Connect with us


7 Income Streams of Most Millionaires




7 Income streams for millionaires

How many streams of income are you aware of? Are you generating money using only one stream? Which and how many streams do the wealthy millionaires apply? Which is the best stream for you? There is much more to earning money than what you are probably aware of…Read on…

There’s a lot of hype going around the get-rich-quick industry about how to become a millionaire overnight, but the truth is that most people don’t have an overwhelming, all-consuming desire to earn a great deal more money than they need to live comfortably. I believe that what most people want isn’t to make a 20 million USD in a few years. What they really want is to stop trading their time for money – or at the very least, reduce the amount of time they spend making that money.

Quality of life is the operative phrase here. “Living comfortably” is quite a subjective state of being – it holds different meanings for different people. But what we all have in common is that, unless we are born with silver spoons in our mouths, we go through life trying to find a way to balance our time spent working, with our time spent doing all the things we like to do.

I am going to share some of the streams that the millionaires use, along with the merits and demerits of each. You may definitely want to work towards new streams.

Here are 7 Income streams for millionaires


7 Income Streams

1. Earned Income

Earned Income is the money that you earn by doing something or by spending your time e.g. the money that you make in your job, the salary you get by working for someone else. Now, this is where your quality of life will suffer the most, because you will be trading your time for money. In most cases, jobs will pay you just enough to stay over broke. Quite obviously JOB means Just Over Broke. Now, the reason why most people are not able to think beyond earning money through a job is because Job will provide you with a ‘relatively’ comfortable zone.

Unfortunately, this comfort zone will become your biggest enemy and will keep you away from leading an extraordinary life. You will spend the maximum time of your life in this income stream and still will never have enough money to lead a truly wealthy life.

“Comfort is your biggest trap and coming out of comfort zone your biggest enemy.” – From the Rat Race to Financial Freedom

2. Profit Income

Money that you earn by selling something for more than it costs you to make. e.g. Businesses selling their goods at a profit, whether at the retail or wholesale level, as distributors or manufacturers. You need to be an entrepreneur for earning profits.

You might need huge investments or you could start a small business for profit with small investments too. But this will also take away a lot of your time, at least in the initial stages – until you learn to manage it really well and be able to make it churn of its own.

Entrepreneurship is a different kind of mindset and risk taking capability.

Most of the people who are in job and are used to the ‘Earned Income’ want to move to this category at some stage of their career or life, but find it difficult to make the move – primarily because of lack of guts to take additional risks. Most often, this lack of courage is justified because of the family constraints and needs.

To be an entrepreneur and start earning profits, you will need to identify a product or a service that you want to sell, and then sell and manage it well, and manage your clients equally well.

For most people, ‘Earned Income’ and ‘Profit Income’ are the only viable means to earn serious money but they often tend to forget that there are 5 other ‘equally’ viable and serious streams of wealth generation.

3. Interest Income

‘Interest Income’ money is the money you get as a result of lending your money to someone else to use, e.g. putting it in the bank, lending it to the government in the form of buying Treasury Bills etc.

This is a great source of passive income where your active involvement is not needed once the investment is done. Many doubt on the seriousness of wealth ‘Interest Income’ can generate, but when combined with the power of compounding, and the fact that this is a true passive income with least amount of risk, this can beat any of the first 2 sources of income generation hands down.

An INR 3 Crores lump sum can generate enough interest to feed you with a passive ‘inflation adjusted’ income of INR 1.5 Lacs per month and last for 40-50 years with average family expenses in a metropolis city.

4. Dividend Income

This income gets even better than Interest Income. It is equally passive and not only that, it also makes you a shareholder of a company. This is the money that you get as a return on shares of a company you own. For e.g. the dividend that most companies announce at the year end. The better this stream of income sounds, the more ignored and neglected is this source of income.

If you invest smartly on ex-dividend dates of good blue chip companies, you can far exceed the returns from Dividend Income than what you get from the Interest Income, since you are also a party to the Capital Gains that the share price goes through.

This is one of the key instruments that we recommend for generating adequate Cash Flow and still get very good income.

5. Rental Income

This is the money that you get as a result of renting out an asset that you have, like a house, or a building. Now, this income is even better but there are inherent drawbacks of this kind of income over the above 4 types of incomes.

One of the biggest drawbacks is the amount of money required to create such an asset which can generate regular rental income. Since the money required is huge, you may not be able to create many such assets in your life time, unless you have other sources of income.

e.g. You can easily start earning ‘Interest Income’ or ‘Dividend Income’ with an investment as small as INR 1,000 but you can forget about earning a Rental Income with such meager investment.

