The 19 Rules of Money Management for Christian Entrepreneurs – Rule 19: Divide Up Your Income

Education is the only way out of poverty

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I have several businesses and brands that produce my revenue. I also have some books on Amazon and online courses that sell without me having to do much.

A few years back I learned something important in business: Don’t have all your eggs in one basket.

My company’s revenue was 90% dependent on nightclubs, bars, and lounges. When I decided to leave the nightlife all together, my entire paycheck left with it. I had to start over from scratch.

It’s good for us entrepreneurs to stay focused to develop roots in our businesses, but we also need to understand the most important rule of Money Management – Diversification.

Don’t take my word for it.

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The Bible says in Ecclesiastes 11:2

Give a portion to seven, or even [divide it] to eight, for you do not know what misfortune may occur on the earth.

Solomon, the wisest man to ever live, said it himself – diversify 7…no, even eight different ways!

We Godpreneurs can receive three types of income:

  • Portfolio – Income from investing in the stock market or having a 401K
  • Passive – Cash coming in from rental properties or the sales of a book or online course
  • Active – Money we work for like providing a service or selling products in our businesses

You are likely earning active income. Some of you are earning passive income. Fewer of you are earning portfolio income.

But the bible says you need to be involved in all of them.
3 Different Types of Income – Which Ones Do You Have?

Most people know about the 3 Different Types of Income, but very few know how to make no more than one – wage income. Find out why it’s a good idea to know about all three!

How Much Do You Know About Money & Finances?
Many people do not engage in educating themselves about money, wealth and income. I am firmly convinced that the way out of poverty is education. Surprisingly, very many highly professional and technical folks holding high-paying jobs can be, and in many cases are as financially-illiterate as their poor working-class counterparts. And no.

Don’t look for this type of education in your high school or college. You might get some of this education out of business courses, but it’s not a top priority. You might get some of it from an economics course, but beware that the education you get might be stilted and even dated. Sure, you will get the basics, but if you want an excellent education on this topic, the best place to get it from is from those who work with it every day and is their lives – entrepreneurs

Your college education doesn’t come to you from entrepreneurs but employees. There’s a big difference in how much education will be delivered to you.

There are three types of income.

Active – Earned income, Requires FaceTime. You Work For Your Money.
Portfolio – Capital Gain Income from Stocks, Bonds, 401K, etc. Involves Risk.
Passive – Cashflow Income – Rent, Royalties, Your Money Works for You.
Earned Income
WorkMondayEarned income is the worst type you can have. This is all income that comes from a paycheck, including hourly and salary income. Pensions are also considered earned income and are taxable as any salary income is. What’s bad about 401K (initially portfolio income) is that it is one of the highest taxed forms of income right up there with your normal taxable earned income. In most earned income, the learner has very little to no control over how their money, beyond take-home, gets used.

We are well aware of social security and Medicaid taxes that get taken out before the earner even sees it. We also note that 401K gets taken out by the banking institutions that control it. Other deductions occur in earned income, done “for” the recipient, Very often, these types of transactions put many wage-earners into a budget deficit. It forces wage earners to pay themselves last.

Portfolio Income
PortfolioincomePortfolio income isn’t as bad as earned income, but it has its drawbacks. 401K is a big joke! There is legislation being pushed to make 401K mandatory for all wage earners. So, like ObamaCare coming into the picture which makes health insurance mandatory, 401K is another vehicle disguised as government looking out for the consumer, but in reality, is government borrowing from Peter to pay Paul. All such programs are in this boat.

Portfolio income is something one must know about before delving into. While it does have its merit, it can be a very dangerous form of income to play with. It is very much like playing the lotto. Incidentally, Lotto is NOT passive income like many believe it to be. The US government does not see it that way. Many people get into shares with such entities as Apple. While this empire is healthy and strong, its shares are reported to be stagnant. Why? Every man and his brother and his dog are into it.

Warren Buffet can provide you the best education you can get for this type of income.

Passive Income
forrent12Finally we have passive income. Here is a sticky situation.

On the one hand, the US government considers royalties (income from the writing of books, software and other means of intellectual property) to be passive income, and yet it doesn’t. I’m still learning about these phases and the complications here.

Rent is considered passive income by far. It produces cash flow. This is why it’s better to retain real estate as a long-term asset and derive this passive income from it. Flipping real estate falls under earned income. Cash flow is better than capital gain.

Passive income is the lowest-taxed form of income. Some of it IS taxable, and some of it isn’t. Earning income on the Internet is technically a form of passive income is not taxable in most cases. Some of it is taxable on the state levels (i.e., Connecticut and California.) Did you know you can begin right now, in baby steps, in getting your foot in the door beginning to earn passive income? Wealthy Affiliate teaches online business and is a highly-respected and the most renowned educational facility you will find on the Internet. Check out my blog over there for more information about this topic and about WA itself.

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