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.
Updated 2/16/2015
Regards,
Rob
Great post Robert! I prefer direct advertising. That way us bloggers are less prone to being spanked in the butt hard by Google Adsense or some other ad network.
Very true, but direct advertising can be volatile as well!
You’re absolutely right, Rob! I have learned this principle as well. Having a job used to be considered safe and secure, but now many people are learning how risky it really is! If, for some reason, you are laid off or fired from your job (often by no fault of your own), you immediately lose all of your income. If you have no other source, then you’ll need to survive on your reserves (hopefully you have some). But, if you have income from 4 other sources, ou will continue to earn a portion of your income and could easily survive without much trouble. Great post!
Good reminder Robert! I would also like to add, it is far easier to create revenue streams while you still are employed than when looking for a job.
Some of the side hustles I seeded back in early 2000s are still bringing in revenue!
I’m a big believer in income diversification myself. The more streams of income you have the more protection you have in case one of them dries up.
I’ve been diversifying my income for years now, partly out of necessity. After college, I realized I the corporate world wasn’t for me. So I worked multiple jobs to pay the bills. Eventually, I found one “day” job I really liked, but kept up some of the side jobs to cushion the down times. I’d love to add rental property to the mix of income, but I think I’m a few years from that still. Excellent reminder!
Very nice article. Losing any income is bad, but it sure does cushion the fall if you have other sources of income coming in at the same time.
great post Robert followed up by an excellent comment by MC. i am with you guys completely – lot less pressure when diversifying while successfully employed. and yes, diversification is key with most things in life, especially when dealing with mediums that are so volatile such as the internet.
question: have you tried appealing your adsense status? have you tried establishing a new account under your EIN?
I did appeal – no avail. I did open a totally separate account under my business, which I formed essentially for that reason, and it got banned within weeks. I did, however, get a direct contact at Google advertising two weeks ago, and she is personally looking into the reason, and has been helpful so far. While I don’t hold my breath about getting it reinstated, at least I have a real person helping at Google.
that is huge – persistence pays off. this is a topic of personal interest and i have been researching this for some time now. i have written about it extensively as well on my blog. if you don’t mind i’d like to hear from you regarding any resolution/final disposition. even if they don’t reinstate you, i’d like to know the reason they provided you. i hope to gather enough data points to come up with a meaningful chart/graph of some sorts as too many people are simply blind sided by what G does at times. all the best – i’ll await
I just want some reasoning as well – even if they don’t reinstate me. I’ve never violated their TOS, and it bothers me that they end it by saving “your site could be a problem for our advertisers?” Could be? What does that mean?
Given your blog’s popularity and followership, I’d consider vocalizing it professionally. Google TOS police is out there scouring the web, and let’s hope it catches enough attention to compel someone to take reasonable action. Curious how the current interaction with the live person turns out. Please keep me posted.
I hope that someday soon I can write a post about how I got my AdSense back…cross your fingers!
I wish you luck!
I think for those of us who struggled through the recession, no truer words were ever said. My grandmother lived through the Great Depression and she is still tight with her money and reluctant to spend. Instead of doing that I am looking to diversify income and be able to ‘set and forget’ various income streams so that I can continue building a cash flow system that is less and less dependent on my on-going effort. Great post!
Rob, very true about the need for diversification. I’ve found that not only should you setup multiple types of revenue source on your blog (affiliates, CPC, etc), you should also diversify within each of those in case something happens. For example, if you are a lending affiliate, several different lenders just in case one goes away you still have a fallback.
I also wholehearted agree with your strategy of mutliple sources of income for your life as well (salary, blog, property, etc)…..you never know what will happen to one and it’s great to have backup plans.
I was half way through a post for Yakezie in this very same topic as someone who lost adsense (and eventually got back, but that taught me how foolish it was to rely on adsense) and Amazon (that was close to 10% of my revenue) in the last 6 months. I have really looked into every single option to diversify. Even now it is 2 major source and 6-7 minor source, eventually have to somehow space them all out to be more or less equal.
Great reminder Robert. We wish we could add real estate income as well, but we are light years away from that.
Suba–I was so sad that you took that double hit! I guess you and Robert are in the same boat.
