Why You Need Multiple Streams of Income

Many of us have heard it said that most extremely successful people have multiple streams of income.  But what exactly does that mean? To have multiple streams of income basically means that you are generating income from more than one source.  

Why is this important?  Because it means that should one income stream dry up or slow down, you still have other sources on which to rely.  Some income streams can look like your weekly/bi-weekly paycheck, income from rental properties, or revenue from a “side hustle.”  You may be thinking it sounds like working a bunch of jobs and still not being able to make ends meet–you’d be wrong (we’ll discuss a little thing called “passive income” below) .  

Studies have shown that having multiple income streams is actually a pretty solid road to wealth.  Most millionaires are found to have many revenue sources. Regardless of how many, having more than one source of steady, viable income is a good practice.  But if you’re on that millionaire track, then you may want to consider three or more streams of income. In fact, a study by Tom Corley, author of “Rich Habits” shows that 65% of self-made millionaires had three streams of income.

Getting Started

If you find that your 9-5 keeps you busy, you can develop a savings plan and then invest the money from your savings to generate passive income.  If you run a business, you can find creative ways to generate new revenue streams within your business model. For example, if your primary service (i.e., source of revenue) is interior design, you can offer group workshops on ‘How to Decorate Your Home on A Budget’.  It’s important that you start where you are, with what you have and do what you can.  Nothing is guaranteed, but the more sources you’re pulling from, the greater your likelihood of survival should you find yourself out of a job or facing a downturn in the economy.  

Active Income v. Passive Income

Active income is basically trading time for dollars.  It’s the money you receive for working. That can mean the money you receive from being employed at a traditional job, or the money you pay yourself from your business.  Active income is great, but it also means if you do nothing, you’re not getting paid.

Passive income is more or less the opposite of active income.  You make an investment in a product or service that generates revenue without you actively participating in an activity.  If you write a book, develop webinar courses, own rental property, or invest in stocks–you can theoretically generate money “while you sleep.”  And who doesn’t want to make money while sleeping?

However you decide to diversify your income, it should make sense for the lifestyle and goals you wish to achieve. Maybe you don’t necessarily want to be a millionaire and would just enjoy the simplicity of financial freedom. Maybe you do want to be a millionaire and want to create generational wealth. Either way – as we said before, start where you are and with what you have. The road to wealth is usually not travelled quickly, but with focus and the right strategy, you can walk it with purpose and determination.  

Share this on...Share on FacebookTweet about this on TwitterShare on LinkedInShare on Google+Email this to someone

Written by Desnoyers CPA

Desnoyers CPA

Known for her friendly, outgoing nature and her rare talent for financial foresight, Lydia Desnoyers has been serving individuals and small businesses in Florida since 2010. After earning her Master’s Degree in Accounting from Nova Southeastern University and her Bachelor’s Degree in Accounting from Florida State University, she became a Certified Public Accountant and a Certified Fraud Examiner.