Money is an important part of the
human existence and it cannot be separated from our daily activities.
You need money for virtually everything. This explains why employees and
self employed wake up early and perhaps close late. They are interested
in finding the best possible way to increase their daily or monthly
earnings or income. But for you to increase your income, you need to
have a clear understanding of the two types of income and which you must
intensively focus your energy on. The two types of income are earned
income and passive income.
Earned income is the money you earn from
trading your time, talents, experiences and skills to accomplish a
particular task for the betterment or growth of an organization. What an
employee receives at the end of every month, although tagged salary or
stipend, is called earned income. What a self employed make from selling
his or her products or services, although called profit, is earned
income. So it is for business owners who are making their earned income
in large volume. Therefore, we can conclude that earned income is the
money you get from trading your time and skills to accomplish a giving
task in a particular organization.
Earned income, for an employee, is fixed
and subject to increase base on the decision of the management of the
organization where such an employee is trading his or her time and
skills. However, such an employee can increase his or her earnings if
such decides to trade his or her skills and time in another
organization. For a self employed, earned income is subject to the
number of products or services rendered to the customers. Such can
increase his or her income if the numbers of patronizing customers
increase. However, in increasing your earned income, it will require
that you increase your skills, polish your talents and commit more time
to performing your task day in, day out.
The second type of income is called
passive income. Passive income is the income you receive on a regular
basis, which requires little effort to maintain it. Some school of
thought call this type of income “residual income” and because of these
words “passive and residual,” quite a number of people do not pay
attention to this type of income. But the untold truth that the rich
wants to keep a secret is that they make bulk of their earnings from
passive income. If ever you want to be financial free, you must create
passive income for yourself. Once you can tactically make your passive
income surpass your monthly expenses, then you will become financial
free. This is the major type of income that the rich are interested in.
And you should too.
Passive income is the money you receive
as royalties from your intellectual property, which includes writing a
bestselling book, having a timeless music album, producing a classic
film and other inventions that people can capitalize on. For example,
the book “Things Fall Apart” was written precisely fifty-four years ago,
but Chinua Achebe (late) was receiving royalties from every copy sold
anywhere in the world and today his estates are still receiving
royalties not only from Things Fall Apart, but also from all his
creative works. Passive income also includes the earnings derived from
rental properties (real estate). For example, a landlord who owns a
rental property that he built some forty years ago will be receiving
annual rent from his tenants.
This passive income arguably also
includes portfolio income, which is known as dividends. One can also
receive passive income from a limited partnership in which you do not
play an active role in the day to day running of the organization.
Passive income can also come from network marketing if you are at the
top of the pyramid.
The conclusion of the matter is; beside
your earned income that you are working tirelessly to earn, sit down and
creatively create for yourself passive income, making sure you keep
growing it until it surpasses your monthly expenses. Then you will
become financially free.
By: Alfred Ade-Ijimakinwa
No comments:
Post a Comment