Why You Should Have Multiple Income Streams and How To Do It
Its believed that the average millionaire has at least 7-income streams. But the question is, is that really necessary? This article is a detailed explanation of why rich people have so many income sources. It also begs the question, why should you have multiple income streams?
When you were young, you had many plans, to go to Disneyland, have a vacation in the Maldives, have a fancy car, have a duplex, or even own a yacht. I hope you still have them. You work hard, earn money and save it for some goals of yours, some enjoyments, or even some luxury, but more often than not, a thing or two come up requiring you to use your deposits, shattering your dreams of achieving your goal.
Gradually, what happens is the same flow continues. You save up some, then an emergency strikes, and you are back to square one. An average American is unable to gather even $500 as emergency cash. Then the question arises, why do you not have enough money at any instance? It is not the case where you have stopped working hard, and also, those “incidence” due to which you need to use your money can not get outright removed.
Is It relevant?
Now you may be able to get a slight hint of how having multiple sources of income can prove to be a sign of relief. But now you may ask, is it utterly impossible to enjoy only on your current income source?
Well, no, it is not impossible as a matter of fact, it is possible, and many people perform it. If you are among those sitting at the highest bracket of income, having all the facilities at your disposal, then this might not be your article.
If you can do all your desire with a single source of income, then this article is not for you, and you can skip this and relax on your private island in Hawaii but if not, keep reading this as you can find some gems. You will understand the necessity to generate income streams and step into the journey of financial independence.
Before getting into the main topic, let us first inform our readers regarding the definition of an income stream?
Whatever kind of activity you perform that brings money in your pocket will be classified as your income stream.
It can be any equity investment or a small shop. People tend to have non-related income streams for the sake of diversification. You may think of having a farm where the fruits grown gives you your return on investment. You can run your own book store and even have a few rental properties.
Why To Generate Multiple Income Streams?
Generating multiple sources of income is a complicated issue as some feel it is not worth the efforts, and some find it too difficult to attain. Yes, it takes effort and time to build multiple sources of income, and yes, it requires patience, but the result is worth every second of your hard work.
Paint a picture for me, will you?
You are in your early 20s. A young & energetic personality. You can put your time and efforts into building a new source of income. Yes, it will be painstaking as you might get exhausted sometimes, or you might feel that it is not going anywhere, but you need to be persistent. When you age, you may not be able to put in that much energy or effort or do that much hard work as your body won’t allow you.
Then how will you enjoy yourself on the beachside on a summer morning wearing your shiny goggles and relaxing? Or how on earth would you be able to do those charities and philanthropic endeavors you have wished for so long.
If you are still not convinced, let me put up some extra reasons to have multiple sources of income after all.
Reasons To Generate Multiple Income Streams:
- Rising Unemployment: Having stuck with a single source of income does not only limit you from having the things you desire, but you are even prone to losing the job all the time when employed by someone.
- Develop A New Income Stream: To start a new venture in any field, you require capital, and thus having some extra income each month can allow you to diversify into other domains to improve your portfolio.
- Creating A Contingency Fund: Having various sources will allow you to have an emergency fund for unexpected events and not harm you financially.
- Build A Retirement Corpus Quickly: The more you earn and invest it towards your retirement corpus, the greater the amount you receive, and faster is the freedom.
- Reduction Of Debt: Loans could be reduced at a much faster rate, saving the unwanted payment of interest also.
- Holiday Fund: Having to work the whole year and not having little vacation time? You sure deserve it! Generating cash at quick intervals will allow you to have vacations energizing your mind and body, and guess what, while laying down on a beach doing nothing, you will still see your bank balance go up!
When you have a constant flow through various streams, you take a step forward in achieving financial independence having more stability and safety for your future. You can start devoting time to your hobbies or even just relaxing and having a vacation. Not only this, you will find more and more opportunities that you can grab due to the amount of wealth you generate. The better the cash flow, the greater are the chances for better opportunities.
Cash flow is a crucial concept, and even companies are judged healthy and safe based upon this parameter.
Any amount of money generated after paying up all the expenses is your cash flow. Higher the cash flow, the better command you have to take your business to a higher level. You could expand heavily due to the money you have in your bank account.
You can achieve high cash flow by either increasing your Income capacity or decreasing your expense. Reducing the cost has limitations as you cannot reduce your expenditures below a certain level without compromising your basic needs. Instead, you can increase your income capacity.
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How To Generate Income Streams
If you are newly starting, there are a bunch of options available. These options will not pay you large sums of money outright, but they can be proven beneficial for starting. There are many online channels where your earnings will also influence by your social media presence.
(This article is for readers not having thousands of money to invest. It has been written by keeping in mind to perform low paying work part-time and gradually shift to conventional high paying opportunities.)
Low Paying Opportunity:
- Online Tutoring
- Solving Questions Online
- Creating art and selling on Redbubble or Teespring
- Part-time work at the local shop
Keep in mind that the amount earned by low-paying opportunities is not at all for your wants. You need to save this money in order to progress to the next step. The goal is to hustle out and have sufficient income to invest in other opportunities, giving a better Return On Investment. Some of the options include:
Good Paying Opportunity:
These income streams will be of significant value and give you enough opportunities to spread your income.
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How To Increase The Incomes and Become Wealthy?
The above opportunities are those forms of income in which you need to invest your time. It will take a significant amount of time to get anything off the ground and give you any earning, but that is only half the task done. If you wish to increase your earnings and be financially free, you must follow the following thumb rule:-
By looking for passive income opportunities, not only will the money flow to you every month, but also it will leave you sufficient time to look for another income source.
Your portfolio must contain a good portion of passive income streams to allow you to live stress-free.
What is a portfolio?
A portfolio is an ensemble of your income streams that provides you with money every year. A conventional portfolio consists of equity investment, businesses, rental properties, etc.
Let us take a look at the conventional portfolio
Capital Gains Income
There is no thumb rule for structuring your portfolio, whatever works for you. If any income stream can bring you money for a long duration with fewer changes within them, then it is the right match for you. You only need to stay updated with the trends.
How To Improve The Portfolio?
After generating a sufficient amount of income through low and some moderate paying tasks, you could start by investing your money into some good companies, paying you dividends each year.
Investing is one of the crucial things that you must do. Without investing in the stock market, you will find it hard to generate significant wealth.
Furthermore, you could buy a rental property and generate monthly income due to rent payments.
This money could prove to be very beneficial to expand your income sources. Your blogging channel can very well be a business in the future. Use your money wisely.
The only principle you must follow to improve your portfolio is whatever asset you put your money in must give back the return with minimal risk. You should create your portfolio such that even if one or two sources get impacted, it does not affect your lifestyle.
Our Final Thought
The above-said method is only one of the many ways you could make yourself financially independent. You could very well skip a step or two if you feel. The only thing you need to do is your due diligence before figuring out what is good for YOU!
A famous statement in the book Psychology of Money by Morgan Housel goes like
I do not know who you are, so I cannot tell you how to manage your money. Nobody else can. It is only you who knows what is best for you.
If you find the time, check out the article on the book review of Psychology of Money, where he explains how the human mind operates when investing money and making financial-based decisions. You will definitely learn a lot from it.
I hope this article serves you the purpose of the essentialness of creating new sources of income and excites you to generate multiple income streams. Until next time!