What is said about 7 streams of income?

There are some misunderstandings about having multiple streams of income and becoming a millionaire, let's analyze why.

Income is the money you receive, regardless of its source, an income stream is when your receive income in a regular basis, flowing into your personal finances.

However many strategies have been recommended by gurus and motivational speakers to obtain "the 7 streams of income" to become a millionaire, but in reallity these streams of income are something else.

To give you a better understanding, let’s go to the organization that, after you, cares the most about the money you make – the IRS.

Do you need 7 streams of income?

According to the IRS, there are 7 main streams of income that individuals can have – although you don’t need all 7 to be a millionaire. 

While most millionaires and wealthy individuals have more than one income stream, very few have all seven.

Moreover, people with more than one income stream usually have one or two sources of income that are their main support, while other income streams are small. 

What are the 7 sources streams of income?

These income streams are: 

1. Salary
2. Business profits
3. Dividend income
4. Rents from real estate
5. Capital gains income
6. Interest income
7. Royalties

Salary

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This is the most common income stream, and the way most people think about earning money. 

Any money earned from a job working for someone else is salary or wages income. Interestingly enough, this is generally the income stream taxed at the highest rate. 

Business profits

If you own a business, you will have income from your profits. Depending on how your business is structured, you may pay taxes on your business income a few different ways. 

Wealthy individuals who make a great deal of their money from owning businesses generally have found various tax-reduction strategies to keep as much of their money as possible.

Dividend income

If you own stocks or other investments that pay you yearly or quarterly dividends, you have dividend income. 

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Unless you have a great deal of money to invest, this is generally not a very large income stream. 

However, dividend income can increase over time as you grow your nest egg or reinvest the dividend income into more stocks

Rents from real estate

Most wealthy people are wealthy because of what they own.

Whether their real estate is residential, commercial, or a mix, rental income is usually a big part of their wealth.

Not everyone is cut out to be a landlord, but if you have the resources to do so, owning and renting out property can be a great way to diversify your income.

Capital gains income

Capital gains are profits made on the sale of an asset. This could be land, a house, stocks, a car, or even a watch or jewelry.

If you hold the asset for more than a year before you sell, capital gains taxes are quite low.

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