Do you know what separates the rich and the poor simply put it's the number of
ways both groups are an income it is said that the average millionaire has
around seven streams of income while the average person typically only has one
and you guessed it that one income stream is their job however as you've
probably already come to realize jobs aren't the best way to make a fortune
which is why the rich depend on multiple streams of income to grow their wealth
they leverage both active and passive income to fuel their wealth generation
engine and over time these streams are what build their sizable wealth the good
news is that once you learn how the rich make money then you can start to
duplicate their strategies and build your own personal fortune and in this
video i will share with you seven ways millionaires make money and if you're
new to the channel then hit the subscribe button below for more life
changing content method number one nine to five income as
i just mentioned gaining your income solely from a job is not likely to make
you rich but that doesn't mean the rich don't have their 9 to 5 job as part of
their income generation strategy now their roles can vary from being
mid-level managers to ceos and corporate firms to doctors or engineers any and
all of these roles work within the paradigm of trading time for money which
is otherwise known as active income in fact this active income extends beyond a
9 to 5 job as can also be tied to freelance work this type of income is
typically the starting point for many self-made billionaires this is where the
average person starts and this is beneficial for a few reasons
first this is probably the easiest way to start making money and with this
money you can invest into other ventures that will yield you a return and grow
your wealth also working a 9 to 5 job will help you work on skills like your
interpersonal and problem solving skills which would be handy if you decide to
start your own business now there are also downsides to this method of making
money with the first relating to trading time for money we all only have so many
hours in the day and when you work more to make more you are giving up other
activities in your life like family time time to exercise or just enjoy life in
general not to mention if you start to get too comfortable in your job you may
never feel the need to strive for more money and will have to settle for
whatever standard of living your job currently offers you another huge
downside is how much you get taxed when you're unemployment income income tax in
this category can be up to 40 percent meaning that some people are literally
giving back months of their hard work to the government which is not only
discouraging but can demotivate you from striving to earn more money in this way
however as i said this is usually a starting point so the main thing is that
you use the money you do take home from this form of income in the most
financially fruitful ways possible method number two profit income the
second way millionaires make money is through profit income profit income is
quite simply the generation of income by selling something for more than it cost
you to make it a simple example of this is a car if it takes ten thousand
dollars worth of parts to make a car and you sell for twenty thousand dollars
then the profit you are realizing is ten thousand dollars now the reality is that
not many people use this type of income to build their wealth because they see
this form of income as being restricted to only large businesses and quite
frankly big business did dominate the space for a long time building a
business that you could use to generate profit income would take a large initial
capital investment from setting up a warehouse to sourcing products hiring
employees and of course marketing luckily however with the expansion of
e-commerce has come the potential to make a ton of profit income without all
this unnecessary overhead now this can be both active income or passive income
depending on your business model if you make things yourself and sell them then
it's more of an active income and a little bit more difficult to scale but
if you source the product that you sell through your online shop that is already
pre-made then the only effort you have to put in yourself is communicating with
suppliers and ensuring your products are adequately marketed this is generally
how drop shipping and amazon fba shops work however if those options don't
appeal to you then you can take more of a manual approach like buying items in
your local area and flipping them online which is commonly referred to as retail
arbitrage now the rich generally opt for the former option of sourcing products
and selling them rather than making the items themselves because as i said
earlier our time is limited and the more passive they can make their income
streams the better method number three interest income generally when people
think of interest they think of the never ending interest charges they are
subjected to by their credit cards while this form of interest can work against
you there are ways to make interest work for you by adding it as a supplementary
income stream the simplest way to earn interest income is by collecting a
return on money you lend out now i'm not talking about the 500 bucks you lent
your best friend it means buying bonds and letting someone use your money while
you collect a small return for granting them this cash flow some common types of
bonds that people buy are government bonds and treasury bills and while these
financial assets don't always offer the highest returns they are a great way to
offset your riskier investments to ensure you have a balanced portfolio you
see the rich often invest in high-risk stocks or private businesses and to
ensure they guarantee returns and not put too much of their money at risk they
often diversify into bonds bonds typically yield anywhere from one to
four percent which is enough of a return when you are using this asset as a
hedging tool method number four dividend income when
a company realizes a profit there are generally two ways they will use the
surplus option number one is to reinvest the money back into the business to fund
r d expand or buy back stock the second option and the one that you want them to
choose if you own their stocks is for the company to pay a dividend you see
companies pay stocks to shareholders as a reward for them having invested money
into the business and by having enough money invested in these dividend-paying
companies you can begin to build a supplementary income stream now
depending on what type of dividend you receive you can also take advantage of
tax breaks when earning this form of income unqualified dividends will have
you paying tax in the same way you pay tax on your employment income but
qualified dividends are different if you're in less than 39
375 dollars you are exempt from tax on any qualified dividend income you earn
for the rich this is an easy way to make extra money by simply investing their
free cash into stable dividend producing companies they can collect their
quarterly cash payouts with absolutely no effort required
method number five rental income it is probably no surprise to you that
millionaires leverage the power of real estate to grow their wealth however when
most people think about rental income they think about renting out a home to a
family or group of tenants sure this is one way to go about it but it certainly
isn't the only way to make this form of income many rich individuals also rent
out commercial properties to businesses that need a space to operate out of this
is typically office space for their day-to-day operations the other option
is industrial real estate that is generally used by manufacturers now
rental income does not have to come from real estate specifically there are other
ways to create rental income at a smaller scale for example many people
rent equipment for various industries or their cars when you think of rental
income just think lending out an item in exchange for cash again this form of
income tends to lean on the passive side sure being a landlord can take quite a
bit of work however this work can be easily farmed out to property managers
giving this form of income the ability to earn you money with zero involvement
from your end method number six residual and royalty income perhaps one of the
less common ways of generating income residual and royalty income stem from
past work this form of income epitomizes what it means to earn passive income
this could mean receiving money for a tv show you used to be a part of or from
sales of previously published books essentially this is income stemming from
work you did at a moment in the past that will continue to make you money
over time in fact the video you are watching right now is generating
residual income while this type of income doesn't generally make up a large
portion of a millionaire's total income there is no doubt that it can make you
money and it will be quite hands off after the initial work is complete it is
a solid strategy to employ for those who want to minimize how active they are in
their income generation game plan method number seven capital gains the final way
millionaires make money is by buying and selling items for more than their
acquisition price now you may be wondering how this
differs from profit income so let me explain
capital gains are the result of a transaction where a capital asset is
sold for more than its initial price capital assets generally include assets
that are required for prolonged use and that's how they differ from the products
that you buy or produce for resale that generate profit income in short the
difference comes from their inherent nature the most commonly seen situations
where capital gains arise include when you sell real estate and stocks for the
average person capital gains becomes relevant to their lives when they sell
their home a home is a capital asset and when you sell it for more than you
bought it for you will trigger a capital gain for instance let's say you bought a
home for two hundred thousand dollars and then sold it ten years later for
four hundred thousand dollars the difference in the initial price in
the sales price is two hundred thousand dollars which is the capital gain
however the taxable capital gain or the amount that you would pay tax on will be
anywhere from zero to twenty percent depending on which income bracket you're
in not to mention if you are selling your
principal residence you are except on your first 250 000 of capital gains
meaning that in this particular example you could keep a hundred percent of the
profits from your sale now generating income through capital gains does take
some upfront capital and it may be a form of income that you will generate
later in your wealth building journey hey it looks like youtube thinks this
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