DIFFERENT TYPES OF INCOME

 There are generally three types of income.

First there is LINEAR INCOME

In Linear Income, you earn money in exchange for  your time. The more money you want to earn, the more time you need to spend. As an employee, if you are paid wages or a fixed salary, then you are earning linear income.If you want to earn more, you have to work harder and sacrifice more time by working overtime. So, with linear income you could never have time and money since the more money you make, the less time you would have. The problem is, there is a limit to how much you could earn based on time. If you were to stop working or fell sick, your income would also stop. This is a very fragile income source with little security. Unfortunately, this is where almost all of us are, if we work for someone else.

The same concept applies for some businesses. For example, if you are in the business of selling water filters, then every water filter you sell will earn you an income. The more time you spend selling water filters the more money you would make. This is an example of a linear income.

The second type of income is RESIDUAL INCOME

Residual income is income you make from initial efforts. Intensive efforts are made in the initial stage and then income is reaped continuously for a period of time or indefinitely. For example, Michael Jackson will continue to earn royalties from his future sales of his music albums or from people singing his songs; even after his death. His successors now earn the royalties after his death. Another example would be royalties earned by writers every time you buy their books.But these royalties are not indefinitely as they have a fixed time span.

Imagine  when starting a business, you  spend time to build up the relationship with your potential customers. Once the customer uses your products or services, and he is satisfied, he would stay with you for more. However, in the second time around, you probably would not need to spend time attending to the same customer in order to get a second order. If your product or service is of high quality and proven to reliable, your customer will always return to you. You work less but still earn an income. This is called Residual Income or  Recurring Income.

So back to the water filter example; imagine you have sold 10,000 water filters and each water filter has a consumable part that needs to be changed periodically such as the filter itself. Then all you need to do is to sit in your office and wait for phone calls from your 10,000 customers wanting to change their water filters. The printer companies don't make the bulk of their money selling you computer printers; they make more from selling you ink cartridges.

By having a residual income, you are actually leveraging time. You spend less time and earn more money. The question then is how to find residual sources of income. When you are in business, according to Paul Getty; you must offer highly unique and consumable products. Why? Because these products will be able to give you residual income.

Finally one can earn MULTIPLE INCOME from multiple sources at the same time. This is the best and most exciting type of inome. You may earn multiple income, by leveraging your time for wealth creation. Multiple income is earned from the efforts of others.

You want to be able to earn $1 from 100 people rather that earn $100 from your own time. Now, why would anyone give you $1? In the water filter example; if you have 100 people selling water filter sfor you and you earn a cut from every sale, then that would be multiple income.

Consider the McDonald's franchise concept. Ray Kroc did not become a millionaire by selling hamburgers. He has independent business owners selling the burgers for him and they each pay him a franchise fee of the percentage of sales. What Ray has is a proven system that can be duplicated. Multiple income is based on the concept of "the power of duplication" or what we can call the "effects of multiplication".

Curious about creating multiple sources of income? Attend the 'You Can Create Wealth' seminar. Click the 'Financial Education Seminar' banner on the top left  for the latest schedule.