What is Earned Income in simple terms?

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So, earned income is basically the money you earn through your hard work. It’s the cash that comes in when you put in the hours and do your job. Whether you’re working for a boss, freelancing, or running your own little business, if you’re actively doing something to make money, that’s earned income.

Earned Income

Examples of Earned Income

  1. Job Paycheck: If you have a regular 9-to-5 job, the money you get at the end of the month or every two weeks – that’s earned income.
  2. Wages for Work: Let’s say you work at a store, and you get paid for every hour you spend there. That’s your earned income – you work, you get paid.
  3. Freelance Gigs: If you’re a freelancer doing gigs like graphic design, writing, or whatever you’re good at, the money you make from those gigs is your earned income.
  4. Business Profits: Now, if you’re a bit of an entrepreneur running a small business, the money you make from selling things or providing services – that’s also earned income.

Why It’s Cool

Earned income is like a direct exchange – your time and effort for money. You put in the work, you see the reward in your paycheck. It’s how most of us start making money, and it’s awesome for covering everyday expenses.

But Here’s the Scoop

While earned income is fantastic, it has a little quirk. It depends on you actively working. Take a break, and the cash flow might slow down. So, as you’re earning your keep with your hard work, also keep an eye on other types of income, like passive income – that’s where the money keeps coming in, even when you’re not actively working. It’s like building a money safety net!

Hope that makes the world of earned income a bit clearer! 😊

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