I have been laid off twice in my short career, and my husband has been laid off once (and once we wre laid off at the same time together while dating!). I have come to completely not trust my employer for my source of income. In fact, my husband thinks things are looking shady again now that his company was just sold (d’oh!). I am glad to have this other income stream (blogging/freelance writing). Also, being married and having two incomes is a good diversification as well.
It is a good way to diversify – as long as you live below your means. My wife is in the same situation with a pending reorganization at her company.
Wow! That’s a lot of movement! I would definitely not trust employers any more if I went through those experiences. I’d work like he’ll to be independent!
Multiple streams of income is the way to go. We can’t depend on one source of income anymore. Those days are long gone. No jobs are 100% secure anymore.
Nothing is permanent. Employment, customers, you name it.
Rather, change is permanent. Some change happens much slower than others, but it does happen sooner or later, think about it. Best to be prepared and accept that reality that things can and do happen that might actually be out of our direct control. While I personally am someone who values consistency and predictability in certain areas, I’ve come to realize that it’s good to work on accepting change and even embracing it.
Diversification makes sense, as we wouldn’t invest everything we owned in one company, right? Then why invest all of our income stream exposure to one source.
You don’t have to lose income to realize the more different sources of income the better. It is a little like an asset allocation for investments. A good diverse allocation is key to weathering a volatile market and a good long term strategy.
I definitely agree with the principal of having multiple sources of income … there’s too much risk involved in putting your eggs in one basket, and that’s true for both investments and income.
I am impressed with your dividend numbers (saw it on your site)! Do you have any links explaining your investments?
Great post. I have recently joined the diversified income train and I must say I love it. Not only is it a safety net but it also helps in keeping your brain stimulated.
There is no argument against divursifying blog income sources. But, I have question on life’s income. Diversifying always doesn’t help, what is more important is doing the things you like. If you like your job very much, no harm in sticking to it and continue to enhance your skills, it won’t hurt as you like it any way. even if you loose your job, you can get another one. If you don’t loose your job, you can get appraisals and promoted if you continue to do well.
So in essence, what is more important in life is, work hard on the things you like and the things which will make you more successful, which not necessarily always means diversifying income
You hopefully can get another one, and it may not earn the same as the previous one. Plus, you have to deal with the interim. Diversification can help with that, as it make you less reliant on once source of income. Furthermore, I think more people would be happier at their jobs if they didn’t depend on the income as much.
Rob, Superb post which applies to those of all ages and income levels. Very well put. I’d l ike to hone in on the importance of being flexible and able to change course when necessary.
Great article Rob. I think diversification is the spice of life :) As the cliche saying goes, “You shouldn’t put all of your eggs in one basket.”
I was bummed when I saw the news about Amazon too. It’s so frustrating to lose income streams to no fault of your own. Diversifying helps take some of the pressure off when the unexpected happens. We’ve all had periods of unanticipated financial surprises and having an active plan B, plan C, and plan D really help pull us through. -Sydney
Rob,
This is such a good reminder for all of us – thanks for writing such a great article! Here in Colorado we had the same rug pulled from under us with Amazon about a year and a half ago. Sorry it happened to you Californians, too. Diversifying income and reducing debt and expenses will help us all sleep better at night, and I appreciate your suggestions.
Diversification is key to sleeping well at night. It takes time to build those income streams but in the end it is all worth it. My next step should be in real estate rentals but that will take some time before a down payment is ready….
An excellent philosophy. Speaking as someone who has lost his primary source of income multiply times in the last few years, I agree completely that building multiple income streams is all but a necessity in our modern world. Unless you are one of those rarefied few who have absolute job and income security (and honestly, only tenured professors leap out as being able to say that), the possibility that you could lose your job or have a business venture go under is quite high. Protecting yourself by ensuring that you have multiple income streams definitely sounds like the smart thing to do.
I couldn’t agree more. I’ve begun tracking my various incomes as a percentage of my spending. My goal is to have at least at least 5 sources of income that all are more than 10% of my income. That way, if I’m laid off, I’m OK. If my dividends stall, I’m OK. If my online business gets hacked, I’m OK. If all 3 happen in the same month, only then would I need to start liquidating stocks.
Definitely agree with income diversification. I don’t want to depend solely on my job for income… that would be putting all of my eggs in one basket. They are still mostly in one basket, but I’m working to move away from that. :)
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