An individual might receive a commission in addition to their regular salary, or they may work only on commission. If the consultant sells a vehicle valued at $10,000, they receive a $500 commission. For example, a vehicle sales consultant might receive a commission of 5% on each vehicle they sell.
PASSIVE INCOME VS ACTIVE INCOME PROFESSIONAL
Related: Salary vs Wage: What's the Difference? CommissionĬommission is a form of active income where a professional receives a fixed percentage of the amount they generate in sales. For example, if a professional earns $100,000 per year and they receive monthly payments, they accrue an active income of $8,333.33 per month. An employer may pay a salary weekly, fortnightly or monthly. While this is like wages in that it's money you earn from providing your professional services, a salary is usually an agreed amount of money that's written into a contract before you commence a job. SalaryĪ salary is the amount of money an individual receives for one year of work. For example, if you work 40 hours over a week at an agreed rate of $20 per hour, you receive a gross wage of $800 for that week.
PASSIVE INCOME VS ACTIVE INCOME SERIES
If you're a construction professional, the money you earn hourly is an active income because you actively provide your time, energy and expertise to complete a series of tasks for each shift you work. This form of active income refers to a set hourly rate a professional receives for completing an established number of tasks. You typically acquire active income as one of the following forms of payment: Wages Active income earners can be full-time, part-time, contractual or freelance professionals and they often receive their income on a weekly, fortnightly or monthly basis, depending on the agreement they have with their employer. If an individual has a job in which they perform tasks for a fixed amount of money, they receive an active income. Here are definitions and examples of the four major types of income: 1. Related: 20 Side Jobs to Generate Additional Income 4 types of income There are many other advantages to understanding income types, including: With knowledge of alternative ways to generate money, you can provide additional income to support your family and improve your overall quality of life. Understanding the various forms of income can help individuals explore investment opportunities, such as stocks and bonds or pursue other potential income options like buying a website or leasing equipment. Most forms of income are subject to taxation.
Additionally, selling possessions or creations for cash is another income source. They may also generate income by pursuing investment opportunities such as stocks, bonds and annuities. Individuals typically earn income as wages or a salary, which they often negotiate as an hourly rate or an annual contract for services they provide. Businesses acquire income by selling goods or services at a price above their production costs. Income is the amount of money an individual or business receives in exchange for providing labour, products or services. Related: 21 Essential Finance and Business Terms for Professionals What is income? In this article, we outline what income is and provide definitions and examples of the four major types of income. Learning about these forms of income can help you make well-informed financial decisions. Most people typically receive income in the form of wages or salaries, but there are various other ways to make money using passive income streams like portfolio investments. Individuals with a strong understanding of income types and how they generate money can use this knowledge to set financial goals for the future.