If your goal is to reach financial independence, one of the best ways to go about reaching it is to develop multiple streams of income. You may have heard or read that most millionaires have multiple streams of income, and following the pattern of those who have proven to be successful seems like a good idea.
But have you wondered about the specific reasons why you should create multiple streams of income? Or have you wondered how you can actually put this concept into practice in your own life?
Why Build Multiple Streams of Income?
You’ve been told that you should have multiple sources or streams on income, but why is this important? Why is it better than focusing on one thing and trying to do that one thing very well?
Increase Your Overall Income
The most obvious reason for pursuing multiple streams of income is to increase the overall amount of money that you make. The key to this is that some of your streams of income should be passive, or not directly tied to the amount of work that you put in.
Creating multiple streams of income doesn’t mean that you should work three different jobs instead of one. A much better approach would be to use some of your time or money to create other sources of income that will continue to make money for you with little-to-no work on your part.
If you have a full-time job and you make extra money on the side thanks to a rental property that you own, that is a perfect example of creating multiple streams of income. You’ll need to do some work related to owning and managing a rental property, but the amount of money that you make from it is not directly tied to the work that you do.
Have More Money to Invest
Reaching financial independence or financial freedom requires you to invest your money for the future.
The more you make, the more you’re able to invest. And the more you invest, the more it will grow, thanks to the powerful effect of compound growth.
Increasing your income and investing more is a proven way to move closer to financial independence. While it’s true that you may be able to increase your income by focusing on your job, for the average person, building multiple streams of income is a more realistic option. Plus, as you’ll see from the next few points, there are other significant reasons to build multiple streams of income.
Added Investment Security Through Diversification
There is some risk associated with having all of your income from one source. Regardless of whether that source is a job, a business that you own, or an investment, you’d be safer to have your income spread out among a few different sources.
History has proven that unexpected things can happen, and it’s best to be prepared and protected as much as possible. Right now, huge numbers of employees are being laid off because of the current economic conditions. Those who have income from other sources may take a hit in terms of their overall income, but their income will not drop to zero.
Possibility for a Career Transition
Some people are able to use one of their secondary sources of income as a way to make a career transition. For example, Clint Proctor, a blogger at Wallet Wise Guy, worked full-time as a pastor for several years. Clint started a side hustle working as a freelance writer, and less than a year later his income reached a point that he transitioned to full-time freelance work (earning six-figures as a freelance writer).
You may start a side hustle with the goal of making a career transition, or you may start it simply to earn some extra money and it may open up some doors in the future.
If you’re pursuing financial independence, your secondary sources of income may provide you with some work to do after retirement, if that’s something that interests you. Chad Carson of Coach Carson used real estate investing to reach financial independence and retire early. You could start investing in rental properties now with the goal of transitioning away from your full-time job and using your time to manage your properties.
Many people who have reached financial independence continue to work as a freelancer as a way to stay productive and continue making some money after retiring early from traditional employment.
A Chance to Make Fun Part of Your Financial Portfolio
Aside from the financial benefits, creating multiple streams of income can also be fun and allow you to pursue things that you enjoy. This could involve investing in certain things that interest you or using some of your working time for a side hustle that’s built around one of your hobbies.
Before we start looking at some of the specific ways that you can add streams of income, I want to give a quick caution or word of warning. Don’t try to do too much at once. This article is not suggesting that you need to pursue all of these things or that you need to do several things at once. Focus on adding one new stream of income at a time and you’ll have better results.
Different Streams of Income That You Can Develop
If the points above have you on board with building multiple sources of income, you may be wondering what options are out there. This is not an all-inclusive list, but it covers some of the major categories that you should consider.
Obviously, for most people, a job is the primary source of income. This is true whether you’re an employee or self-employed. In most cases, the goal is to continue working and making money through your job and adding other supplementary streams of income.
At some point, you may be able to leave your job and retire thanks to the money that you’re making in other ways and thanks to a portfolio and net worth that you’ve accumulated.
A side hustle is anything that allows you to make money outside of your day-to-day job. You could work as a freelancer, work in the gig economy (for example, drive for Uber), start an online business, offer a local service, or any number of different things. Later on in the article, we’ll look at some specific options that you might want to consider.
Most side hustles require work (the word “hustle” kind of gives that away), so this would be a source of earned income, similar to a job. But a side hustle may allow you to increase your overall income and give you more money that can be invested, which can lead to passive income. And some side hustles have the potential to transition into passive income in the future.
A side hustle is also ideal for the possibility of a career transition that was mentioned earlier. If you’re looking for a more fulfilling career or if you’re interested in starting something that you could continue in early retirement, you may want to think about a side hustle.
Real estate investing is extremely popular with people who are pursuing financial independence. The most common type of real estate investment is the rental property, and that’s a very realistic way to start building a supplementary source of income.
Owning rental properties is a proven way to build wealth. Not only will you build a cash flow from rental income, but you’ll also (hopefully) make money through long-term appreciation of the property values.
Real estate could fall under the category of investments, but I chose to break it into two separate points because owning rental properties is not passive (if you’re managing the properties yourself) like most other types of investments.
There are plenty of options for building passive income through investing, including some options that involve real estate. If you like the idea of investing in real estate but you don’t want to be a landlord or responsible for the property, you could use real estate crowdfunding to earn passive cash flow.
