Robert Kiyosaki: Three income types divide rich and poor

Robert Kiyosaki, author of Rich Dad Poor Dad and a financial educator, outlined three income types-earned, portfolio and passive-in recent public comments, interviews, books and social media posts.

He described earned income as money received for work or wages; portfolio income as gains from buying and selling assets and from securities that pay dividends; and passive income as recurring cash flow from businesses, rental properties or investments that require little daily involvement.

Kiyosaki argues that which income stream a person relies on affects their financial trajectory. He noted people who depend mainly on earned income typically exchange hours for pay, while those focused on portfolio and passive income use assets and systems to generate returns that are not directly tied to work hours.

Kiyosaki pointed to tax treatment and scalability as reasons some income types can produce greater wealth over time. He noted many tax rules treat wages differently than capital gains and investment returns, and he said business and investment income can often be expanded through leverage, delegation and reinvestment.

Examples he cited include rental properties, dividend-paying stocks and business ownership as common sources of portfolio and passive income used to grow and preserve capital.

He outlined steps people use to move from earned to portfolio and passive income: learning about investing, acquiring assets that produce cash flow, structuring businesses so others run operations, and reinvesting returns. Kiyosaki also emphasized financial education for identifying and managing risks tied to investment and business ownership.

In his remarks Kiyosaki wrote: “There are three types of income: earned income, portfolio income, and passive income.” He has repeated the classification across interviews, books and social posts to explain the distinctions.

Kiyosaki previously presented related ideas in Rich Dad Poor Dad and the Cashflow Quadrant, concepts that distinguish employees, the self-employed, business owners and investors.