We've all heard the financial gurus tell us to create multiple sources of income, right? Is it a good idea to create multiple sources of income and how do we do it? In Part I we will explore the various options to earn or create income that is LIMITED. This type of income will not lead to financial freedom, at least not quickly.

There are two ways to earn limited income: 1) as an employee and 2) as a self-employed person. Both of these methods involve you being present in order to earn the income. Ninety percent of all people are employed. They must show up to work and exchange their time and energy for dollars. Even the small self-employed business owner must show up himself to manage the business. Some examples of the small business owner would be a doctor or lawyer in his own practice, or the owner of a single retail shop.

Now let's examine these two types, the employed and self-employed, with respect to six factors that determine the feasibility of becoming financially free. Those six factors are: 1) income, 2) risk, 3) leverage, 4) residual or passive income, 5) tax advantages, and 6) overhead.

Income is money you derive from your efforts. Risk is the possibility of losing your invested time and energy. Leverage is the ability to use another source of energy, time, money or technology to create more benefit for you. Residual or passive income is income you receive in perpetuity for having done work one time. Tax advantages are the financial benefits you create by tapping into the full extent of the IRS code for business owners. Overhead is the amount of money and human resources required to produce the income.

Most people are taught to go to school, get a good education, and then get a good job with great benefits. This puts that person squarely in the first category as an employee. Let's take a look at the six factors in relation to the employee: they have limited income (by definition); low risk (unless they are working in a company ready to downsize); they have no leverage; no tax advantages; and no overhead. They also have a slim chance of becoming financially free.

Other people don't like working for someone else. They want to be their own boss, own their own business. This type of person is the hard-working individual who thinks that he/she must do it themselves. Often they are the only one in the shop who can perform the job that runs the business. If they are not present, the income stops. While the employee has a job, the self-employed person is owned by the business. They must work harder than anyone in any other category. They have a limited potential for income; high risk for failure; a small possibility of leverage; a slim chance for passive income; some tax advantages; and relatively high overhead.

Both of these two categories are not on the fast track to financial freedom. However, they are ways to create income that will help you enter into the last three categories that are the primary methods to riches. In Part II, we will examine the advantages of being a business owner (systemized business), relationship marketing associate, or investor. Which one of these three categories do financial gurus like Robert Kiyosaki and Donald Trump recommend? Find out next time!