We always hear financial experts advising us to diversify our investments to minimize risk, but how come no one ever talks about diversifying income?
Developing multiple streams of income can help protect you from the threat of job loss. Think about it. If one-hundred percent of your income comes from one source, what happens if that source suddenly dries up?
You might think your job is secure but unemployment rates say otherwise. Being a top-performer won’t protect you from layoffs if your company decides they can save money by outsourcing your job to India. Or what if your company goes out of business? Or a competitor buys them out and takes a hatchet to your department? There are any number of reasons you could find yourself out of work and many of them are completely out of your control.
If that happens, you’ll be glad you were wise enough to diversify your income. Even if it only partially replaces your lost salary, it may be enough to keep food on the table until you’re able to get back on your feet.
Ways to Diversify Income
Get married! Assuming your spouse works you just created a second stream of income. If one of you loses their job at least you’ll have another to fall back on.
Get a part-time job. If your full-time gig goes belly up your part-time earnings can help support you. Plus, if it’s a job you enjoy maybe you can even start working there full-time.
Invest in income generating investments like bonds or dividend-paying stocks.
Freelance. If you have strong writing skills you can offer your services on the internet as a ghostwriter. If you’re a graphic artist, why not try creating website headers or ebook covers? If you have a teaching background, you can offer tutoring services.
Start your own business on the side. Use your skills and knowledge to branch out on your own. You don’t have to quit your day job right away if you don’t want to. Just build your business on the side until it grows to the point where you can do it full-time if that’s what you want.
Start a blog. I’m not going to lie to you. Running a blog takes hard work, but if you enjoy it then it won’t really feel like work. And don’t worry if you’re not a techie. Pretty much anyone can learn how to make a website to help supplement their income.
Last year my earnings from Saving Money Today (and a handful of smaller websites) were equal to about 16 percent of my salary from my day job. This year I hope to double that so my online earnings equal a third of my salary. That kind of income growth is very possible on the internet, which is why I see it as one of the best ways to diversify income.
What about you? Do you have side gigs that help diversify your income? If not, why not?
I love the concept of multiple streams of income – taught by most really wealthy people.
Its pretty easy to start a side business based on a hobby. If you love sports, become a coach. If you love computers, do repairs or help others create web sites. In m case, I love music, so I DJ weddings for a small profit (and just rent the equipment as needed). Getting started is easy – then it can really take off.
That’s exactly the idea. Take something you enjoy and turn it into a viable stream of income.
I never consciously tried to build multiple streams of income, it just happened. I love real estate, so I built a rental portfolio over the past 10 years and am looking for more now. I’m a blogging addict, so I’ve been building a blogging portfolio over the past two years. I love to save money, so I’ve built a cash portfolio that is sitting in 7 year CDs at 4-5% interest. I love the stock markets and investing, so I built a couple stock portfolios to go along with the 401K portfolio over the past 15 years.
So I guess that’s 4 different streams of income + a day job = 5. The job dwarfs the others, but perhaps over the next 5-10 years the others will start dwarfing the job’s income. That would be nice. It’s just fun doing a lot of different things.
That’s awesome! Making money doing the things you love is sweet!
My job’s income still dwarfs my online earnings too, but hopefully that will flip-flop within a few years.
My goal is for my other income to reach 50% of my average day job income in 7 years. If that happens, I’ll happily retire from my day job and do other things.
I agree that multiple streams of income are important. Along with my regular job, I have a side business doing estate sales on the weekends, I have my blog, and I’m very passionate about investing. As Financial Samurai said, my day job is by far the biggest stream of income, but all my other gigs combined accounted for about 20% of my income last year,
Last year my online earnings equaled about 15 percent of my day job salary. This year I’m hoping to more than double that so it equals 1/3 my salary.
Mike, I of course agree with you 200% (yes, I added an extra 100% because you can do that with multiple streams of income :) ). And if you enjoy creating the extra streams of income (if they are hobby not a chore), what better way to make more money than doing something you love.
If you love what you’re doing it won’t seem like work at all, and that will keep you motivated to keep going. If you don’t like what you’re doing it will be awfully easy to quit.
Hopefully this recession has taught people not to rely entirely on their job as it can be gone in an instant. I am late to the multiple streams of income theory, but I now have several little streams of multiple income. Hopefully in the next few years they will add up to at least wages from a part-time job.
If nothing else people should realize that no job is safe and it’s wise to have a backup plan in case of emergency.
HA! I laughed when I saw the first suggestion of getting married as a way to diversify income. But I really liked the start your own business on the side idea. I’ve always seen this as a good way to bring in extra income.