And of course, there are all kinds of other investment options like stocks (including dividend stocks), mutual funds, ETFs, and many different types of alternative investments. If your goal is to produce cash flow, you should focus on investing in income-producing assets, like those that pay dividends.
This could be a business that you start yourself, you could invest in a business, or you could purchase an existing business.
Depending on the type of business, it could be relatively passive or it could require a lot of work and effort on your part. If you’re looking for something passive, you could hire someone to run the day-to-day operations, or you could choose a business that tends to be low maintenance (like laundromats or vending machines, for example).
For those who are looking to get started with building additional streams of income, a side hustle is often the most practical and realistic approach. You may not (yet) have the money to buy real estate or invest, but anyone can start a side hustle.
While there are all kinds of different things you could do for extra money, if your goal is to reach financial independence, you may want to focus on a side hustle that involves building a business. Some side hustles, including gig economy jobs and small online tasks, will pay you once for your work, but building a business gives you better long-term potential. Gig economy side hustles also don’t offer the possibility of converting into passive income in the future.
With that in mind, here are some side hustles that involve starting a business and offer great potential for the future.
There are many different services that you could offer as a freelancer. The most ideal approach is to use the existing skills and experience that you already have and put it to good use. You could work as a designer, coder, writer, photographer, voice actor, and much more.
Working as a freelancer is an ideal side hustle because it can be done part-time or full-time. You can start on the side now and scale up to eventually become full-time, if that’s what you want to do. And most freelance services allow you the possibility of earning a very good hourly rate for your work.
Another benefit of working as a freelancer is the possibility that you could grow it into a larger business in the future, and it could even become a source of passive income. For example, many successful freelance web designers have hired others to work for them and made the transition from independent freelancer to agency owner. As an agency owner, you could hire others to do the vast majority of the work if you wanted it to be more passive.
Start a Blog
One of the most popular side hustles is to start a blog. Blogging is definitely not passive in the early stages, but it has the potential to become much more passive later on.
Building a successful blog takes a lot of work, and some patience for that work to pay off. But after your blog has turned the corner and you have steady sources of traffic arriving every day, it’s possible to earn a great income from part-time work (or you can outsource the work).
Blogging is popular because it costs very little to get started (less than $100), it offers unlimited income potential, and you can start a blog on a topic that you enjoy.
Build a Niche Website
A niche website is similar to a blog, but with a narrow and very targeted focus. An example of a niche website is GlutenBee.com. This site is all about gluten-free living, including loads of information about which foods are gluten-free and which foods are not. The site does not cover a wide range of health topics or food and recipes. Instead, it takes a very narrow focus and attempts to serve people on a gluten-free diet.
There are endless possibilities of niche websites that you could start. Similar to blogging, you can choose a topic that you know well or something that interests you.
Most niche websites make money from display ads and/or affiliate programs. For example, a niche site may link to relevant products on Amazon.com and earn a commission for people who click through and make a purchase.
EDITOR’S NOTE: One of our favorite sites for building a targeted business is NicheHacks. Check out their resources if this is a tactic you’re interested in pursuing.
Start a YouTube Channel
Starting a YouTube Channel is somewhat similar to blogging, except with video content instead of text. There are huge opportunities for those who create video content, with plenty of visitors preferring to watch videos rather than reading text-based content. (Think Save Retire is now on YouTube—check out our channel!)
YouTubers can make money through ads on the videos (YouTube Partner Program), direct sponsorships, and the use of affiliate links within videos or the video descriptions.
Also like blogging and niche websites, starting a YouTube channel requires a lot of work upfront, but it does offer the possibility for passive income in the future. Those videos that you’re creating today could continue to earn more for years to come.
Depending on the experience that you have, working as a consultant may be a great option. You may be able to leverage the experience from your full-time job or past jobs to start a consulting business that makes money in your spare time (just be sure that it doesn’t create a conflict of interest or violate any agreements with your employer).
Like freelancing, consulting is something that you could do part-time or full-time. Starting small and scaling up is definitely an option that you could pursue. Most consultants are able to charge a high hourly rate, so it could be a great use of your time.
Start a Bookkeeping Business
When it comes to home-based business opportunities, starting a bookkeeping business is an under-appreciated opportunity. There is a big demand for bookkeepers, and since it is an essential aspect of business, the demand is likely to remain strong.
Bookkeeping is also something that you can do without a lot of experience. You may already have some bookkeeping experience from your job. If not, you can learn bookkeeping basics much faster than you could become qualified to work as an accountant.
You could start a bookkeeping business part-time serving a few clients and slowly grow the business. It’s also the type of work that you could outsource to others down the road if you wanted a passive stream of income.
Start a Local Service-Oriented Business
Another excellent option is to offer a service in your local area. There are plenty of options, including:
- Mowing and landscaping
All of these types of business could be run part-time or full-time and you can start making money as soon as you have your first client. You may be able to get started by simply talking to people that you know, you could post an ad on Craigslist, or you could use local bulletin boards to advertise your services.
These types of services typically allow you to earn a pretty good hourly rate. If scaling up is something that you’d like to do, you could hire others and potentially run the business somewhat passively down the road.
Putting It Into Practice
We’ve covered a lot of details related to why you might want to create multiple streams of income and possible ways to do it. Now it’s up to you to take action and get started.
Evaluate your own situation and see which ideas might be a good fit for you to move forward. Remember to take it one step at a time and keep in mind that it’s a long-term process.
Originally posted at https://thinksaveretire.com/develop-multiple-streams-income/