You may have heard about the value of multiple streams of income at some point in your life.
Yet, many people may not realize they do indeed have different money making areas currently. And others may not consider why different streams of money really matters.
Not matter what spectrum you fall under, you stumbled on this post for reason. Hopefully, you’ll come away with a better understanding of why multiple streams of income can be so important.
Below, I’ll explore a few different areas of this topic, so feel free to skip to your desired section.
What Are Multiple Streams of Income?
The concept of this is pretty simple and you probably do not need an official definition to truly know what it means. But, let’s still put something together to get on the same page.
Creating multiple income streams allows an individual to have various cash flow sources that are coming in. This puts you in a better position to be prepared if one source of income fails. Now you have something to fallback on.
What’s cool about this current digital age, is there are a lot of ways to make consistent extra money, whether that is passive or active. But before we get into some examples, I want to cover the benefits of having multiple streams of income.
The Benefits of Multiple Streams of Income
Just like the definition, you probably have a pretty good idea or can guess to why having more than one income source is a good idea. But let’s explore these a bit more in detail.
Helps you make more money
I mean the most obvious benefit, is generating more money. This can help you reach your financial goals, live a more comfortable life (as long as you have lifestyle inflation in check), and help pay off any debts you may have faster.
Think about all the opportunities and freedoms having money coming in to you and your family from multiple streams can do.
Some financial protection of job loss
Majority of people are working for a company and have a 9-5 profession. Unfortunately at some point you may be part of a lay off, which is never fun. I was back in 2014 right before Christmas!
While I was a bit shocked, I had already been doing some contract work for a company on the side and immediately reached out to increase my hours. I had a financial cushion of 20 hours a week to bring in some money while I was on the job hunt.
Multiple streams will ensure if a job loss happens, you still have some money coming your way each month. It can alleviate some money stress that a job loss can bring.
Hit early retirement goals
Many people have a desire to retire early, that could be in your 30s, 40s, or 50s. Of course, you may still work on some of your income streams, but starting them early can also be your ticket to early retirement.
Not everyone is going to have high income or make over six-figures in their careers, which may provide saving and investing limitations.
But, having multiple streams of income can elevate your saving and investing rates, which can compound quicker for you.
Early retirement is also not dependent on having a multiple streams of income as many have done it with just their salaried job, but additional money generating streams can certainly help.
Probably one of the most important financial terms to learn and live by is diversification. The simple way of looking at it is not putting all your eggs in one basket. I know, cliche statement that has been used to death but it’s the best way to describe it.
Diversifying is a big strategy to successful investing, you want to spread your money to different assets for protection during downturns.
Example being in the stock market, you want to have a mix of stocks, bonds, and maybe some real estate too.
But this concept applies to how you make money too, you want to have different paths of revenue generating streams. You might earn more on your day job than others, but you should have others streams to offset if something would happen.
Can make you a millionaire faster
This is not to say you’ll become a millionaire overnight or that it is super easy to do so. You’ll need to put in the work, but multiple streams are a key way to becoming a millionaire and to continue to maintain that wealth throughout your lifetime.
Sorry if that was a clickbait headline to you, but it does have truth to it. Having a few streams of income with smart personal finance and investing habits, will have you hit millionaire status faster.
You may also have heard about the 7 streams of income, which is what the average millionaire currently has. And many millionaires have more than that too!
But it makes sense right? The more income you have coming in from different streams, the better your odds are of becoming a millionaire and having a high net worth.
Here are the 7 multiple income streams with a very basic synopsis:
- Earned – Money earned by doing work for someone else.
- Profit – Money generated by selling something (goods or services).
- Interest – This is money accrued by loaning money to bank, government, someone else, etc.
- Dividends – Money returned to you (sometimes monthly, quarterly, yearly) for owning shares in a company.
- Capital Gains – Money generated from increased value in an asset you own.
- Rental – When you rent out a real estate asset like a house or commercial.
- Royalty – Cash you make from licensing products, ideas, or processes of yours.
Examples of Multiple Streams of Income
When it comes to build various streams of income, you have a lot of different options. The digital age we live in has created more opportunities to make money than ever before.
But instead of listing every example, below are just some of the high-level common ones you might want to consider.
Your Salaried Job – For most people, your 9-5 salaried job will be your primary source of income. It’s where your consistent pay comes in, but your goal should be to make as much as possible and utilize any employee benefits. Looking for more? Here’s how to increase your salary.
Secondary Salary – I refer to this as your spouse’s income, which can add another nice income stream. Maybe it’s full-time income or part-time, either way this other salary is a great way to ensure your family has another income stream.
Your Investments – The other common stream of income you’ll start generating is through your investments in the stock market via 401k, Roth IRA, etc. Your investments typically pay out in the form of dividends and capital gains. Additionally, you won’t be touching any of this money until retirement (usually), but it is generating income for you. Here are some simple questions to ask yourself before investing in the stock market.
Online Business – The internet has made it possible for more people to find ways to have another income stream. Many online businesses can easily make part-time to more than your full-time income. It can be anything from starting a blog, selling items on eBay, selling your art, drop shipping, Amazon FBA, etc.
Gig Economy – The rise of the gig economy has grown in recent years thanks to technology companies stimulating this new wave. Think of companies like Uber, Airbnb, Lyft, and Rover where you are paid for a specific task through the platform. Will you get rich or be able to do this full-time? Probably not, but it’s another revenue stream to consider.
Rental Income – Besides some of the tax advantages of owning property and renting, you can make some money just by renting properties you might own. Of course, you’ll need some initial capital to get started, but once you do there is some great wealth building potential. For those who aren’t ready for this or do not have the initial upfront cash, real estate crowdfunding might be a good alternative.
At this point, you should be seeing the value of multiple streams of income.
Do you need to have seven or more like some millionaires do? Not really, it’s completely up to you in what and how you decide to generate more income.
The important aspect is that you indeed should have more than one. And from the examples above, you probably do have some if you are investing or have 401k/IRA.
But if your financial future pumps you up and you want to have more financial security, look for ways to have 3-4 income streams. You can always expand as you get more comfortable.
Just remember, many income streams can take time and work to build, but you will learn a lot along the way and it will ensure you’re on the right path financially.What do you think of multiple streams of income? Do you have some currently? Or are you working towards some now and just getting started? Let me know in the comments below.