What Income Best Suits You?

This is a sequel to my previous post. This time around we are not talking about Nigeria, our main concern is financial education.

Financial education is not as common as it ought to be, not many know about the kind of income they want. I wish financial education could be taught by entrepreneurs and not lecturers, because entrepreneurs understand the practicality better. In school only the basics of financial education is being taught. To fully grasp this kind of education one has to form a relationship with entrepreneurs who are knowledgeable and willing to teach.

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There are basically three types of income: The Active Income, The Passive Income and The Portfolio Income.

^{Wages for work done.}

Active Income (Working For Your Money)
This includes earned income. If you are a salary earner, this is the kind of income you get. When your wages is paid hourly, weekly or monthly it's earned income. It is usually taxed by the government, one doesn't have control of what he takes home at the end of the day.

^{Picture showing an estate which is an example of a passive source of income.}

The Passive Income (Money Working For You)
This is the least taxed form of income by government. The income that comes from intellectual property, like writing books and programs are passive income. The most common form of this income is rent. When one is involved in real estate as a long-term asset it is considered as a passive income. This is because this way one continues to make profit from it. On the other hand, when one is only involved in the short-term, it could then be viewed as an active income. Treasury bills issued by the government is another example of this type of income.

Portfolio Income
This is the form of income that involves risk. You have to study the market properly before getting involved in this, because of the high risk usually involved. Investing in bonds and stocks can be called portfolio income. It is almost like betting, you either lose or gain. Actually, betting is not even under this kind of income (funny but true).

Cryptocurrency falls under portfolio income too. The market is quite volatile, but highly profitable. Warren Buffet can educate you properly when it comes to portfolio income, he's not fond of cryptocurrency though. When you are involved in portfolio source of income, you have to follow the news. The information you find there could be really handy and influence your financial decisions positively.

Here comes the big question once again, What Income Best Suits You? I guess you'll be able to make a good decision based on your knowledge on types of income. If you have any question, I'll be willing to reply you via comments.

All images used are under Creative Commons CC0. Images are from http://pixabay.com


Glad to see you here. :)

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