Income
Understanding different types of income and how to maximize your earning potential throughout your financial lifecycle.
Income is the foundation of your financial life. It's the money that flows into your accounts from various sources, and understanding how to maximize and manage income is crucial for building wealth.
Related Topics
Income is one component of the cash flow equation and varies throughout your financial lifecycle. Managing expenses relative to income determines your savings rate, which enables investments. Understanding taxes on different income types helps maximize after-tax income.
Types of Income
Income is money earned thru active work, passive activities or based on prior work history.
- Salary/Wages - Regular employment income
- Self-Employment - Business income from your own work
- Commissions - Performance-based earnings
- Tips - Service industry gratuities
- Investment Returns - Dividends, interest, capital gains
- Rental Income - Rental property earnings
- Royalties - Intellectual property earnings
- Business Income - Automated or delegated business operations
- Pension - A guaranteed income stream provided by a former employer or government agency.
- Social Security - A federal benefit based on your work history.
Income Throughout the Lifecycle
The LCF Planner helps you identify and quantify your income streams during working years and in retirement. A typical income stream during a lifecycle might look like the graph below: