Accumulating wealth fast with active and passive income
We might need to sidetrack a little and explain the two forms of income which are passive and active income.
Passive income is when the payment you receive is not tied directly to any active work. Good examples of passive income are interest or dividends. Passive income requires some work but doesn’t generally require you to work a set of hours to get paid. A prime example would be if you were renting a property and as a landlord, you were collecting rent every week or month – this is passive income. This doesn’t mean that landlords sit and collect money, no, there’s obviously work that needs to be done to get the property fixed, furbished and rented before renting it out.
Active income is when you do active work and get paid for it. For example, you may work for a digital agency, a 9 to 5 job and you get paid for those hours that you work. This form of income is pretty straight forward since you know that if you do nothing during active working hours, you will no longer be paid.
For millionaires, to accumulate wealth fast, your job is simply not enough. They start active and slowly build passive income. Did you know that millionaires have at least 5 types of income?
6 Common Income Types of a Millionaire
Below you will find the 6 most common types of income that millionaires have:
- Rental income is one of the most common types of income that millionaires have. This type comes from owning property and renting it out to tenants or renters. Real estate is
- Earned / Active income is where the majority of people get their income from. Usually from their full time or part-time job. This is where you trade time and effort for hourly, weekly or monthly payments.
- Profit income usually comes from selling a product or service for more than the actual cost to buy or make it. This form of income can be found mostly in affiliate marketing and has proven effective in some cases.
- Capital gain is seen much in millionaire’s world. This is where the value of your owned stock – a portion of company ownership – is increased over time.
- Royalty income is also another common type of income and most frequently found when wealthy individuals own things like a business, property, a soundtrack or an art piece and sell the rights to another person or company. Once they sell this item, you may get royalties from it.
- Investment is another form of income to most individuals but specifically HNWI’s. Most of us gain income diversification through investing. Investing produces income through interest and dividends and it should be an objective to maximize these two.
Having these common types of income or more, as a wealthy individual, power will lean more into your favour. In time your passive income may exceed your active income which means you will be less reliant on active incomes and begin to rely on more passive incomes as stated previously.