There are four basic ways to earn money. And these strategies could help you build a fortune.

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It is the money you receive for selling your time to an employer. It is often represented as salary or wages. The rate you receive for your time depends on how rare and in demand your skills are to society. Someone who pushes carts at a discount retailer earns less not because they are any less intrinsically valuable as a person, but because virtually anyone in good health can push a cart, causing a huge supply of potential workers to drive down wages.

To earn more money, you have to Invest in Yourself and improve the rate you can charge, work more hours, or a combination of the two. This type of income is the most tyrannical form of earning a living because you only generate money when you are actively laboring.

When you buy a certificate of deposit at a bank, for instance, you are lending money to the bank in exchange for a predetermined rate of return, typically a few percentage points per year. The bank takes the money it "rents" from you and lends it out at a higher rate, pocketing the difference.

For those of you who are curious, this is why the yield curve is so important. It is the relationship between short-term and long-term rates. The steeper the yield curve, the more money your bank can make on that certificate of deposit or savings account you have with them. An example of interest income: My grandmother lends money to people who want to buy a house but who have bad credit and are unable to get a mortgage through traditional channels. They buy a property and she loans them the money to fund the purchase, charging 13 percent interest.

In essence, her money is going out and working for her. To understand how investors make money from interest income by buying bonds, take a few moments to read Bonds This represents your share of the profits of a company in which you have bought an investment. A good investment is one in which the company earns more year after year, increasing the amount of cash that is sent to you on a regular basis.

Just like interest income, the essence of dividend income is that your money is going out and working for you. There are some forms of labor, however, that can be included in this category. A salesman who earns commissions on recurring orders with little or no work is, in effect, running a business. So, too, is the man who registers a new patent and earns royalties on it or a songwriter who earns money when a recording star choosing his or her song for a new single.

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An example of dividend income: My grandmother also owns some rental properties. She buys real estate and then charges the tenants money to live in her houses. In these cases, her rental business is generating profit equal to the total rent she receives less any costs, such as maintenance and upgrades on the properties.

At the end of the year when she takes the money out of the business, those profits represent dividend income. For a more advanced understanding of dividends, read All About Dividends. It will explain literally everything you could ever need to know about dividends, what they are, how they are paid, and much, much more. This type of income is generated when you buy an investment or asset for one price and sell it for another, higher price, making a profit.

In recent years, many Americans found their standard of living artificially inflated during the housing boom because the capital gains that resulted from their homes appreciating in value was a source of income that they thought would continue indefinitely.

As your portfolio a word used to describe all of the assets you own grows, you will find yourself earning all four types of investment income. Search the site GO.

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Investing for Beginners Basics Stocks Bonds ETFs Mutual Funds Retirement Real Estate Balance Sheets Income Statements Portfolio Management Personal Finance Value Investing Economics. Updated May 11, Money Made Selling Your Time This is the source of income that the middle and lower classes consider the most important.

Capital Gains Income This type of income is generated when you buy an investment or asset for one price and sell it for another, higher price, making a profit.

With inflation rising, how can you make the most of your investments? | This is Money

Benefits of Using All 4 Types of Income in Your Portfolio As your portfolio a word used to describe all of the assets you own grows, you will find yourself earning all four types of investment income. The reasons are several and include: Money made selling your time salary and wages is often taxed at far higher rates than the other types of income as discussed extensively in Your Biggest Investment Enemy - The Payroll Tax and All Income Is Not Created Equally.

There are only 24 hours in a day. Thus, you can only work so many hours.

At some point, it becomes physically impossible to sell more of your time because, well, you ran out of time! You can always increase the rate you earn by developing rare skills that are in high demand, as we already discussed. With interest, dividend, and capital gains, there are virtually no limits to how much you can earn.

If each year, you pile your money back into growing these sources, you can find yourself earning millions of dollars each year a few decades from now. Get Daily Money Tips to Your Inbox Email Address Sign Up.

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