What You Need To Know About Multiple Income Streams
The first question is what is a multiple income stream? Most of us have one job where we work 8-10 hours a day and that is our only source of income. A part of our salary is usually invested in some sort of retirement plan which eventually will turn into our primary income stream once we retire. In order to retire you have to have enough money in your retirement account to live off of. At least this is how I thought how the world worked for the longest time as my parents both had government jobs and did not do anything productive with their free time. Of course working for the government does provide a bit more of job security than working a regular 9-5 for a company. A multiple income stream is when you work your primary job as your main source of income but have other investments or side hustles that generate you extra income.
The reason you need multiple income streams is based on what-ifs. What if you lose your job, your mom gets sick, you get sick, you can’t work anymore, you have a large unexpected expense? The list just goes on and on. If one of the scenarios happens and you have a multiple income streams going already then you have a lot less to worry about. If you have money coming in from three to nine sources and you lose your primary income stream you already have some prospects that you have been cultivating that you can throw yourself into without having to worry about finding a new job or a new source of primary income.
Having multiple income streams is the first step to financial independence and freedom. One of my friend’s clients is an NFL player making a lot of money but what if he got injured? My friend is working with him to set up another business based on his brand as an NFL player. If he can build a successful brand based off his current fame and one day he can’t play in the NFL anymore he won’t have to worry because he will have his side business to focus on which if successful will be generating a lot of money.
For most of us this is a 9-5 job. What you need to do is to maximize your income from this stream so you have more money to invest in the other streams you want to set up. You also need to pay your current expenses as well. Your current job should be able to accomplish both these tasks. If it can’t do that right now think about getting a new job, asking for a raise, or using budgeting software like Mint to help grow your savings.
If you are like me and want to break off the shackles of your corporate gig then instead of thinking about how much you don’t like your job think about what it can do for you. You have to take the money you earn from your 9-5 to invest in your second income stream, third, fourth, and so on.
What is your new income stream going to accomplish? Will it help you get out of debt, quit your job, save up for something special, or earn your financial freedom? Once you set your goal you will know how much money you are going to need. For example if you are saving up for a new car you could do small side jobs to earn enough money but if you are trying to retire in 5 years you are going to need to take on a bigger endeavor.
Whatever your goal is, it is going to take a certain amount of time and most likely money to achieve. It certainly will not happen overnight. You have to consider the risks before taking on any endeavor. How much time are you willing to put in towards your side hustle? Could you possibly spend that time working extra hours at your job to earn more money? If you are investing in a business (either in the stock market or buying a franchise like a Subway) how much money can you risk? How long can you wait until you see a return? If you are investing in a start-up or even starting a new company the average time to see a return on your investment is 5-7 years.
Now that your goals and risk tolerance is set you can make a list of things that you could potentially dive into. Do you have any skillsets that are in demand? Are you good at selling? What are your hobbies and things that interest you? You can even make a pro and con list of each idea that considers the amount of resources (time and money) you have to invest in order to get a return. Pick your top three ideas and do some research on how to make them work.
After looking at your list and selecting your top idea it’s time to get to work. It is important to only pick one at a time and do everything in your power to get that one working and generating a good income stream. Make sure you are particularly excited about your first choice though because the excitement is what is going to keep you going.
After a few weeks or months of working on starting your second income stream step back and think about how it is going. Are you progressing? Is it something that you can monetize? Do you still like it? If the answer is no to any of these questions it might be time to give up and move onto another idea. Just because you think it will work doesn’t mean other people need or like whatever you are eventually going to sell.
Remember having fun and being excited about your new income stream is the best way to keep it going. The last thing you need is another grind in your life. There are no get rich quick schemes that work unless you are lucky enough to win the lottery. Success is based on hard work and creating a great product.
About Shaun Archer Tatum Shaun works in corporate finance in New York City. He has done financial consulting for several start-ups and has worked at several Fortune 500 companies. He has contributed several finance/investing articles on Seeking Alpha which have been published on Yahoo! Finance.