There are three types of income a person can work for namely ; Ordinary , Portfolio and Passive.
Ordinary Income. This is income you acquire from working in a job as an employee. This is the highest taxed of the three incomes. you exchange your time for money to earn this income normally an hourly rate. Many people earn their money this way. The downside of earning money this way is the lack of time freedom and that you only earn while you are at work. You can’t double your income unless you double the amount of hours you work foe example.
Portfolio Income. Portfolio Income is also called Capital Gains. A Capital Gain occurs when you buy low and you sell high. For example, you buy a share of stock for $10 and sell it for $15. You have a Capital Gain of $5 per share. The $5 is Portfolio Income. The same is true when you buy Real Estate in a crash and then wait until it increases in value before selling it. Buying and selling Real Estate for a gain is the same thing : you buy low and sell high. Portfolio Income generally is taxed at a lower rate than Ordinary Income.
Passive Income. Passive Income is cash flowing from an asset. Your asset is producing money. In real estate, Passive Income is called rental income. For example if I buy a rental property for $100,000 and my net monthly rental income is $1,000 a month, the $1,000 is Passive Income. Passive Income is generally the lowest taxed income. There are many ways to earn passive income and the benefit can be you can be earning income while you are not working and you can work where ever you want. So your income can be independent of how many hours you work or where you are located. For example you may be working from home or in another country or on holidays. If you learn how to earn Passive income you could achieve more financial , geographical and time freedom. Another example of Passive income is if you promoted someones product and received a commission every time someone made a purchase as a result of your recommendation. You could create a website to market to an audience and you wouldn’t have to produce or stock the product. The product could be a digital and not a physical product like a training course for example. This type of marketing is known as affiliate marketing and is the easiest, quickest and least costly way to get started if you want to create passive income.