| Part of learning to become financially free | | | | them. Some types of assets that produce |
| is to begin to understand that there are | | | | passive income are rental properties, |
| three different types of income. They are: | | | | dividend stocks, and businesses. Assets that |
| capital gains, passive income, and earned | | | | produce passive income continue to do so |
| income. They are the three types of ways to | | | | until the asset is liquidated (sold). Passive |
| make money, and are very easy to | | | | income is what makes a person rich. If a |
| understand.Capital Gains - When you buy a | | | | person has more than enough passive income to |
| stock, and sell it for a higher price, you | | | | cover his or her expenses, that person is |
| have made a capital gain. If you buy a house | | | | rich.Earned Income - Earned income is the |
| and then later sell it for a profit, you have | | | | primary source of income for most American's |
| made a capital gain. If you buy an antique at | | | | today. Any type of job that pays an hourly |
| a low price and then sell it for a nice | | | | wage, pays earned income. People who rely |
| profit, you have made a capital gain. Capital | | | | only on earned income, pay the most taxes. |
| gains are not passive income. They are a | | | | Federal, State, Unemployment, Social |
| one-time payment that you receive from an | | | | Security, and Medicare taxes are all deducted |
| investment because your investment has | | | | from a persons paycheck. With passive income |
| increased in value. Investing for Capital | | | | and capital gains, the types of taxes you pay |
| Gains is great because you can keep your | | | | (if you have to pay any at all) depend on |
| money moving, instead of just letting it sit | | | | your investment. Earned income is not |
| in the bank. The government loves to tax | | | | necessarily a bad thing. Having a job or |
| capital gains, especially if you bought and | | | | career is a great way to earn the capital |
| sold your investment in less than one year. | | | | required in order to create assets.Almost |
| Lets say you buy a stock, and the stock | | | | everyone who starts his or her own journey to |
| doubles in price during the week so you | | | | financial freedom begins with earned income. |
| decide to sell it. You've made a nice capital | | | | Relying solely on earned income should be |
| gain, but the government could take as much | | | | temporary. In America today, many people rely |
| as 35% on that capital gain, depending where | | | | on earned income alone, and saving most their |
| you are in the income-tax bracket. If you | | | | earned income for many years until they |
| hold onto your investment for a year or more, | | | | retire. The path to financial freedom |
| the government rewards you with a more | | | | requires making the transition from relying |
| favorable capital gains tax rate.Passive | | | | on earned income, to passive incomeMichael |
| Income - Passive income is payments that you | | | | Press is an investor and teenage |
| receive from the assets you have created. | | | | entrepreneur. He currently owns and operates |
| These payments usually come monthly, and | | | | PassiveIncomeInfo.com, a free website with |
| require little or no work for you to receive | | | | articles about how to build wealth. |