5 ELEMENTS THAT CAN HELP TO GENERATE/INCREASE YOUR INCOME

There are multiple ways to generate income, but to make your money work for you, consider sustainability, maximizing, automation, reinvestment and tax efficiency.

1. Making your money sustainable

Sustainable income is simply income that is predictable and reliable. For example a doctor would have a more sustainable income than a sales professional working on commission. While a sales professional might have the capacity to earn a higher income, it is likely more volatile and perhaps not as reliable. But having a sustainable income is more than having a steady paycheck – it’s also about having a steady income stream, which can come from several places, including:

i. Investible products. You could put money into dividend-paying stocks to generate sustainable income. Other products in this category might include CDs, bonds, treasury bond and protected securities (TIPS).

ii. Insurance products. Cash value life insurance and annuities can provide income and cash flow during different periods. Even better, if you see your life insurance and annuities the right way, there can be tax advantages to these income sources. Work with your financial professional to help you pick the optimal products for you.

iii. Investing in businesses. Sustainable income could mean you are bringing in consistent income for your investments in different businesses. For example you could buy into a car wash or other type of business, and over time, these investments might generate sustainable income for you.

iv. Real estate. If you are able to invest in real estate, this has been a valuable source of sustainable income for many people over the years due to its high growth potential and the ability to earn by renting it out. But keep in mind you must have the capacity and funding to invest in and manage the properties to make this a good investment.

2. Maximizing income

As you set your goals for your career this year, one of them might be to maximize your income. Maybe you have taken the time to invest in yourself by getting a new degree or certification. Perhaps you have taken on more responsibilities at work. Considering all these things, you might be able to increase your salary. We will dive a little deeper into salary negotiation in the next section. But maximizing your salary isn’t the only thing that goes into maximizing your income – it’s also about when and how you get paid. There are several components to maximizing income.

i. Deferring income. It might sound counterintuitive, but one way to maximize your income is to defer some of it into the future, which is called an non-qualified deferred compensation plan. This is a good option for you have a high salary and are in a higher tax bracket. If this is an option for you, weigh the risks and the benefits. One risk is that if your company is well-established, a benefit is that you don’t have to pay taxes on the total of your salary, just the portion that you are paid that year.

ii. Benefits. You can utilize to maximize your income and earning potential is critical. As the year kicks off, check in with your human resources department to see what your company offers that you might not be taking advantage of.

iii. Equity. In some organizations once an employee reaches a certain level, equity compensation is a possibility. It makes sense that as you progress in your career and climb ranks, you ask if equity compensation is an option for you. Your equity-based compensation is likely to cost you less in tax than ordinary income. Work with you financial professional to ensure you are maximizing your income. They can provide guidance based on your specific situation.

3. Automating processes

Helps to make it easier for you to make your income work for you. Doing so helps you to take the thought of it, it is just something that happens because you have taken the time to set it up. Negotiate your salary early and often. While wage negotiation might not be an explicit expectation during your annual performance review or when you are taking a new job, you should do it anyway. Part of automating your income is to ensure you prepare to renegotiate the highest rates of pay for you and your experience, whether it is your annual review or when you are taking a new job. Automating processes include.

i. Automate savings. Your savings is probably the most important thing to automate. It is also important to put a portion of every paycheck into other investment accounts or a basic saving account for your emergency fund. If you don’t have an emergency fund yet aim for funding just one month of living expenses with the ultimate goal of having three to six months of living expenses away.

ii. Automate your sustainable income. If you have income-producing rental property, be sure to hire a good property manager so you aren’t spending all your time managing the properties yourself,

iii. Automate distribution. If you’re already retired, make sure you automate your distribution from your retirement account so you can spend your time enjoying the benefit of the income vs. being frustrated by managing your distribution yourself. This can make it feel like you are still receiving a paycheck, which may help you to align your spending with your income.

4. Reinvesting income

It good to for me to advice you to put your money to work for you. When you earn money, you can put it back to work for you by reinvesting those earnings. For example if you are business owner, you can reinvest back into a business so you can scale and grow, because when you stop growing you start dying. This is an important thing to keep in mind when reinvesting in your businesses and other income producing ventures.

5. Making income tax efficient

There are multiple options to make your income tax efficient, but the optimal strategies depend on you. Your trusted financial professional can help you navigate all these situations in a way that is more beneficial for your circumstances. One of the most important things in making sure your investment income is tax efficient, and you can work with your investment advisor. This trusted professional can help you find and employ tax-efficient investment strategies. If you are retired, these strategies can include helping you manage your other income to prevent your social security benefit from being taxed at the highest level.