Everyone wants to be rich. But how? That is a problem many people have. Therefore Tutebox plans of providing you with a series of tutorials which will let you manage your finances effectively and thereby make you rich. As the 1st today today we are going to present you about Income.
What is income?
Income is a cash inflow to you and there are several types of incomes. Many people struggle to manage the composition of their income from different sources and they tend to reply on one source avoid complications. But the result would be a poor financial management leading to poor getting poor day by day.
Many successful businessmen identify 03 types of incomes which would provide cash inflow and they argue that to be rich well manage financials through out his life, a person should have all 03 types of income in his basket of incomes. Types of income are
This is the income that you earn from providing physical or mental labour to another party and obtain cash/other incentives as your rewards. In simply terms it is the salaries and wages you receive from your workplace. Many people tend to solely rely on sweat income as it does not require initial investment as such. However, depending purely on sweat income is very dangerous as if the means of the sweat income gets blocked the person does not have any other ways of earn a living and become rich. In other words, if the person had to retire, the firm had to shut downs its operations or sudden physical/mental disability would lead to loss of income and make the person suffer. Therefore it is advised to have other sources of finances to reduce the risk.
Rental Income is the you receive as a result of holding physical assets. This is could in the form of rents received from leasing/renting real estates. People make lot of money fro rental income by investing their money in purchasing land and buildings and renting them out. However, during the times of real estate price bubbles (as happened during the global financial crisis-2007/2008) the rental income could be low or even minus. Thus, it is advisable not to purely depend on rental whose investment will be devalued if there is a crisis situation.
This is the income generated as a result of holding financial assets such as shares, financial bonds, Financial bills, debentures and so on. People invest in different types of portfolios and expect dividend or interest income in return. The return they receive would be in line with the risk they undertake. However, managing portfolio income requires financial knowledge and technical skills. Nevertheless, stock brokers and other financial advisors provide advise to their client with average financial knowledge and there by provide them with the opportunity to receive a portfolio income.
If you are willing o be rich if is a must for you have a combination of all 3 incomes mentioned above. For a optimal income to get rich, there is optimal combination of income from each type. The optimal combination of types of income depends on various factors. We will be discussing about these factors in our next article.