Benefits of having multiple income streams
When you’re relying on one income source, your finances are always at some kind of risk. For example, when an industry dies out, like when streaming services made video stores redundant, anybody relying on that income is left in a very difficult situation.
Not only do multiple income streams give you protection against unforeseen circumstances, but you can also increase your wealth by trying out a range of different ways of earning money. Instead of only making money during your 9-5 hours, you can start to make monthly dividends, passive income, royalties, and much more – sometimes even when you’re asleep.
But that doesn’t mean everyone should aim for multiple income streams.
People who are entrepreneurial, high-energy, and need a lot of stimuli to stay interested often do well with multiple income streams.
Some people, however, are more suited to concentrating on one income stream at a time and doing really well in their one specific field.
The 7 streams of incomes
There are many ways to make money, and there is not one that’s better than the others. Some people will choose to have a range of different kinds of income from the same category, for example starting multiple businesses, whereas others will hedge their bets further with a combination of income streams.
If you’re really ambitious, you might even want all 7 streams of income.
This is the most common income stream that you get from working a physical job, a remote job, or freelancing – anything where you are trading your time for money.
Pro: Usually a stable monthly income, cannot be lower than the national minimum wage, there are many jobs opportunities available
Cons: You can only make money while you’re working, capped income ability, you’re reliant on somebody else
This is the income your business makes. You may choose to pay yourself your business profits directly, take a salary, or a combination of salary and dividends.
This is the income stream that many entrepreneurs strive for as they like to be independent and in charge of their own fortune.
Pro: Uncapped earning potential, total independence, you can work on something you love
Cons: High risk, can be very all-consuming
This is one of the most passive of the 7 streams of income. Anybody who has savings makes interest, and if you have a lot of money in a savings account you can make a sizeable interest income.
Pro: Very passive, low-risk, money is more easily accessible than many forms of investing
Cons: You need a lot of savings to make much this way, if you don’t have a good interest rate you might make more money by investing your money elsewhere
You can earn a dividend income from any shares you have in a profitable company, whether that’s your own or one you’ve invested in and bought shares from.
Pro: Passive income opportunities, can make lucrative returns
Cons: If it’s your own business then any money taken out for dividends is money that cannot be invested into the business’s growth
If you have a property to rent or the money to invest in a rental property, you make a generous monthly income without doing a huge amount of work.
Pro: Monthly income that might cover the mortgage if you have one, an asset that you can sell at any time, hiring a property manager can make this very passive
Cons: You’re responsible for any repairs, fees such as insurance, estate agents, and furniture can take away from your profit
This is the income you make when you sell an investment and make a profit, whether that’s a property or a piece of art.
Pro: You get the money in a lump sum which can be invested into something else, you can make money from something you already own
Cons: You may be subject to capital gains tax, less predictable income
Royalties are when you get paid a percentage of the profits of an item, a common example is when you are working with a publishing house to sell a book. You get just a small percentage of each sale because they shoulder all the costs of production and marketing.
Pro: Your work is done upfront, so the continued royalties are a passive income, less financial risk upfront
Cons: Generally small payments unless you have an incredibly successful product, time-intensive
How to create multiple streams of income
When people ask how to create multiple streams of income, I always recommend focusing on building one income stream at a time, as it can be easy to burn out if you’re spreading yourself too thinly.
Once you’ve mastered one income stream you can slowly build up the next and the sky is the limit, but make sure you have the sufficient time and energy to keep your income streams ticking over nicely.
Certain multiple income streams will work better together than others, so consider this when you’re choosing your next income source. For example, a lower time-intensive income stream like real estate might well alongside running a busy business.
To get some ideas specifically for creating a passive income, check out this blog post.