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If you’re looking to make money fast, then you’ll need to know the three times to make money. This is critical to know, because when you’re starting from nothing, it is how you stack money fast.
Unfortunately, most people were only taught by parents and teachers to focus on the first type of income, but the other two are of critical importance when you’re in the wealth building phase.
Using these three times to make money, wealth creation can become a flywheel as you put your hard-earned money back to work allowing it to multiply itself.
So, let’s dive in, starting with the most common method of making money first.
1) Active income
This is when you go to work and collect a paycheck—or if you’re self-employed, you make money for yourself.
It is you exchanging your primary working hours, usually 9am to 5pm, for a consistent income flow.
This type off income is called “active” or “earned” income by the IRS and is taxed at rates that can climb as high as 37% federally, plus state taxes.
2) Secondary (“After Hours”) Income
This is when you make secondary “side hustle” money.
For example, this type of money could come from a second job, selling affiliate products, mowing lawns, offering consulting services, starting and monetizing a blog, driving for Uber or Lyft, working on Upwork.com, or consulting on Clarity.fm.
You can also use these “after work” hours to increase your skill-set, so that you can command more money during your active hours in the future.
This type of income is also taxed as “active” or “earned income” by the IRS and is taxed as high as 37% federally, plus state taxes.
3) Passive (“While You Sleep”) Income
This is money that you make from investing in cash-flow producing assets. It’s how you put your money to work for you.
Known as passive income, this is money that you can and should collect while you sleep.
You could collect this type of income from…
- rental real estate
- renting out your garage on Neighbor.com
- renting out a room on AirBnB.com
- renting out a parking spot on Craiglist.com
- an automated business
- affiliate links that you embedded into a website you own
- ads on a blog that you pay someone else to maintain
- royalty income
- dividend payouts from stocks
- interest payments from bonds
- interest payments from peer-to-peer loans
- distributions from crowd-sourced real estate investments
- and so much more
What is fantastic about this type of income is that the IRS often treats it favorably, allowing for a lower effective tax burden.
For example, income from rental real estate can be sheltered from taxes by depreciation (which is the IRS’s way of acknowledging that building materials have a limited lifespan), amortization, and mortgage interest deductions, among other methods.
Similarly, certain qualified dividends can get taxed at low capital gain tax rates (ranging from only 0 to 20%), rather than as active income.
As a result, passive “while you sleep” income can be one of the most satisfying and lucrative types to collect.
Are you working to get these types of income streams incorporated into your life? If not, are you inspired to start? Let me know below!
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