Everyone strives to get a stable source of income. Besides, the amount of income that one can access determines the social class in which they belong. There are seven major types of income, depending on the source. Income can mostly be obtained through earning, making profits, interest, renting assets, paid dividends, royalty, and capital gains.
- Income from earning. Most people believe that they have to work in order to earn a living. This fact means that earned income is the most popular type because it reflects direct employment. It is income obtained from completing tasks or working on a job. Therefore, earned income is mostly acquired in terms of salaries and wages.
- Income from profits. Income can also be earned by engaging in commercial activities. Such activities include selling goods and services. In this case, the individual or business buys products and services at a cost, then puts a mark-up called profit when selling. This type of income is popular in the business world.
- Income from interest. There are a number of people and businesses who earn interest from interest. In this case, the entity or individual lends out money, which should be returned at an additional fee and within a specified time. The additional fee, in this case, is called interest. This approach is one of the major sources of income for banks and other lenders.
- Income from renting assets. Renting assets is also considered a lucrative source of income. The most popular form of rental income is in the real estate industry. In this case, the owner of the asset gives it out to another party, for a specified period, at a fee. The fee charged for rent is the income for the asset owner.
- Income from dividends. Individuals and businesses can also earn income when they invest in shares of different companies. In this case, the shareholder earns income when the company declares dividends on profits. This fact means that a shareholder is part of the company ownership. Income, as a major type of income, is common in the corporate world.
- Income from royalties. People and businesses can also earn income from royalties. In this case, the income earner allows a third party to use something that they have made or designed. For instance, artists and musicians often earn money by allowing third parties to use their creation. This fact means that royalties is the main source of income in the creative industry.
- Income from capital gains. Capital gain is another major source of income. In this case, the income is reported when the value of assets, both tangible and intangible, increase. Therefore, the owner of the asset has to dispose it at a higher value in order to realize capital gains income.
Most people only know about earned and profit income. However, there are many other sources of income that an individual or business can explore. Therefore, the next time one is looking for the sources of income to invest in, it is also important to consider income from rent, royalties, interest, dividends, and capital gains.