"INCOME" - What is your understanding about it?

 

Income:

When we are talking about money 90% of us think about the income. There might be various forms of income we can think about, it might be our day job, it might be a business, it might be a company you own and lots more.

The major income streams can be classified into following categories:

• Active Income
• Passive Income
• Portfolio Income

Active Income:

Active income is the category where you are going to invest your time and skill to gain money out of it. Here for example consider, i work in a company my work time is 9 to 5 and i have to work for 5 days a week. I am exchanging my time and expertise to earn money out of it. It might be a company or a business you run. 

It have a maximum threshold in form of maximum salary over which you cannot go beyond. But if you fail to turn out for a day the constraint is different, you will not be paid for the day.

Passive Income:

Passive income is a category which most us have understood wrong. It is a kind of income which requires a lot of effort, work and time put up front with out any income or minimal income in the beginning and the returns of it grow exponentially over a period of time. 

The major advantage about passive income and why a lot of person talk about it is, once your stream get up i will grow exponentially than we think. More there is no need for you to turn out regularly to earn out of it.

For example consider yourself starting a youtube channel and monetizing it. Initially there are certain constraints for it, you need a 1000 subscribers and 4000 watch hours to start earning out of it. It requires a lot of effort in the beginning to show up consistently and putting up videos, but once monetized you can earn for your older videos even if you are not posting new videos. This is the major advantage of passive income. 

Portfolio Income:

The portfolio income is the kind of the income which we get through various investments such as stock investments, bank investments through deposits. The major part of the passive income comes through the stock based income through capital appreciation or through frequent dividend, or the deposit provides in the form of interests.

The newest and most raising form of portfolio income is the crypto currency. The digital currency form where we invest over digital money and watch it grow over time. 

The portfolio income is a form of a passive income but it requests a much higher capital investment in the front to start with. For example for earning a rental income out of property or by renting out car we are in need of car or home. To earn through dividend we have to invest a lot of money in them.