The first time I came across this concept I was maybe eighteen. I picked up Robert G. Allen’s book ‘Multiple Streams of Income: How to generate a lifetime of unlimited wealth’ and was hooked on the concept. Theoretically anyway. I wanted to put it in practice but like many eighteen year olds the money I earned went on going out, buying clothes and having a good time. I wish I had more money sense back then. Now looking back I wasted thousands of dollars that could have been used to secure a healthier financial future.
Generally our primary source of income is our job. We work say 38 hours per week and get a wage at the end of it whether it’s weekly, fortnightly or monthly. Once upon a time this income was secure but in uncertain times and fluctuating markets there is no such thing as job security.
This is where multiple streams of income become very useful. They provide more financial security. They provide peace of mind when unemployment beckons. Having multiple steams of income is the difference between paying your bills and getting into debt when there’s no job in sight.
So what are these stream of income? How can I diversify my eggs so they’re not stuck in just one basket? Below you’ll find eight income streams with links to useful information around the Internet.
1 – The Day Job
Your job is the first stream of income. It’s necessary to build the other stream of income. You earn a wage and what you do with that wage will depend on whether you will develop the other streams in the future. The good news is that you don’t have to start with millions. The average income is enough, even on a low income if you’re determined you can grow your streams so that in the future you can be more financially secure. Spruce up your CV, update your Linked In profile, and get yourself out there and into the job you want.
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2 – Start a business
A business can be a job or a stream of income if someone else is doing the bidding for you. Some people buy a business but all they are doing is buying themselves a job without all the benefits. A good business will have others working for you while you earn the profits. This is a stream of income that can grow indefinitely depending on the type of business you’re running. Nowadays it’s so easy to set up an online business and earn extra income that anyone can do it. Start up costs are much lower and you can get started almost immediately.
How to start a small business in a few hours (US)
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50 Side business you can start on your own
3 – Shares
Investing in shares is an easy way to start an extra stream of income because the barriers to entry are rather low. You can start with as little as $500 and build onto that slowly. As companies generally pay dividends once or twice per year at the beginning you can reinvest that until you have enough to reach a desired income level. Wouldn’t it be nice to receive a an influx of cash every month from the companies you invest in? This is one income stream I am growing. Right now it’ s nothing to write home about but it’s growing. My current annual income from shares is about $400 per annum and I’m hoping to double that by the end of the year. I see shares as a long term investment (15-20 years at least). Last year I made the mistake of selling one of my stocks, while I had made a profit of more than 100%, I had to pay capital gains tax on the whole amount (if held over 12 months there’s a 50% CGT discount in Australia), and nine months later, the stock has increased again and would have given me more than 300% profit had I held onto it for longer. Silly, silly me.
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4 – Property
The barriers to entry for property investing are much higher than shares. The profits can be greater too as is the security. With real estate you need a much larger sum to start with. Generally, at least 5% of the purchase price. So if you’re buying a property worth $200,000 you need at least $10,000 as a deposit and another $5k for purchasing costs. Once you do have a property and have it fully paid for, the rent is your income. I’m a huge fan of property. It’s tangible and it’s a necessity. People are always going to need a roof over their head. Having said that buying any old property isn’t enough. Research and leg work is required to finding the right one and then committing time and energy in maintaining it. One of my dreams (goals) is to own enough properties to create $50,000 in passive income in the next 10 years. I spoke with a mortgage broker last week to get started on my goal.
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5 – Managed Funds
This is investing in shares indirectly. Funds invest in different equities so that you have greater diversification. Personally, I’m not a fan of managed funds due to the fees involved for fund managers but whether you invest in them is a personal choice. They do have their benefits. Someone else is doing the research for you hence the ongoing costs and you can start with as little as $1000 and then direct say $100 per week or month to the fund and let it grow. Managed funds also pay distributions which can be reinvested so that your investment grows quicker. Once your investment has grown you can switch from having the distributions reinvested to having them paid into your bank account.
6 – Interest
Savings in the bank are not the best investment as you’re cash gets eaten up by inflation but generally you’re money is safe. If you have a hefty sum and are adverse to risk stashing your cash in an online saver account or term deposit could be the way to go. Although if you have a mortgage, and your interest rate is higher than the interest return on your savings account, you’ll save more money by paying down your mortgage into an offset account, than having it stashed in a savings account.
7 – Build a blog or niche website
People are earning lots of money from the Internet. If you do it right you can create a substantial income stream from the comfort of your living room or at home study. A successful website can help you become location independent and even let you quit your job early. What’s not to love? Check out the hot spots below where the owners of the blogs/sites are doing it themselves and can teach you how it’s done:
How to make money blogging @ Making Sense of Cents
Make money blogging @ ProBlogger
28 Ways to make money blogging @ The Work At Home Woman
Make money blogging @ Make Money Your Way
How to build a niche site @ Smart Passive Income
8 – Other
There’s other ways to add to your streams. Freelance work can bring in a bit of extra cash whether it’s play money or to pay down the mortgage or invest. You can moonlight with a second job though this means extra work hours and less time for yourself, your family and friends. Royalties are great if you can publish a book and it sells well. Writing songs and selling them to music producers if you have the talent. Complete surveys and get paid extra cash. Rent out a room in your house. Teach English to foreigners in the evenings.
Creating multiple income streams is something I am aiming to do. I don’t like the fact that I am so dependent on my day job. Having cash coming in from different sources will allow me to create the lifestyle that I want and that includes writing, traveling, spending time with family and friends, investing running more and doing triathlons in different parts of the world.
The benefits of having seven or more different streams of income is that you have more financial security. If one income stream goes bust, and it can happen, you still have a few more keeping you going. When times get tough and the economy isn’t doing too well you don’t have to worry about redundancy. During good times you can grow your investments, increase your retirement accounts, or enjoy a leisurely holiday because you have income coming in from different directions.
*The links provided in this post are from information I have found useful. If you don’t like being linked to, please let me know and I will remove it.
Are you building multiple income streams?