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