Income Series: What is Earned Income?

Overview

When most people talk about income, they usually refer to earned income as their focus. It is common for earned income to be the main source of income as it includes working from a 9-5 or a part-time job. Depending on your field of work, it can take form in several ways such as wages, salaries, bonuses, tips, or commissions. For example, if you were a waiter at a restaurant, your earned income would include any tips received on top of your hourly wage. On the other hand, if you worked in sales, your earned income would consist of your salary and any commission. 

Pros and Cons

Earned income is known for being the most stable source of income involving fewer risks and being more reliable. With this in mind, it is often heavily taxed based on a person’s income bracket and requires active involvement to maintain. Despite this, many prefer the stability of an earned income as it is the most common and traditional income type.