Different Types of Incomes for Wealth Creation

Types of Incomes
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By Emmanuel C Agubuo

There is always risk in every investment or endeavour in life. Your job is to learn to manage risk rather than avoid it. #richdad

In the world of business and finance, there are three types of incomes: namely (1) earned income, (2) portfolio income and (3) passive income.

Now, let’s look at these three types of income mentioned above individually.

While growing up, you must have been told to study well for good grades at school to enhance your chances of getting a well-paid job after studies. When you finally secure a job, what is paid to you monthly, as it is mostly practised in Nigeria, salary, is your earned income.

Now, hear this; doing well financially is totally not dependent on what you earn as income, but on what you do with the money you get paid for rendering a service to your employer.

Some rich people don’t work for money, but make their money work for them and that takes us to the next two types of incomes highlighted earlier.

The passive income, in its most common form, is the revenue derived from real estate investment, royalties from rental properties vis-a-vis patents or license agreement. This is also called progressive passive income because the earner does not really need to be actively involved in the investment to grow the income

On its part, portfolio income is what you get as profit from paper assets such as bonds, treasury bills, stocks, mutual funds, annuities, insurance, etc.

For the portfolio income, there is a regulated market for it and in Nigeria, the Securities and Exchange Commission (SEC) oversees. This is done to safeguard investors’ funds from fraudsters.

To achieve all what we’ve discussed in this write up so far, you have put in place a good financial plan and according to many financial analysts, there are three objectives for this; to be (1) secure, (2) comfortable and (3) rich. Many people have plans to be rich without having plans to be secure and comfortable.

If you are not financially secure (having roof over your head, food on your table, and clothes on your body, which are the basic needs of life), you may find it difficult to be financially comfortable and rich. Therefore, you must set your plans with the aim to be secure, comfortable and rich.

Now, through your businesses, jobs, careers or services, you can work for money and earn an income, but it’s your duty to make the earned income or money work for you and increase more.

Now hear this, unless the money you earn starts working for you, you are still poor and struggling.

Your money works for you through investments; which could be in various business enterprises, real estate, shares or other investment instrument. These investment tools can help you have portfolio and passive incomes to maintain and consolidate your wealth. With this in place, your desire to get security, comfort and wealth, which can help you live a prosperous and fulfilled life, is by the corner.

My humble advice is; try and secure your money so that you can be confident and comfortable. Do something good today with your finances. Learn to invest because investment is the engine room for wealth creation and sustainability and you will be glad you did.

But please, invest wisely because this is the ultimate key to being wealthy in life. Remember, foolish investment leads to ruins and erosion or destruction of one’s money.

Take note and see you at the top. Cheers.

Emmanuel C Agubuo is an entrepreneur, investor in stocks, real estate and a stock market information strategist. He helps to strategize on better ways to invest in the stock market profitably.

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan. Mr Olowookere can be reached via dipo.olowookere@businesspost.ng