Lesson 1: Choose your type of income

Author: Ely

Congratulations, You have chosen to start a home-based business. I’m sure you are both excited and a little anxious. I know I was when I’ve started my home-based business. It was all new to me (even though I was self-employed for many years) and new unknown paths tend to make me feel that way. Don’t get me wrong – it’s a great feeling and it motivated me to learn and act. I hope you feel that way too.

The Greek philosopher Epictetus said: “One cannot learn when one thinks he already knows”. I urge you to keep an open mind and avoid the trap of assuming you already know. The human mind need to match everything it encounters to known patterns. It gives us a sense of security but at the same time prevents us from being open to new ideas.

There is another topic I would like to talk about, and that is: choices. I have learned that everything I do in life is about making choices: starting with what to eat at breakfast and going all the way to questions of life and death. It’s all choices. I do not “need” to do anything – I “choose” to. I am not made to feel or react a certain way – I choose to. The great thing about choices is that I can always make new ones. If and when I get the feeling that I need a change – I allow myself to stop and re-think the choices I’ve made. Choices of the past are nothing but choices – I can always make new ones.

OK – lets get down to it. You are probably asking yourself – “now that I’ve decided to start a home-based business, what will my next step be?”. Great question! And I have an answer for you: “choose your type of income”. Yes, I believe, that should be your next step. Even before you decide what your business is going to be all about. The type of income you are going to choose will not only effect your earnings – it will have an impact on every aspect of your life from now on. Pretty huge deal, is it not?

There are 4 basic types of income for you to choose from. There is no “Better” or “worse” way to earn a living – it’s a matter of choice. You will make that choice based on what feels right for you.

1) Linear Income: This is where there is a direct correlation between your time and your income – they are directly connected. In other words, you are trading your time for money. You work 8 hours – you get paid for 8 hours. You don’t work – you don’t get paid. For example: A job (working for somebody else) or a small business in which You-Must-Be-There in order for it to operate.

2) Residual Income: This is income that you gain by doing something correctly once, and then reaping the financial profits over and over again without any further effort on your part. For example: royalties, a percentage of a previously sold product that has a re-occurring income (e.g. insurance, a monthly membership or subscriptions). Also being involved in a legitimate network-marketing program is a proven method that many have used for building a solid residual income.

3) Leveraged Income: Income that you gain in conjunction with the combined efforts of others. For example: a team, sub-affiliates in your affiliate programs, downline income, or your employees if you own a big business and employ others to generate income towards your bottom line. Here is another way to understand leveraged income. Picture this: You – multiplied over and over again and each one of you is making you more money. That’s the Power of leveraged income – it’s greater than you alone – it multiplies your efforts!

J Paul Getty said it best: “I will rather earn from 1% of 100 peoples effort than from 100% of my own effort”.

4) Passive Income: Any type of income that doesn’t require your time (or very little of it) in order to sustain. For example: Investments, high interest bearing accounts, legitimate network marketing, product developed and sold through automated system, your own affiliate program managed by a third party such as ClickBank, Share-A-Sale, or other. Residual income also falls in this category. Passive & Residual Income is oftentimes used interchangeably although they differ slightly.

OK, now that you have an idea of the different types of income, what will your choice be? Will you choose to work for every dollar that you make or will you prefer to create a mechanism that (once created) earn you the money? I don’t know about you but I have chosen to get out of the rat race and create that mechanism.

In lesson 3, I will talk about the types of mechanisms you have to choose from if you want to have your income flavored passive, residual or leveraged. But before we continue our quest, I would like to address a slightly seem to be off-track issue. Stay tuned for lesson 2: “it’s not all about the money…”.

Please add your comments – they are highly appreciated and would help me produce better content for you.

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Tags: Business School, home based business, home business, online business, start a business, work from home

This entry was posted on Friday, January 23rd, 2009 at 21:39 and is filed under Business School. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.