Holding down a steady job and earning regular paychecks is both the easiest and most common form of earning an income. Building a solid foundation of deep wealth however, requires time, planning and a considerable amount of research. There are three general means to creating wealth: active income, portfolio income, and passive income.
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While these three concepts of wealth building are reasonably easy to understand and initiate, hordes of people continue to muddle through work days feeling trapped in their current job. Discovering other enjoyable ways of earning money is the simple key to financial success and happiness.
Almost everyone is interested in looking for ways to make some extra income, and almost everyone can utilize at least two of the following wealth building methods.
The premise of being paid for the work a person completes that provides the worker with little to no control over the payment amount is a prime example of active income. Some companies do provide production bonuses or profit sharing as employment benefits, but the position is still considered a source of active income. Some jobs are dead ends, but that doesn’t mean the employee is really stuck — there are always ways to get a promotion or another job.
While most jobs still require regular daily attendance at the company’s specific location, many people are beginning to take advantage of technological advances to become freelancers. Freelancing provides a number of benefits over a traditional job.
The ability to work from home is a valuable commodity in a society that is continuing to emphasize family time and quality of life over years of sacrifice and commitment to a single company. Taking control over work schedules and work location coupled with the ability to be personally available to care for children or aging family members are some of the top reasons more people are seeking freelance jobs.
An attractive alternative to creating active income through employment is to become the employer. Achieved through entrepreneurship, it consists of creating and managing a company that offers a unique product or service. Though it requires significant risks of capital, it also offers the possibility of tremendous rewards. If you do this correctly, it’s certainly the most powerful wealth building strategy you can possibly achieve — owners/employers typically take the lion’s share of a company’s income as their own.
With the exception of entrepreneurship, active income is seldom the path to significant wealth building. However, using active income to fund the creation of portfolio income can be. A balanced portfolio often includes a broad selection of investment options that can be obtained using accumulated active income. These investments can be gold mutual funds, high-interest savings accounts, index EFTs, gold and silver bullion, flipping real estate and many others.
Speculation can also be part of portfolio income though relatively few people understand that there is a difference between investing and speculation. While there is a certain amount of risk associated with both activities, investing is a process involving research into many different companies within a specific sector and having balance sheets and profit and loss statements documented by the companies to support the investment.
Speculation often involves a heavy dose of emotion. Excitement generated within the investing community can lead potential investors to conduct little to no research and instead rely on a “good tip” from a financial insider. Speculation often relies heavily on past performance and a good deal of hope and luck.
Of the three means of creating wealth, passive income is the preferred method as it involves little to no work beyond initial implementation. Owning rental properties where the owner is not responsible for the maintenance, dividend investing, multi-level marketing and outsourced businesses are the most common types of passive income.
To learn more about building a passive income, check out these ways to earn a passive income.
Maintaining a traditional job or expanding into freelancing is an excellent way to pay for daily expenses and accumulate seed money to begin accumulating true wealth using portfolio and alternative income streams. Having the skills and information required to create all three types of income simultaneously is critical to maintaining a steady income while building a strong financial foundation.