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Most people do not become rich because they work hard for bad income. When you ask for raise, you ask for an increase in bad income. If you want to retire young and retire rich, you need to work hard for the right kind of income.
Ordinary income: Ordinary earned income is you working for money. This income comes in the form of a paycheck. When you ask for a raise, bonus, overtime, commissions or tips, you are asking for more of this type of income.
Portfolio income: Portfolio income is generally income from paper assets such as stocks, bonds and mutual funds. A vast majority of all retirement accounts are based on future portfolio income.
Passive income: Passive income is generally income from real estate. It can also be royalty income from patents or for use of your intellectual property such as songs, books or other objects of intellectual value.
The worst kind of income to work hard for was ordinary income. To him, it was the worst income for four main reason
It is the highest taxed income and it is the income with the fewest controls over how much you pay in taxes and when you pay your taxes.
You personally have to work for it and it takes up for valuable time.
There is very little leverage in ordinary income. The primary way most people increase their earned income is by working harder.
The rich did not like ordinary income. The worst advice you can give your child is to go to school in order to get a high paying job that was not because he was against school. Rich people against teaching his children to spend their lives working for ordinary income.
Most people dreamed of high paying jobs with lots of ordinary income. Teaching people to spend their lives working for ordinary income is like teaching someone to be a highly paid salve for life.
Rich would take passive income all the time because it was the income he had to work least for, it is often the least taxed and it committedly earned him some of the highest return over a long period of time. He worked hard for passive income because, in long run, he worked less and less, served more and more people and earned more and more the older he got.
Rich person had all three types of income because each type of income had different advantages and disadvantages. The poor worked hard for one type of income. That difference between the two men made a big difference between the two men make a big difference when measured over their working lifetimes.
Poor repeatedly said go to school so you can get a high paying job. It is not how much you can get a high paying job. It is not how much you make that counts but how much money you keep. Ordinary income is the income that you work the hardest for and you are allowed to keep the least of.
The income you receive from a paycheck, 50 percent money. The reason it called 50 percent money was because no matter how much money you earn, the government always takes at least 50 percent of it or more in one way or another. If you make $50,000 a year, then at least $25,000 may go to the government, most of it before you even get your hands on it. Even after you receive that remaining $25,000, the taxing continues on.
