Lesson 2 Types of Income Objectives Identify sources

Lesson 2: Types of Income

Objectives: • Identify sources of income. • Identify various forms of income. • Determine how the average wage or salary for different jobs differs by the level of education, job skill, or years of experience.

Earned Income Earned income is any income generated by working. Source of earned income: Labor Forms of income: Wage – hourly rate of pay Salary – yearly rate of pay Commission – percentage of sales

Earned Income These are three employees of the same company. What types of income are they earning? Mark: 10% of every sale Commission Betty: Regular pay - $10/hr Overtime - $15/hr Wage Rita: $70, 000 - annually Salary

Portfolio Income Portfolio income is any income generated by selling an investment at a higher price than you paid for it. Source of portfolio income: Investments Forms of income: Stock Investments Real Estate Other Assets

Portfolio Income Are the following examples of portfolio income? Example 1: Yes Victor’s granny, Wilma, is too elderly to drive. She has asked Victor to help her sell her 1960 Buick Electra 225. Because the car is in excellent condition and is an antique, it is worth $45, 000. Wilma paid $15, 000. Example 2: No Mathis purchased an apartment building, and his mortgage is $15, 000 a month. Mathis has tenants who pay $20, 000 a month. Example 3: No Cecilia purchased stock to build up her investment portfolio.

Passive Income Passive income is money you earn from assets you have purchased or created. Passive income is generally recurring income. Source of passive income: Assets purchased or created Forms of income: Rental income Business income Creating and selling intellectual property

Passive Income Are the following examples of passive income? Example 1: Yes Ariel is a pop star and singer/songwriter. Ariel’s latest project has gone platinum. She will receive $. 45 for every song that is sold. Example 2: Yes Mathis purchased an apartment building, and his mortgage is $15, 000 a month. Mathis has tenants who pay $20, 000 a month.

Summary: • Identify sources of income. • Identify various forms of income. • Determine how the average wage or salary for different jobs differs by the level of education, job skill, or years of experience.