Money Making Terms You Should Know for Wealth Building!

Income: Income is defined as money going into your budget. It can be broken down into two parts, gross income and net income. Gross income is all of your income before taxes. Net income is what's left of your income after taxes and other deductions are taken out.

If you own a business, your income can be taxed after your expenses are paid, essentially lowering the amount of taxes you are paying out. Starting a corporation is one way to achieve this after expense tax. When you have a job, you are taxed based on how much you earn, give your share to the government, then pay your expenses with what's left.

Income is broken down into two categories, passive and linear. You should study both types of income in order to fully understand where you are and where you want to be.

Passive Income: Passive Income is income that is made without you having to work for it continually. Passive income can be made through investments, royalties from books/albums, and businesses. This income is there because you used some form of leverage to create an income source.

Linear Income: Linear Income is income that you have to work for. You put in time and effort to produce some much money, whether it is in a job or a service you provide. If you have to put forth effort and take up your time in order to get paid, then you are making linear income.

Expense: An expense is one of the money making terms defined as something that comes out of your budget every month. There are two types of general expenses: Fixed and Variable. Fixed expenses are expenses that come out of your budget every month at a set or predetermined amount. Variable expenses are those expenses that vary from month to month based on usage (utilities, gas for your car, groceries).

When you are working up your budget, you can estimate variable expenses close enough to set a plan for the months to come.

Liability: A liability is something that you owe money on and that doesn't produce cash flow. This is one of the most widely exercised money making terms on the planet. If you own a house and rent it out, if the rent you are receiving is less than the mortgage you are paying out, you have a liability. Yes, the house you are buying and living in is definitely a liability, not an asset. Same with the car in your garage and the furniture in your house. Anything, essentially, that is NOT making money for you is a liability!

Asset: An asset is something that you own or are making payments for that you are earning cash flow from. If you own real estate and rent it out, if the rent you are receiving is more than the mortgage you are paying out, then it is an asset.

There are many forms of assets out there including real estate, businesses, your network (in network marketing), and various paper investments (stocks, bonds, CDs). If your money is making you money, it is an asset. This is one of the most important money making terms to understand.

Pyramid Scheme: A pyramid scheme is defined as a structured business that funnels money from the bottom up and the person or business at the top of the pyramid gets the most money. It can also be a company that doesn't offer a legitimate product or service for the exchange of money.

A pyramid can be avoided by thoroughly researching the company. If the company is approved by the Federal Trade Commission, it is not a pyramid scheme. They ensure the company is legitimately selling and distributing products or services and doesn't enable any one person to receive the most money.

The amount of money one receives is based on the amount of time, effort, and work they put into it. If you can make more money than the person or business that refers you (and this is very easy to do if you are a highly motivated and self-initiated person), the business system is not a pyramid. Or if there are specific limits set on the amount of income you can make from the model, it is legitimate.

A lot of people think that all network marketing companies are pyramid schemes because of their structure, however, just because it is shaped like a pyramid doesn't always mean it is a pyramid scheme. It's all about how the commission plan is structured.

Don't judge a company without first thoroughly researching it. You may be passing up the opportunity of a lifetime. So, learn all about these money making terms to make the right decision for you.

Multi-Level or Network Marketing: Multi-level marketing (also known as network marketing) is a very common way for people to make a lot of money as a business based on the Law of Networking. The money making terms Multi-level marketing and network marketing are defined as a business system that is comprised of many levels up and down that allow compensation for the sales and distribution of products and services through those levels. By participating in the network, you receive commissions for selling and distributing products or services based on the compensation plan.

There are several types of network marketing models. You should research them all to decide which ones are the best for you. I would recommend a company with a binary compensation plan as these pay out more often and at a higher rate.

Leverage: Leveraging is one of the most useful money making terms you will find when it comes to building wealth. This should be part of your vocabulary no matter what. Leverage is defined as the act of getting more out with less in. You work less for more work out. Your time is very important to you and if you ever want to retire, you need to work less and have more money coming in with little to no work required. This is done by leveraging your time, money, and tools available to you.

Cash Flow: Cash flow is very important among the money making terms and you must understand it thoroughly. This is what actually makes you wealthy. Cash flow is the amount of money you are making from your assets minus your asset's expenses.

In a job, your cash flow is generally steady, never goes up, never goes down. When you get a raise at your job, your expenses usually just go up proportionally and your cash flow stays the same.

Your goal to becoming wealthy is to continually raise your cash flow while maintaining your expenses in order to build wealth. When it comes to real estate investing, it's not how much income you have but how much cash flow you have that makes the difference.

Return on Investment: You may have heard "you want to make the most return on your investment", but do you really understand what that means? Return on Investment, or ROI, is how much money you make from the money you put into an investment. If you put little to no money into a major purchase and make twice as much money with a resale, then you double your ROI. Learn more about Return on Investment so you can calculate your profits for sales.

Reciprocity: Reciprocity is defined as how many people you are able to generously serve. It is also defined by the Law of Reciprocity. If you have money, you are generally rich because you serve many people. Most poor people think rich people are greedy because they are stingy with their money. The opposite applies. If you are rich, you have more time and money to help other people, either with the services you provide, the products your business's provide, or the time you have to devote to other people. When you are broke, you are generally too busy working, living paycheck to paycheck, and have no time or money to help yourself let alone anyone else.

Greed: Greed is the opposite of reciprocity. Greed is not serving others. People who are stingy with their money aren't trying to be greedy, they are trying to survive. But if they aren't serving other people and those people's needs, then they are being greedy. There are more ways to be generous than just money. Time is another commodity you have to help serve others. Take inventory on yourself before you judge someone else as being greedy as ask yourself "How many people do I serve?"

Retirement: Retirement is a very joyous word in money making terms for most people, mainly because it marks the time at which you can stop working. This is also a measurement of wealth since retirement is based upon how long you can survive without working for money. If you have many forms of passive income coming in, then you will need to work less and less.

There is a misconception of a pension as retirement. A pension check is simply a form of linear income you receive monthly for the time you put into a company or the government. Some people call this a "retirement" check, but there is no possible way you can retire off of this unless you make over three thousand dollars a month after taxes and all of your bills are paid off. And it is taxed the same exact way your job income was taxed.

Retirement is when you don't have to work but your money is still coming in to pay for all of your expenses.

Freedom: Freedom is much the same as retirement. It is the time at which you are free to do with your time and money as you want, not as you need. Both your time and money are your most valuable attributes. The more time and money you can devote to yourself and the service of others, the more free you are.

There are many more money making terms, but these will get you started. To learn more money making terms, study some of the laws of money which will help you understand why things with money work the way they do.

Money making terms will help you understand what people are talking about in your network and get you started in the right direction with your life. Don't limit yourself to just learning these money making terms. Search online and check out your dictionary to learn even more money making terms.

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