Philip Harman The major reasons men and women are poor and struggling all their lives for money is their ignorance of the difference between streams of income. Not all streams of income are created equally There is the one you get paid only once for your efforts. There is the other you work hard once and it unleashes a steady flow of income for months and even into your retiring years. You get paid over and over again for the same effort.
There is another type of income stream that generates a raging river of residual riches to you and your family. There are some types of income that flow, either you are there or not – in most cases you don’t have to be there. The question is; what kind of income are you working for?
The good thing about money is that it works harder than human beings and is capable of working for generations; depending on the stream it is directed. There is the right kind of income that will ensure you end up in the 5% bracket of those who will be financially independent at 60.
It is hard to become rich at 60, if you have to work hard for certain types of income, which I will be highlighting very soon. To become rich at 60, you need to learn how to build or create assets. It will all depend on what you want from your money, to be secure comfortable, or Rich.
MAJOR KINDS AND STREAMS OF INCOME
1. Earned Income
It is the income from paid employment that comes either as salaries, wages, bonus, overtime, levies or commission and fees. This kind of income is fairly stable, affords security and reasonable comfort to the earners, but does not make people rich.
LIMITATIONS OF EARNED INCOME
A. They are the highest taxed of all income as it is taxed at source
B. You don’t have control over how much you pay in taxes, and when you pay taxes on it.
C. You personally have to work for earned income.
D. It takes up your valuable time.
E. There is no residual value for your work. In other words, you work, get paid and then you have to work again to be paid.
F. You have to work harder to earn higher income.
G. Earned income stand in the way of getting rich.
PORTFOLIO INCOME
These are paper asset like mutual funds, money market, bonds, treasury bills and shares. They are safe, and provide comfortable return, but the returns are not high enough to make one very rich at 60.
The limitation of paper assets is that investors only gain when the market goes up and lose when the market goes down. It is for average investors.
PASSIVE RESIDUAL INCOME
These are income from real estate, trust deeds, royalty income from patients and for the use of your intellectual property, such as, songs, books or other objects of intellectual value.
ADVANTAGES OF PASSIVE INCOME
a. It is the income you have to work the least for
b. It is least taxed.
c. It returns are some of the highest of all income
d. This passive income keeps coming higher even when you are working less and less on them.
e. Income from passive income keeps increasing as you get older.
Rich people work harder on passive income and portfolio income and not earned income. While the average financially independent people (4%) retired with portfolio income, the rich (1%) work harder on passive income into retirement. The struggling masses (95%) concentrate all their energy working hard for only salaries, fees and earned income. People who work hard at earning salaries and promotions and commissions all their lives end up a highly paid slave for life.
