{"id":65083,"date":"2024-09-09T17:39:13","date_gmt":"2024-09-09T09:39:13","guid":{"rendered":"https:\/\/www.imoney.my\/articles\/?p=65083"},"modified":"2024-12-04T11:41:02","modified_gmt":"2024-12-04T03:41:02","slug":"passive-active-income-type","status":"publish","type":"post","link":"https:\/\/www.imoney.my\/articles\/passive-active-income-type","title":{"rendered":"The 8 Types Of Income You Should Know To Achieve Financial Freedom"},"content":{"rendered":"

September 16 is a date that bears a great significance to all Malaysians. While we remember\u00a0 the long road and obstacles that we overcame as a nation to achieve this unity, what better way to celebrate it than by making your first move to financial independence.<\/span><\/p>\n

Prudent financial spending may save you a few ringgit here and there, but having multiple streams of income is the more realistic approach to hit those big-ticket financial goals – like being financially independent.\u00a0<\/span><\/p>\n

If you can establish multiple income streams you\u2019ll have various cash flow sources coming in. You will be in a much better position to fulfill any financial endeavors even if one of your sources of income fails.\u00a0<\/span><\/p>\n

Here are 8 types of income streams if you want to go down the road to being financially independent, while having just more than one type of income will get you started down the right path already.<\/span><\/p>\n

<\/span>1. Earned Income<\/span><\/h2>\n

The most basic form of income stream – it\u2019s the income that we get in exchange for our time and effort like the salary from our jobs. It doesn\u2019t matter if you\u2019re doing it full time, part-time, or as a second job, as long as you\u2019re pouring your time for money, it falls under this category.\u00a0<\/span><\/p>\n

iMoney recommendation<\/h4>\n

Freelancing is a form of earned income. Nowadays, there are abundant freelancing jobs available on the internet, which you can do as a second job to supplement your income.\u00a0<\/span>If you don\u2019t know where to begin, we have listed down some of the most common home-based jobs to propel yourself into the world of freelancing and remote work! Read it <\/span>here<\/span><\/a>!<\/span><\/p>\n

<\/span>2. Profit<\/span><\/h2>\n

An income that you can get by selling something for more than it cost you – a business basically. This is the second most common source of income and unlike earned income, the amount of money you\u2019ll earn won\u2019t heavily depend on your time and effort.\u00a0<\/span><\/p>\n

iMoney recommendation<\/h4>\n

Running a business can indeed be financially promising and rewarding, but it also comes with a certain amount of financial risks. Before deciding on a business, make sure you\u2019ve done your research and calculated the risks that come with it. <\/span>Find out the real costs of starting a business<\/a> before you dive in.<\/p>\n

<\/span>3. Interest Income<\/span><\/h2>\n

Interest income is the money that you earn by lending your money and charging interest or it could be from a savings account or time deposit.\u00a0 This is a great source of passive income, and there\u2019s a minimal risk especially for the savings and time deposit.\u00a0<\/span><\/p>\n

This is a great source of passive income where your active involvement is not needed once the investment is done. Many doubt the seriousness of wealth ‘Interest Income’ can generate, but when combined with the <\/span>power of compounding<\/span><\/a>, and the fact that this is a true passive income with the least amount of risk, this can beat any of the first 2 sources of income generation hands down.<\/span><\/p>\n

iMoney recommendation<\/h4>\n

You don\u2019t need to invest hundreds of thousands up front to see a healthy return.\u00a0 If you haven\u2019t started investing, it is never too late to start by <\/span>investing your first RM1,000<\/span><\/a>.<\/span>If you are just starting out on your investment journey, check out our online investment options <\/span>here<\/span><\/a>.<\/span><\/p>\n

<\/span>4. Dividend Income<\/span><\/h2>\n

Another source of passive income, it\u2019s much like the interest income but better. You become a shareholder of a company and at the same time earn from the amount you\u2019ve invested in them. The simplest way you can engage in this is through the<\/span> local stock exchange.<\/span><\/a><\/p>\n

What are the dividends?<\/b><\/p>\n

Dividends are money you earn from publicly listed companies for buying a share of their company. It\u2019s basically an interest you get for investing in a company via a broker.<\/span><\/p>\n

iMoney recommendation<\/h4>\n

Bursa Malaysia<\/span><\/a> is an easy-to-use trading platform for investors to buy and sell shares in the local stock exchange. Here\u2019s our <\/span>quick guide<\/span><\/a> on how you can sign up and start earning dividend income! <\/span>Don\u2019t forget to factor in the <\/span>fees and costs<\/span><\/a> that come with investments.<\/span><\/p>\n

<\/span>5. Rental Income<\/span><\/h2>\n

From the word itself – rental. You earn by renting out an asset or property. It\u2019s pretty self-explanatory. This income is clear cut and probably among the most dependable but the drawback is that you have to have a property or an asset that is rentable. You may need to shell out a good amount of money to obtain such valuable assets.\u00a0<\/span><\/p>\n

Despite the investment that you need to have this kind of income, it\u2019s worth noting that owning a property is already a good investment opportunity itself. You can choose to sell it if rental income doesn\u2019t serve your purpose anymore.<\/span><\/p>\n

iMoney recommendation<\/h4>\n

For starters, you need a property to have a rental income. If you don\u2019t have a property yet but are in the market for one, read our <\/span>property investment guide <\/span><\/a>to learn more about how to find a property that\u2019s a bang for your buck.<\/span><\/p>\n

<\/span>6. Capital gains<\/span><\/h2>\n

It\u2019s the money that you earn for buying then selling an appreciating property or asset. It\u2019s almost like a business, the difference is, you\u2019re flipping a valuable asset (like properties, cars, or even a website) instead of low-cost products.\u00a0<\/span><\/p>\n

This term is usually common in the investment market, but it isn\u2019t just limited to mutual funds and the stock exchange. Apparently, it\u2019s an act of investing in something for a lower price with the intent of selling it for a higher price.\u00a0<\/span><\/p>\n

It can be anything – from stocks, vehicles, stamps, antiques, or even action figures, as long as it\u2019s about generating more money from buying and selling.\u00a0<\/span><\/p>\n

<\/span>7. Royalty income<\/span><\/h2>\n

It\u2019s about making money from using a concept, idea, or product that you own. You don\u2019t need to do the heavy lifting for the business to earn money, you just lend them your intellectual property and you get paid for it.\u00a0<\/span><\/p>\n

One good example of this are the famous fast-food chains like McDonald\u2019s, or the convenience store 7-Eleven. The owners of these brands are paid by their franchisee for using their processes, their logo, and marketing, as well as their business name to earn money.\u00a0<\/span><\/p>\n

Real talk<\/h4>\n

Royalty income is not for everyone. Having a business that\u2019s worth franchising will really require extraordinary skills to pull off. This is not to say that it\u2019s impossible to create a business model that is unique and repeatable, but it\u2019s definitely not something that most people are capable of doing.\u00a0<\/span><\/p>\n

Other than businesses, royalties also apply to the following media:<\/span><\/p>\n