The other big drawback of this asset is the (il)liquidity of the asset. It is difficult to liquefy this asset quickly in times of need or when you move / re balance your portfolio mix.

6. Capital Gains

This is the money that you get as a result of increase in value of an asset that you own. For e.g. when you buy shares at $10 and sell them at $11 – the $1 is capital gains, or if you buy your house for $200,000 and sell it for $220,000 the $20,000 is your capital gain. There are different tax laws in different countries on capital gains. However, there are ways to come around taxes as well.

7. Royalty Income

This is the money you get as a result of letting someone use your products, ideas, or processes. They make all the revenues, they do all the hard work and you get a small percentage of what ever they earn.

e.g. if you have a Subway Franchise – the royalty you send to Subway for using their processes, their logo, and marketing etc. is royalty income for them. If you are a writer, you get paid for every copy of the book sold.

The biggest challenge here is to create something unique and then make it repeatable. This will need special skills to create such an asset but once created, there is virtually no limit to the amount of money you can earn

These are the seven sources of income and millionaires usually earn from multiple such income streams. Most millionaire won’t have all of these 7 income streams – in fact most of them wont even more than 1 or 2 income streams.

e.g. Warren Buffet is a Billionaire – but he doesn’t make most of his money from all 7 of them. In fact he became a millionaire by using income stream 4 and 6 – Capital Gains and Dividend Income. But he didn’t get in to capital gains on everything – but specialized on a very small thing, Capital Gains of companies in the stock market. Then by constantly honing his skills in valuing companies and investing in them – he was able to become a millionaire, and then a billionaire.

Another example is Bill Gates, who generated income through ‘Profit Income’ and ‘Royalty Income’ streams. He created a company and created an asset called as Windows. He used that to change the way we interacted with computers. He became so good in these 2 income streams that he became one of the richest persons across the world.

There are umpteen examples of millionaires getting created from ‘Profit Income’ but they had to be really good at what they were doing. You would also find various examples of millionaires from Royalty Income.

So focus on what you can do right now from one of these income streams. Then become the best you can in a small niche in that income stream.

But here is the crux for millionaires : You would hardly find any wealthy billionaire with an income stream only from the ‘Earned Income’ category.

And the reason for the same is very simple: This stream is where our time utilization is least efficient, and since there is a limit to the number of hours we can put in a day, there is also a limit to the amount of money we can earn from this stream of income. All other streams of income are not directly dependent on time, and hence can leverage time well to generate huge wealth.

So go on, choose your streams. The biggest risk to your financial life is being dependent on only one income stream where you are actively involved. Each of these streams are one step above the other. You just need to get into the details and understand them more. Try it out. It could well be life changing for you and your upcoming generations.

Like the article?
Do not hesitate to share. It can make a positive impact on someone’s life.

The book From the Rat Race to Financial Freedom has many such investment concepts explained in a very simple and uncomplicated manner, especially in the Indian context.

Article by: Manoj Arora

Manoj Arora is the author of three bestselling books, From the Rat Race to Financial Freedom, Happiness Unlimited and Dream On. Visit his blog.

Read the original article.

Read Next: Top 10 Habits of Millionaires for Building Wealth [Infographic]

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *


Main Reasons People Avoid a Financial Plan




Photo by William Iven on Unsplash

What are the main reasons people avoid a financial plan? (And why you really do need one)

Many of us dream about living a better life, leaving the daily grind behind and planning for more leisure pursuits and free time to enjoy ourselves. What a lot of us forget is, that to do it, you need to have a decent financial plan. It’s estimated that only 25% of adults have one in place, and there are lots of reasons why people simply don’t bother…but that needs to change.

Should You Hire A Professional Financial Planner In Your Twenties

Only 24% of millennials demonstrate basic knowledge of proper financial literacy and planning, according to a study by the National Endowment for Financial Education. Financial planning is a road map that is meant to help you achieve economic goals more efficiently and timely. A financial advisor uses your monetary data to create projections on when and how you can accomplish your goals. They base these estimations on your income, inflation patterns, expenditure, among other assumptions. So, should you, as a youth, seek the services of a professional financial planner?

Finding the right planner

Before you even begin, take time to write down what you want to accomplish both in the short and long term. When ready, ask for recommendations from friends and family members who have similar goals and seem to be progressing well. You may also seek professional direction from your local bank or brokerage firms. Associations such as the Financial Planning Association, FPA, and the National Association of Personal Finance Advisors, NAPFA could come in handy as well.

