Life is EXPENSIVE. I think that’s something everyone can agree on. From bills, to groceries, to excursions and your daily cup of coffee from your favorite coffee shop things tend to add up, and quickly.
That’s why in the past few years entrepreneurs have been speaking to the importance of having multiple streams of income. Having multiple streams of income can change your life by offering you the one thing everyone craves, freedom.
Freedom to buy what you need and what you want. The freedom to take a vacation to recharge your batteries so that you can evade the ever present concern of burnout. Freedom of choice and having the personal agency to do as you please, when you please. That’s the reality you can create for yourself and your family when you open yourself up to diversifying your streams of income.
For most people, earned income means the money you make from your job. This is your primary stream of income, and since you can usually make a decent living off of these wages a lot of people stop here.
Since the cost of living continues to rise exponentially, some people are realizing that having a job just isn’t cutting it anymore. Unless you’re comfortable with living within the confines of your salary then I’d suggest you look into combining your Earned Income with another source of income. That’s how you build wealth.
Some would argue that they get along just fine with the money they make from their jobs, and if that’s you then congratulations! While this may be true for a select few the reality is that this isn’t the vast majority of the population's reality.
To generate income beyond your job is risky, but you know how the old saying goes, “fortune favors the bold.” So be bold and try something new.
When you start selling a product or a service then you move into the field of Profit Income. Traditionally, this looks like someone opening a retail store, a restaurant or a babysitting service. Now, there’s so many avenues that you can take to generate Profit Income.
Some people get into drop shipping, where they’re able to work directly with manufacturers to provide goods at a fraction of the price by eliminating the middleman. Other people may have a law degree, and instead of taking it to the courts they’re working from home by offering personal consultations and selling courses on how to make sure your business's website is legally compliant.
Or maybe you’re a naturally organized person. You have wonderful communications skills, both written and verbal and are looking for an opportunity to work from home. You could start capitalizing on your skills by becoming a virtual assistant. When you have the right skills you can make 4-5 figures a month by helping others manage their time.
While becoming an entrepreneur isn’t the path for everyone, with consistency and by taking a chance on yourself you could make as much, if not more than you make at your 9-5.
When you invest in the stock market you are opening yourself up to dividend income. This basically means that you invested your money in a company and now you own a share of that company. Being a shareholder means that you’re entitled to a percentage of the income that the company generates.
Now, most people are aware of the stock market but not everyone is comfortable buying stocks. It’s something that we’ve seen older generations be burned by time and time again. Having discernment when it comes to buying stocks is key.
For example there are many up and coming environmentally conscious businesses that stocks are anticipated to continuously grow given the current environmental issues that we’re collectively experiencing. It’s also pretty safe to invest in technology based stocks since our society values technology.
Now safe is a relative word, because in reality no investment is ever really safe. Safe is sticking to what you know. To grow there’s always going to be some level of discomfort, so don’t let that stop you from growing personally and financially moving forward.
Interest income for private individuals is defined as, “the returns generated from interest generating accounts.” This could also be described as the amount earned by a persons investment in a project or entity.
Typically this is the type of return you’d see from a bank when you leaving your savings account alone. The money doesn’t just sit in your account. The bank will use your money to lend to borrowers, which they in turn charge an even higher interest rate on, therefor paying you your money back all while turning a profit.
In this scenario the banks are the ones making most of the money and they leave you with metaphorical crumbs. Another safe way to create interest income is by buying government bonds or CDs.
When I say CDs I’m not talking about compact disks, I’m refering to a certificate of deposit. This is an account you can open with a banking institution where you typically are allowed to store a specific amount of money with the bank for a set amount of time at a fixed rate. This fixed rate is typically more than you would receive with a typical savings account.
A Government Bond is a debt security that is issued by a government to support government spending. In simpler terms it means that you give the government some of your money to spend on whatever it needs and you charge them interest so over time you’ll receive back more than what you lent. This is typically considered to be another safe investment considering your investment is backed by the issuing government.
So put your money to work and start making passive income by accruing investment interest.
Another form of passive income is Rental Income. This is income generated through property investment. This is an excellent way to protect your money and generate income through collecting rent from your tenants.
Now this stream of income does require a pretty hefty initial investment, so if you’re just starting to diversify your streams of income this may not be the option for you to initially opt for. Also, it can take a while to start seeing a return on your investment, so if you’re wanting to make money quickly this option would be better for you to address farther down the road.
While long term rentals are always a solid source of additional passive income, more and more people are opting for short term rentals. You typically make much more in short term rentals as compared to long term rentals. And it’s relatively easy to set up with platforms such as AirBnB and Vrbo.
If you already have a few streams of income and are wanting to increase your forms of passive income, definitely look into creating a form of Rental Income.
If you’re a creative you can create something unique like a piece of art, a song, a design, etc and charge people and businesses to use it. The most common example of this is in the entertainment industry.
When artists are signed to a label and the label will then pay for the artist to record the album, the musicians featured on each track, the production costs, marketing and will facilitate the selling of the record. In turn the artist gives them the rights to their music and then receives a royalty payment every time a record is sold and each time it’s used in the public.
You can earn royalties on various types of intellectual property or personal assets. While the most common examples are seen in entertainment you can also ear royalties on copyrighted works, franchising, and natural resources.
Now, did you know that you can actually invest in royalties? This is actually a great way to provide yourself with consistent income and it’s considered less risky than investing in traditional stocks. A modern example of this thats gaining popularity is investing in NFTs.
Creating multiple streams of income will help you reach your financial goals and will set you up for accruing the type of wealth that can benefit you and your family for generations to come. Take some time to asses where you are currently with your finances and get started on creating a stream of income that is right for you at this time in your life.