Income, for planning purposes is any source of income that comes into your personal or professional balance sheet. Most people see this is income from their employment. We focus chiefly on investment income. This come from a few different sources:
- Interest Payments – which come from holding a persons or companies debt.
- Dividends – which are payments companies pay to their shareholders at the discretion of the board of the company.
- Distributions – payments made to unit holders for a myriad of reasons ranging from rental and operating income to capital appreciation from sales of assets. These can also include passing losses to unit holders.
- Capital Gains – realized with the sale of stock or other assets.
- Rental Payments – incomes that come from the ownership of property, mostly real estate, but can also include equipment and materials.
- Royalties – are from the ownership of leasing agreements, mining rights, music masters, or mining rights. Similar to rents paid for usage of the underlying assets.
Income and cash flow focused saving and investment in the financial markets can grow moderate savings into large investment portfolios. More importantly they can create an evergreen income stream for investors sourcing and qualifying income appropriately.
Income is not all taxed the same, so prudent investors are aware of the difference between their investment and store them in the right accounts to maximize their effectiveness in their plan.
Essentials of Income:
- Investment income is ALL of the profit that is earned from investments.
- The price of a assets is a reflection of the market value of current income
- Investment income is taxed at a different rate than earned income.