you to retire early and focus on your more important aspects of life, such as family, and friends and allow you to engage more with your personal matters without having to actively work on a job.
If you’re interested in learning how you can start your own passive income business, I highly recommend that you check out the fillable eBook “How To Start A Business”.
Smartiac is a website that contains a lot of content regarding how you can build your own passive income streams in the easiest possible ways. If you want to receive a set of FREE templates that includes daily planners, savings, and expenses trackers, you can sign up to the Smartiac email list and grab your copy today!