You may be surprised to know this but there are different kinds of income and not all income is treated the same. There is earned income, profit, interest, dividends, rental income, and capital gains to name a few.

One important distinction of how you make the income, whether it is received from trading time for income or whether the income does not depend on hours worked. The only thing more scarce than sound money is your time because you cannot make more time. You can always make more money. That being said trading your time for money is a bad deal. Instead, find ways to earn money or income where you don’t have to trade your time for it. This would rule out having a JOB (just over broke) or being self-employed. Instead, if you can create profit from selling a product or commissions from sales, these are not necessarily time-based ways to earn income. It may take a while to make a product that adds value to a market, but once the product is made, selling it is no longer a function of time. Owning rental property is a function of time-based on a rental agreement, however, there is no limit to how much rental property you could own. So the amount of rental income you collect is not dependent on time.

In most countries around the world, the same types of tax regulations apply. Generally speaking as an employee you pay about 40% of what you earn in taxes. 60% of your income goes to taxes if you are a small business, 20% of your income goes to taxes if you are a large business and you can actually pay no tax if you are an investor. Investors do not drive their income from active work, instead, they receive income from assets they own or control. Many people think that they don’t have the time to own a business because you have to have a great idea and then start a business from scratch. It is possible to buy profitable businesses from other people. This is a great way to get out of the time for cash trap and own a business or system that provides value to others in exchange for cash. Another great way to avoid trading time for money is to buy assets. Assets are things you control that put cash in your account. Businesses can be assets. Rental properties can be assets. Dividend-paying stocks are also assets. The point is that you own or control assets that create positive cash flow and put cash in your account passively. So the next time you are considering increasing your income think about ways to increase your income without trading time for money.

Disclaimer: I am not a registered investment, legal, tax, or financial advisor. All investment /financial opinions expressed in this post are from the personal research and experience of the owner of this account and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur. It is very important to do your own analysis before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with or independently research and verify the information that you find in this post to rely upon, whether for the purpose of making investment decisions or otherwise.

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