By Merry Riana

Financial Freedom is the ability to spend your life on your way. It is the ability to freely bloom. It's the ability to do whatever you want to do, to have whatever you want to have and to live your desired lifestyle without any financial constraint. 

To achieve financial freedom, it is important, first of all, to understand its building blocks. This 
understanding begins with the knowledge of 3 types of income.

Many people think that there is only 1 type of income, but in fact, there are 3.

The first type of income is the most common type, which is called earned income.

This is the income that employees get at the end of every month. They work a normal 9-to-5
job and in exchange for their time they are paid a fixed salary. They must really work to earn that income.That's why it is called earned income.

 The second type of income is called investment income.

This is the type of income that you get when you invest in certain asset classes or save your money in the bank. When you save your money in the bank and you get an interest out of your savings, that interest that you get is wh at is called investment income. When you buy stocks with the hope that the stocks' price will rise, the profit that you get when the stock price really goes up is what is called investment income.

One difference between investment income and earned income is that for investment income you must have an initial capital to be invested first. It means before you even start to have money coming into your pocket, you must be ready to take out money from your pocket first and that money will work for you to earn more money. So, instead of you working to earn money, as in the case with earned income; for investment income, your money works for you to earn more money.

Another difference between investment income and earned income is that there will be more financial risks involved with investment income. Remember, for earned income, you are exchanging your time for money. For investment income, you are investing your money in the hope of earning more money and in the investment world, nothing is guaranteed. Period.

So, as you can see, to have investment income, you must have an initial amount of money to be invested first and you must be prepared to take higher risk, just in case your investment goes bad and you lose your initial capital.

Obviously, this type of income is not for those who are still young, who have just finished school, and don't have any initial capital to start with. That's why most young people will opt for the normal 9-to-5 job to work for earned income first. Some of them plan to maybe look for investment income once they have accumulated some capital on their hands.  

I just hope that they do not have to go through the same experience like me when I lost all of my hard earned savings in the stock market. Let me share this expensive lesson with you.

 (To be continued in next month's article.)

Merry Riana is a Millionaire Entrepreneur, Best-Selling Author & Motivational Speaker. To know more about Merry & get her book 'Dare to Dream Big', free-of-charge, visit www.MerryRiana.com