We Can Earn Three Types of Income

 My friends together with our mentor, Eireen  Diokno Bernardo

For two days, I took a break from my work and joined a special community of people who wanted to learn how to make massive passive income. Yes, you read it right ! I attended the first ever Money Summit and Wealth Expo Cebu 2011 at the Waterfront Cebu City Hotel and Casino. Barely three hundred (300) people including entrepreneurs, business owners, investors, and employees participated in the Money Summit. To my personal opinion, the summit was a tremendous success. I learned new and specific ways to make more money from fourteen (14) great and wonderful money gurus. Ways that really work because they do it themselves and have seen tremendous results. They taught us that it is possible to earn three types of income all at the same time to fast track our journey to financial freedom.

Three Types of Income

During the Money Summit, each money guru, most of whom came from Manila, presented each specific way to make massive money.  They showed that if we change our mindset, apply any or all of those ways and focus on what we do best, it is really possible to earn three types of income: earned income, portfolio income and passive income. While one type of income can be preferred over another, each type of income is needed to help us achieve financial freedom and more choices in our life. Let me share with you more of what I learned from the Money Summit by looking at different types of income.

Earned Income. This is the income that we obtain from working for someone or company. This is income from active work, like our salary or hourly employment. Earned income is based on our time, effort and skill. Some activities that provide us earned income include:

• Having a job
• Providing consultancy services
• Operating a business
• Working as virtual assistant, and
• Other activities that require our time and effort

Earned income is limited. It is a function of the time, skills and effort we provide. We are working for the money. If we do not work, we may not earn the income. Sometimes even if we work harder and yet we do not feel we are properly compensated. This is the type of income most people earn because this is the easiest to do and we prefer to be employees rather than business owners. This is not our fault because we were trained and programmed to be employees. But earned income is important because through this we are able to save up money which we can use for investments. It allows us to make the other two types of income.

Portfolio Income: It is income called capital gains. It is income we make from our investments by selling it at a higher price than we paid for it. It is making our money work for us. Some examples of investments that generate portfolio income include:

With Mark So, forex guru and founder of Forex Club Asia

• Buying, flipping and leasing real estate properties (This is one of the ways I learn in the summit and I would like to pursue further)
• Buying and selling stocks (and other paper assets like T-bills, bonds, mutual funds). This is one of the topics in the summit presented by a broker firm called Citiseconline. I have been into it for a few years already, but am still learning the tricks and rules of the game. I am using CitisecOnline as my online broker.
• Online forex trading (or buying and selling foreign currencies through the Internet). This is also one of the topics in the summit which I really liked and enjoyed most. The presentation of Mark So of Forex Club Asia was very educating. I really got so excited that I signed up immediately. I invite you to join us also and get excellent forex education and online trading training for FREE. You can click here to join for FREE.
• Buying and selling collectible items. You can buy old stuffs that have the potential to appreciate in value and sell it. This was discussed in the summit by Eireen Bernardo, who is an E-bay power seller and an E-commerce and Paypal specialist in the Philippines. She is my mentor in Paypal, which is a payment processor for E-commerce. I write more about Paypal in my next article.  

Portfolio income is a good source of income because it is our money that works harder for us, and not we working for the money. However, it has also some drawbacks. To earn this type of income, first:

• You need good knowledge and experience about how these investment vehicles work. You need to know how they work and how you can leverage on them. For instance, if you want to get involve in real estate, you need to learn what documentary evidence to look for, how to finance your investment, etc.
• You need to use your money up front. You can not expect to earn this type of income if you do not have money or capital to use, even if that means small amount.
• You do not have control over this type of income. Investing paper assets or real estate gives you little control over your investments. Your control is more on the buying and selling. It carries high risks but high returns as well.

Your financial knowledge and intelligence are important because they will make or unmake you rich! That is why it is important to invest in yourself through reading books, training and seminars to gain knowledge and experience how you can earn good portfolio income, and eventually helps you to earn the other important income, too.

Passive Income.  Passive income refers to income that's being derived from the assets and businesses that you have accumulated. It is income that comes to you without you working for it. Some examples of businesses that generate passive income include:

• Income from rental properties like apartments, condominiums, etc. If these assets allow you to have excess money after paying for mortgage and other expenses. Excess money is considered passive income.
• Income from Internet and multi-level marketing
• Franchising
• Royalty income (from books, patent, etc.)    

This is the type of income that we all should be aiming for. Passive income has more advantages than the other two types of income because:

• It gives us the time and money freedom. It requires little effort, and you can choose to "retire" early because the money keeps coming in month-after-month and year-after-year. You work for yourself, not for somebody else, and you can work according to your own schedule
• You have more control over your investment. Because it is your business, you have influence over the operations and you can approximate the risks. For example, if you own a rental property, you have more control over your tenants, set the terms, and others.
• Enjoy better tax privileges. Unlike earned and portfolio incomes, passive income enjoys better tax treatment. You earn and can spend your income first before tax is deducted. For other two types of income, tax is deducted first before you can spend the money.    

I have benefited so much from the Money Summit 2011. Not only it enriched my financial knowledge, but it allowed me also to expand my network. Out of different ways to make money presented in the Money Summit, I have selected to focus into three investment vehicles to create three types of income: paper assets, Internet marketing and real estate.  

In my next post, I will write more about principles and tips about investing and other instruments that we can use to make more money and achieve financial freedom.