Remember, the idea is to hire a certified planner who understands you and your goals. Of course, getting such a professional comes with a price. Most fee-only planners will charge anything between $1000 and $2000 for a detailed plan. Investment advisors ask for a certain percentage; around 1% of your invested assets. Always ask your potential planner to provide a disclosure document (ADV) which has details on all fee patterns and potential conflicts.

Prepare for life milestones

Unless you start planning now, you will not wake up one day and afford to purchase a home, as noted by InvestedWallet. At the very least, you need to save up for a down payment, clear up your debt and build up your credit score. Similarly, you need to save funds for your children’s education lest you won’t have it when the time comes.

Though it may not make a lot of sense to plan in your 20s because of unclear goals, it is vital. Furthermore, your financial plan is changeable and can be reviewed at any time as your life unfolds. Some major life milestones include purchasing a home, starting a family, and retirement. If you make these goals realistic and commit to following your financial plan, you have an excellent chance to always be ready at each stage of life.

“Regardless of your age or net worth, financial planning is important,” says Jeanette Brox, a senior financial consultant in Toronto. Hiring a financial planner is one of the best decisions a millennial could make. A good planner will advise you on how much you need to save or invest, among many other benefits. Make sure to meet your planner at least once a year and when you reach significant life events so that you keep your plan current and reasonable.

Article by: Cassidy Franklin

Continue Reading


70 Mergers & Acquisitions Bigger than the GDP of Small Countries




Revealed – Index of biggest mergers & acquisitions over the past five years

– Verizon’s merger with Vodafone was the most expensive at $130 billion and surpassed the GDP of 154 countries

– The Pharmaceutical Industry saw the highest profile deals with a $318 billion contribution

The potential for increasing market share, reducing competition and charging higher prices through monopolistic control are a commercial dream of all big mergers & acquisitions. However, not all mergers & acquisitions are created equal. While some achieve domination, others pale in comparison to their hefty price tags.

By indexing all seventy mergers & acquisitions and comparing their prices to the GDP of entire countries, online forex trading broker ForexTime (FXTM) have been able to gain a greater understand of the staggering financial involvement. Furthermore, by analyzing the stock prices prior and post completion we are able to postulate whether success is indicative of the price paid.

Out of all deals that had occurred over the past five years, the top ten alone equated to over $850 billion. The most expensive merger occurred in 2014 when Verizon bought out Verizon Wireless Stake from Vodafone. With a valuation of $130 billion, this surpasses the GDP of 154 different countries.

Amazon’s acquisition of Whole Foods was equivalent to the entire GDP of Nicaragua and exceeded over 82 different countries. Jeff Bezos’ strategic thinking ultimately paid its dividends and stock prices closed $986.80 higher than a year after the deal was completed. Alternatively, Google’s acquisition of the HTC Smartphone Team was met by skepticism on the London Stock Exchange and stock’s fell by $74.63.

All mergers & acquisitions are underpinned by employees. Hence, as a further variable we assessed total number of employees affected. Strategy and organization is critical in ensuring a smooth employee transition. If not executed properly there can be serious ramifications on employee harmony and profitability. Amazon’s acquisition of Whole Foods also saw them incorporate the largest workforce of 613,000.

More can be found out about the study and the accompanying index on FXTM’s dedicated webpage.

Continue Reading


How to Set the Right Pricing Strategy For Your Business [Infographic]




In order to succeed in business, there’s a lot you have to get just right. Your idea, the market, and timing all come into play. There’s also a factor that many small business owners and entrepreneurs forget about until the very end: how to price their product or service. While deceptively easy, setting the right pricing strategy has the power to elevate your business into new markets, amplify your brand, and mitigate competition. Choosing the right pricing strategy may take some time, but requires three main elements.

First you must know your audience, the market, and your business. Understanding these three elements sets a solid foundation to select a pricing strategy that helps take your business to a new level. To get a full sense of your market, conduct thorough research. You should understand what your audience values most in products or services like yours, and what they will be comparing your product to. Being able to offer more value that is actually meaningful to your audience is essential to driving sales and a successful business. Finally, keeping an eye on your own costs and profit will help you maintain a healthy cash flow that will make the most of the funding you raise.

From this point, you can select a pricing strategy based on whether your market is oversaturated or sparse, or whether your audience expects cut-rate prices or prestigious branding. For more help on selecting the right pricing strategy for your business, check out this infographic below by Fundera.

How to Set the Right Pricing Strategy For Your Business

Infographic Credit

Continue Reading