1. Maximize, 2. Diversify, 3. Automate

Never depend on a single income.
— Warren Buffet

Income, incoming, money, liquid, kessef, AR, dinero, mulah, cash.

We all need it. Without it, no amount of budgeting, planning, and strategy will help someone with out sufficient income. The lifeblood of financial well-being. A steady stream of income is essential for everyone in order to live not only a dignified life, but a thriving one as well.  

There is Only One Way to Generate Income

Newton’s third law of motions states that “every action has an equal and opposite reaction”. The nature of a transaction is similar in this fundamental structure. Every transaction that generates an income is rooted in a single fundamental act. A sale.

Although the common adage goes something like there are a million ways to make a million dollars, the truth is there is really only one way. The only way to generate income is to sell something. Most of us sell our time. Some of us sell access to our assets. Others sell products, and services.

One can sell:

  • time (i.e. employment)

  • expertise and ideas

  • products & services

  • access to assets for rent

  • access to currency for interest

  • anything else than one owns

Income = Sale of time, sale of product, sale of service.

Client options: People, Corporations, Governments.


The single act of selling to generate an income can be divided into three distinct types of income streams. These streams not only showcase the logic of income, they encompass the strategy one should use to increase income, as well as the taxation approach the government takes and an individual should adjust too in order to protect their income over time.


The 3 Types of Income

Earned Income

Portfolio Income

Passive Income


The continued text below is structured as follows:

  • Earned Income - Valuing Time: Relative Income vs. Total Income

  • Portfolio Income - Diversified Income Sources

  • Passive Income - Automation = Passive Income

Valuing Time: Relative Income vs. Total Income

He who makes $25,000 annually through passive income is more enviable than he who earns $100,000 annually through a salary.
— Mokokoma Mokhonoana

First and foremost it is important to distinguish between two sub-types of income:

  • Absolute Income: The total amount of money, X, you generate.

  • Relative Income: The total amount of money you generate, X, relative to the time it takes you to do so, Y, thus relative income = X/Y.

Absolute income deals in a single variable, total income.  If you haven't already, it is time to start dealing with two variables: money and time.

Say we have Kevin, a rockstar bookkeeper, making $100,000 a year. Let's say Kevin has a friend, Stuart, an expert financial consultant who makes only $60,000 a year.  Clearly Kevin has it "better," as he is making 40% more than Stuart every year.

When introducing the new variable, time, the result changes.  Say Kevin works 40 hours a week, 50 weeks a year, yielding $50/hr. Stuart, on the other hand, works only 15 hours a week, 40 weeks per a year (since he takes the entire summer off), yielding $100/hr.  Now we see that while Kevin's absolute income is 40% greater than Stuart's, Stuart's relative income is actually double that of Kevin's.

Relative income must be taken in to consideration in order to liberate time. Use the concept of relative income in conjunction with absolute income to maximize one’s absolute income, as well as time. That's our goal here, isn't it?  Start assessing how much relative income you are making by calculating your hourly rate. Ask yourself how much your skills can be worth and if you are currently matching that value.

How can you yield a higher hourly wage in exchange for the same skills?

Start by asking for a raise or consider other options where your skills are  valued correctly. If you are self-employed, start charging more per hour with your respective clients.  In either scenario, you need to start by taking the first step to increase your relative income, increase prices, and match the value. If your boss or your clients give you a hard time about it, just tell them “you get what you pay for.”

Diversified Income Sources

Never depend on a single income
— Warren Buffett

Portfolio Income vs. Other Income Streams: having a primary income source is great! i.e. Earned Income. Having multiple income sources is better! i.e. Portfolio Income. 

Life is dynamic. You never know what’s around the corner and part of having financial control means you can weather the storms. If there is another financial meltdown, unexpected healthcare costs, temporary unemployment, investment loss, you will most likely need income security to successfully navigate those situations, and you don’t want to depend on a single source of income for this reason.

 There are many ways to diversify your income:

  • Portfolio Income: In the most traditional sense, portfolio income is generated through dividends on currencies you’ve invested in equities and bonds. However, Portfolio Income can also mean income that is generated from a wide ranging sources assets you may hold. In a less strict sense of the term, and on a personal level, portfolio income can also closely tied to sources of passive and active income.

  • Have one job? Get another! - This will only be sustainable for so long and is certainly not an option for everyone. This is a great place to start if you are struggling to generate income.

  • Consulting - If you are tech/business savvy, or have a specific skill set, try spending more time consulting for other businesses/individuals. You’ll make more money per hour.

  • Personal Services - There are tons of platforms to offer your personal skills at your own price.

  • Sharing Economy - Take advantage of the sharing economy. Try renting a room in your house or even your entire house on Airbnb or become a Lyft/Uber driver in your spare time.

  • Start a Business - Clearly define the business purpose and the reason why it exists first. You’ll need to add value in order to justify a cost, so first focus on creating value, and the money will come. It is hard and requires a lot of skill, but is worth it in the long run.

  • Investing - If you have money saved up, put it to work for you: lend it out at interest, invest in other businesses, assets, and people that can generate an income stream for you.

  • Other Side Hustles - You need to be creative and honest, figure out what your strengths are and focus on amplifying them, serving others/creating value, and then monetizing. Rinse and repeat until you secure multiple streams of income.

Automation = Passive Income

Money often costs too much
— Ralph Waldo Emerson

Passive income is king when it comes to any other income generating option. Why? because it is decoupled from time. As we’ve already discussed, time is so much more valuable than money, infinitely so. When it comes to freeing up your time, there is no better option other than automating your income. How can you beat making money in your sleep without repeating the same or different tasks on a daily basis?! Once a passive income source is set up the hard work is over and it’s time to reap the rewards.

Hopefully this will become the “main course” of your income sources over time. Imagine, what would you do with your time if you had enough passive income every month to cover your expenses and investments. Passive Income sources are the way to freedom of time, and the way to set these sources up is through active assets.

After you establish some active sources of income to help you get started, your focus should be aimed at building long-term income sources.  Passive income requires an investment of time, or money, or both. Establishing stable passive income sources that can last a lifetime, are the key to freeing your time.


The financial lifeblood of a business and/or an individual is cashflow.

Read more on cashflow here

Income Tax

Taxation on income can be avoided entirely if proper tax efficiency is established.

Read more on income tax here

FPF EXERCISE - How can I generate more income?

Review your current income generation scheme. Do you have a job? If not, start by simply getting employed. Do you already have a job? If so, invest your money in stock, bonds, and/or debts to generate you a dividend, and begin to segway into passive income options. With passive income, can you allocate your capital in a way that will generate passive income through equities? Can you generate passive income through real-estate? How about starting a small business that will generate an income with out you having to eventually operate it? Think about it. Then, think about it some more and get to work.

Next Step -> Expenses

Fun food for thought:

Next Step -> Expenses