After writing at The College Investor for over two years, I’ve started to see a common pattern in my thought process. And events that have happened in my “business” life have really helped me to hone in on my philosophy. I’m calling it income diversity, and I’m writing about it at My Multiple Incomes. Basically, I think that it is important for everyone to maintain diverse streams of income, just like you would do with portfolio allocation. This can allow you to achieve financial freedom by not being dependent on one source of money!
Recent events surrounding California Taxes and Amazon have really put the nail in the coffin for me that this should be my most important financial goal. Just imagine if you lived in California, and you main source of income was Amazon affiliates? It would be the equivalent of being laid off – you would have lost your income without having done anything wrong.
LOSING TWO SOURCES OF INCOME IN ONE YEAR
I also recently shared my story of being Banned From Google AdSense. Man, in less than a year I lost two sources of income for my websites: Google AdSense and Amazon. However, I have continued to be able to have some of my most profitable months online ever because I never rely on one source of income: I use affiliates, direct marketers, and other programs to keep my sites bringing in the cash flow.
How This Applies To Life
Beyond the blogging and business world, I feel that this really applies to life. Everyone has different avenues that generate income for them. For most, it is a salary. For a household, it could include a spouse’s salary as well. Now, those are two income streams. Getting a little more diverse.
If you add in some blogging or freelance work, some investment income, and maybe a rental property, you can really start having a diversified income portfolio. When you are just starting out, you most likely will have your salary being the biggest part of your income. But you can immediately diversify by starting a side business or freelancing. Even generating an extra little bit of income helps.
As you start making more money, you might be able to invest more. And you can use this investment to generate a stream of income via dividends. As you income continues to grow, you can keep reinvesting your income to make more income. Maybe you will buy a rental property, or invest more in your business. I know a lot of bloggers who buy more web properties to earn more income.
Why Income Diversity is a Necessity
In May, I wrote about if Anything Was Really Unexpected? And my consensus, as well as many readers’, was that most things could be planned for. The stock market goes up and down, so you diversify your portfolio to hedge certain risks. You could lose your job at any time, so why don’t more people hedge that risk? If you run a business, a supplier could shut down, your, in Amazon’s case, just prohibit California residents from participating.
While you can’t always predict what will happen, you can mitigate the risk. Income diversification can achieve that mitigation. Just look at what’s happening in the equities markets as it takes a tumble thanks to sluggish economic growth. Everyone can do it, you just have to try.