I know a few people who would like to use “getting married” as their sole source of income! ;)
Multiple streams is good. Renting a basement can also be a good one if you are willing to have some tenants around the house. It’s working really well for my brother since the rent is paying practically his mortgage. Don’t confuse renting a basement with the need to rent to buy the place, that’s different.
It’s not the path I took with our first place since we had young kids that we wanted to focus on but it’s what I wish I had done.
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Creating your multiple streams of income is not easy but it is definitely worth it. It’s easier for most to just depend on a job income, but that security is a false security. As we have seen from the last 20 years, a job can be here today and gone tomorrow.
Nothing worth having comes easy. If it didn’t take work everyone would be doing it, but most people are lazy.
Let’s see how I’m doing. I added the rental property and so far it will hit 10% of my base salary. I sell on eBay (average $1K/month) but since BF is in school full-time now we’ve agreed to let him have that income so that doesn’t count anymore. I am averaging 10% returns on Prosper.com no delinquencies but only $500 invested so that doesn’t count for much. Blog income was over $500 last month. Will be less this month but still more than an unemployment check. Hope to slay more debt before devoting more time to income building.
Sounds like you are doing pretty good! You must write a post about your eBay ventures and what you sell and how much time you put in it! $1,000 is a good chunk of change!
I never thought about it that way. Perspective is a beautiful thing.
My records for online income have been less than stellar but so far YTD they are about 20 to 25%!
Multiple streams provide the freedom to say F’ it to one of the streams!
25% is much more than most could ask for. I’d say that is a pretty good percentage, particularly if your income from employment is relatively high as is
I never thought about diversifying income through marriage – that’s a neat way to put it! I’m amazed at several couples I know who met at work, got married, and continue to work together at the same company. I’m impressed they can spend that much time together but also surprised that one spouse doesn’t try to go to a different firm to lower their risk financially of layoffs, and add to some diversity to their marriage. I guess if they both love their jobs it’s probably worth it.
very interesting way of putting it. i’ve always stay invested but never viewed my returns from bonds and dividends as a secondary source of income.
Mike, The post and ensuing comments were both informative and inspiring. Like Sam, I am intrigued by Sandy’s ebay earnings and I have considered prosper, but never followed it through. As a portfolio manager, obviously our investment portfolio is important. I Love the marriage one! We focus on reinvesting (not spending) all of our earnings and additional income above salary and a percent of salary income as well. So in effect, since that money isn’t easily accessible, I don’t even think about it as income, even though it is. I would like to reiterate though, that all of these options take time and dedication, none are “quick bucks.”
I diversified income through marriage, then un-diversified when we had a baby! :)
I’m a huge proponent of the idea of diversifying income by doing side gigs, part time businesses, etc.
My first side income came from my first blog. Then I diversified a bit by starting a couple of other sites, some in the same niche, others in another. I also have a side business doing design work for other bloggers, and business owners. I also make a little on the side selling stuff around the house on ebay, craigslist, etc. All in all, my side income is now almost equal to the income from my day job. Gotta love the security that brings with it!
There are a million and one things that you can do to create income for your family, you just have to be creative!
Creativity helps, but also a willingness to put in the time. All of these things, investing, blog, internet, coaching take time. I bet all these folks commenting above watch very little TV.
Except maybe the folks who married into wealth….
Great post!
I heard about this concept and it just made a light bulb go off, like something clicked we need to stop thinking in terms of job security that the one job will be there forever, because as I learned last year that is not the case so I’m in the process now of trying to create my Multiple Streams of Income anyway that I can. I even went so far of coming with different scenarios of possibilities and actual numbers that may come from it. Seeing the numbers helped me to visualize and see it concretely what doing this idea could generate in $$$’s and numbers. I used to think that I was limited because I don’t have a vehicle or a degree, but there is so many other avenues of generating extra money out there besides what our parents used to tell us I hope to explore those avenues once I do get that one source started so I can then concentrate on generating the other leads of income. Wish me luck because I’m going to need it.
I definitely agree with the power of multiple streams of income. It’s important for businesses, but as you pointed out it still applies to personal income as well. Nothing wrong with building a little security into your life!
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diversification, in anything one does in life, is extremely important in my opinion. the only exception would be your spouse i guess ;)
if i were to summarize mine i’d say at one point i had 5 streams going: career, market investments, real estate, web properties, small business investments. the categories are rather simplified, because for example, i have multiple web properties that contribute to “online income”.
I am a big believer in income diversification as well. I always believe that the more income streams the better.
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I agree with diversification to be able to generate more income. Invest in bonds or dividends, but always remember the risks. The higher the risks, the higher the profit. :)
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I am busy with different income streams.
I already make a small amout from investing in shares.
I am also starting a few websites including webhosting.