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

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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.


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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.

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