Seven Types of Income of Millionaires
Today we’re talking about the importance of creating multiple streams of income to create wealth. Whatever it is that you’re looking for, the importance of multiple streams of cash flow is something millionaires understand. They don’t just focus on saving money but they look to increase their income creating multiple streams of cash flow because the more you earn the more you can save and the more you can invest and that creates a wealth cycle. So according to a study by the IRS there are actually seven common types of incomes that millionaires share.
Number one is going to be dividend income from stocks. Remember stocks can be an appreciating asset meaning that you’re buying them in hopes that they’re going to go up in value so when you look to sell them the next person is going to pay you more for that stock. The other type of stock is a dividend stock which is a cash flow asset because it’s paying you something to actually hold the asset in this case a dividend.
Number two is earned income from a job. Remember if we just have a job and that’s our only stream of income or cash flow then that job ends up meaning just over broke so, yes earned income can be a stream but it cannot be the only stream.
Real Estate Income
Number three is real estate. Real estate’s always a good source of income and a good way to create wealth. Rental income from real estate is once again creating a cash flow asset because you are being paid to hold the asset.
Number four is royalty income from selling rights. Anytime somebody uses something they have to pay you, anytime somebody accesses something they have to pay you. That’s a royalty income which is one of the seven streams of income that can help create wealth.
Capital Gains Income
Number five is capital gains from selling appreciating assets. We’re just talking about an appreciating stock asset, but appreciating assets can be anything from stocks to home sales to collectibles. Basically you’re buying at a price selling it in the future for a higher price which creates capital gains.
Number six is profits from a business. Once again this is something that you control that you own and that you can build and you can scale. Being an entrepreneur creating profits from a business which creates that cash flow stream is a great way to build and control wealth for yourself and family.
Finally number seven is interest income from things like savings CDs, Bonds, etc. Now over the last number of years none of these things have really been in favor because of the ultra low interest rate environment that we’ve been in but as interest rates go higher, interest income from these savings vehicles will become a better and more accessible stream of income to build wealth.
So, there’s seven streams of income that most millionaires commonly share according to this IRS study and really multiple streams of income should help you grow wealth faster it can also add diversification so if one of those fails the others have the potential to pick up the slack. Remember you can’t really balance a one-legged stool there’s got to be enough legs around the stool if one takes damage or gets removed it’s not going to be a complete implosion.