Having multiple income streams can immensely enhance your life. Whether you are looking to be financially independent and retire early (FIRE) or are looking to upgrade your ideal lifestyle – having extra sources of income provides greater flexibility to your life.
Benefits of Multiple Income Streams
Having multiple streams of income greatly benefits various areas of your life.
1. Speed
What are your financial goals? Do you want to FIRE at 35, or pay for a trip to Australia for your entire family? Maybe your goal is to simply move out of a roommate shared apartment to buy your own place. These are all great financial goals! Having multiple streams of income will accelerate your time to get there. For example, if you sell art online and “only” earn $200 a month – that is $2,400 a year! That money saved or invested year over year can vastly speed up to living your dream.
2. Mental relief
CNBC found that 52 Million Americans reported being worried about losing their job in April 2020, at the start of the Covid-19 pandemic. Losing a job is never easy, but not having to rely on your day-job as the sole income source can be a great mental relief.
J(ay) Money of Budgets are Sexy lost his job in the 2000s. Luckily, he was making the same amount of income from his blog as his full-time job. He said that the mental relief he felt let him dive into his entrepreneurial journey with more certainty because he didn’t have to worry about jeopardizing his family. He missed the “extra” income, but he was happy he could still maintain his same lifestyle.
3. Money Confidence
Studies found that 25% of American’s think they will be rich one day. However, 33% of the people in the same study didn’t take any steps to improve their financial situation after the survey.
There is a disconnect between “thinking rich” and actively working to become rich. One of the best ways to become rich is to make more money. By utilizing various streams of income, you benefit from speed and diversification to maximize your gains.
Looking for other ways to boost your money confidence? Check out this guide on 9 Steps to easily manage your finances!
4. Pursue your Dreams
Pursuing your dreams is scary. In Les Brown’s book, Live Your Dreams, he points out people do not pursue their dreams because they are afraid to fail or they don’t want to shift their lifestyle.
Creating multiple income streams takes hard work. It requires you to step out of your comfort zone and tackle new challenges. After gaining some confidence, you will see you are capable of making those life-changing decisions and adjusting your lifestyle to live the more ideal you.
Need help getting out of your comfort zone? Check out our guide to helping you proactively move towards your goals!
5. Compounding Gains
Money compounds exponentially. Market Watch showed how $250 invested a month ($3,000 annually) can turn into $1.9 Million after 48 years. Small incremental contributions can grow exponentially with time. By having more money to put up a front, you can maximize the number of returns you generate even in just ten years.
Disclaimer: I am not a financial planner. I am sharing the below to provide information. Before embarking on these investments, check with a certified financial planner to make sure you are aware of the risks associated with investing.
The Types of Multiple Income Streams
There are several different types of income. They are commonly referred to as the eight income streams. See the below image from @FutureSuccessors to check them out:
The above eight points provide a framework to better break-out up the different ways you can make money. Think about the ways you could earn all eight income streams. To provide tangible examples of multiple income streams, check out how to maximize your income below.
1. Day-Job Income (H3)
- Salary: Most people’s salary makes up a majority of their income. This is expected. People trade a majority of their time in return for a wage. Whether salaried or hourly – look to maximize the amount of income you can generate.
- Benefits like 401-K Match and HSA: Does your employer offer benefits like 401-K matching or a Health Savings Account (HSA)? If they do, enroll in the benefits! They often match the 401-K and the HSA is tax-advantaged. You gain extra money from your employer to maximize these out.
Negotiate a Raise: Are you a rockstar on your team? Do you go above and beyond and receive compliments on how valuable you are? It might be time to negotiate a raise. Ramit from I Will Teach You to Be Rich has a great overview that you can check out to get motivation and practical tips to go get the raise you deserve!
Still, looking for that dream job? Check out our guide on how to find a dream job that works for your life!
2. Side Hustle
A side hustle is a passion project that you monetize. Side hustles are prevalent now, 45% of working Americans have a side hustle. Monetizing a project and building a scalable business or working as a contractor can be a great way to add extra income into your cash flow! Side hustle money is often money you don’t “need” to live and can go right into the below ideas to make your money make you money.
Need help picking your ideal side hustle? Get out this guide on picking a side hustle that works for you!
3. Investing
Investing your money in the market is how you can compound your gains into making the $2 Million over 48 years. There are several strategies for investing your money.
Index funds: For immediate diversification of your money, you can invest in index funds. Index Funds are baskets of stocks that let you get the benefit of market performance without the risk of choosing any single company. Check-out this guide for picking an index fund that works for you.
Dividends: Dividends are money that companies give back to shareholders who invest in their company. For instance, a 6% dividend rate gives you $6 for every $100 you own. Check-out dividend Sensei and how he wants $100,000 in dividend income every year on his blog. https://dividendsensei.com/
Capital Gains: If you bought 1,000 shares of Amazon in 2000 – you would have spent about $30,000. In 2021, your investment is worth around $3,000,000. That is the extreme example of capital gains. Your money makes you money after an initial investment.
4. Real Estate
With real estate, there are two main ways to make money.
Appreciation. Home prices tend to rise year over year. If you buy a property and hold it for several years, you can often sell it for more than you bought it.
Rent. While the home is gaining appreciation, you can also rent out rooms to supplement the mortgage payments or even make money every month.
5. Tackle Small Projects
Similar to side hustle, you can tack-on another side project that you can generate passive income from.
- YouTube
- Writing an eBook
- Selling a course
6. Invest in a business
If you have more residual income to invest in, or as you build up your income streams, you could look into investing directly into businesses. Being a partial owner in a company when it goes big is a great way to make money. Keeping with the Amazon example, Jefferey Bezos owns 10% of amazon, helping make his net worth $183 billion.
Remember about Your Multiple Income Streams
Working on improving your financial literary is hard. However, having multiple income streams and knowing where to put your money; can immensely enhance your life.
When picking an investing strategy or a side hustle – look to the one you can sustain long-term. Consistent effort beats short bursts of effort every single time. Making your income strategies work with you.
Key Take-Aways
- Having multiple income streams speeds up your financial goals, provides peace of mind, promotes money confidence, provides leeway to pursue your dreams, and lets you benefit from compound growth.
- You can generate multiple income streams through your day job, side hustling, investing in the stock market and real estate, creating additional offerings, and investing in businesses.
Action Items
How many income streams do you have currently? Pick two to focus on for the next three months. How can you either create that income stream or increase the strength of that stream?
