Different types of Incomes

One of the famous income categorization is the one by Rich Dad, Poor Dad:

E is when you get paid when you do your job, usually within a fix amount of time or a pre-determined achievement list.  The good thing is your income is relatively consistent.  If you are the 9-5 type worker, even if you go to work and surf the net the whole day, you still get paid that day !!

S is when you think you are doing a business but actually you are not.  Basically you are still selling your time and effort in a linear way.  At the moment you cut down your time or your effort, your income drops accordingly.  The good thing is if you are a very hard working person, you are mostly likely to earn a lot.

B is when you have an idea and you get other people to make that happen.  You are Managing it but you are NOT Doing it.  Significant differences between S and B is that B is operated within a well established "system" while in S, you are the system itself.

I is when you keep your money in FD and every month your money increases.

The problem of Robert's first book 

is that he didn't say 

this Quadrant is a concept, 

NOT a finite categorization.

May be he did but not emphasized enough.

For example, a worker who goes to work everyday, just do whatever asked to do and waiting for month end paycheck falls under E.

However, if another worker is expanding his personal network during his career in order to move up the rank and also join better bigger companies could be considered as S.  He could be treating his employers as his customers, whom he pleases the customers in order to get paid higher and higher.

E worker works from 9 to 5, selling time for money.  S worker may not appear in office all the time but his mind is definitely 24 hours online thinking how to expand his 'business'.  Most CEOs operate their jobs like a Self Employed business.

Beggar who beg 9 to 5 can be considered doing a 'job' as E.  Beggar who analysed what places to be at what time to maximize his 'income' could be a S.  Beggar who gather other beggars to learn his begging strategy while he no longer go out to beg but share a commision of what other beggars have beg could be a B.

So wherever you are whatever you are doing now, you can do it the E way, the S way or B and I ways.  Its a matter of HOW you earn your income, NOT what you do.

One more heads up ... I also think Robert miss out one very important category.  There are a total of 5 income category types, not just 4.

(the 5th income category here, published 7 Jan 2009)

There is NO such thing as Passive Income !?

21st century personal finance is moving away from saving and focus into the income arena. In short, the gurus are now educating public that saving is NOT good enough, hence sourcing for passive incomes on the another hand is a BETTER solution, than just saving alone.

While the concept is definitely true and correct but unfortunately as the hypes go bigger and bigger, the idea of passive income has been abused and more scams started to appear in the market, as if they were the gurus as well. Except the 'passive income' they refer to is barely promoting their own original same old products. The personal finance market has become so competitive that even some real gurus have no choice but to go beyond the line in their marketing effort - Robert Kiyosaki is no exception in spreading "Saving is bad".

Although passive income is very well defined here using income ratio 1:100 but is there really such thing as Passive income ? When I looked up dictionary, these words come up

PASSIVE : not participating, inactive, not reacting, inert or quiescent.

None of these words correctly describe a well implemented passive income. I use my best judgement to find a good location, a value property and a pay master tenant. I setup a profit take target and an exit strategy in my investments before I leave and let them auto pilot. All of these are very participating, actively applying my knowledge and experience, reacting appropriately when necessary etc.

The word "Passive" also gives people a psychology of No Need To Do Anything; As if an easy to get rich scheme with a better cover.

Hence this article wants to pursue all readers to stay away from the term Passive Income. Its negative, misleading and now abusive by the over-stress marketing effect. Instead, think of Smart Income !

There is no hard and fast rules for Smart Income. Any income can be earned the regular way or the Smart way !

An employee can use minimum of his time effectively to earn the highest salary or benefits. A self employ can easily leverage on Internet to earn income repeatedly. A business owner can employ a system to run his business. An investor can setup an autopilot mechanism.

So no matter which income quadrant you are in, it is possible for you to turn that income into a smart one. Its a matter of HOW you earn your income, NOT WHAT you do.

Are you pursuing smart income ?