The key to building wealth and achieving financial success is creating multiple sources of income. In fact, the average millionaire has seven sources of income! When you have multiple streams of income, you aren't relying on one single source for your money. Basically, you aren't putting all of your eggs in one basket! So, if you were to lose your job or if one source isn't generating enough, you have other income flowing in to prevent financial problems.
Part of creating multiple sources of income is making a wealth-building strategy. This strategy should be based on a combination of four actions taken consistently that I would describe as the "four pillars of wealth building," and they include:
- Reducing your expenses (debt, living expenses, etc.)
- Budgeting properly
- Increasing your income
- Putting your money to work for you the right way
This blog post focuses on number 3. Increasing your income allows you to pay off your debts faster, save more, and invest more. It can greatly accelerate the time it takes for you to accomplish your financial goals. So much more than if you were just solely focused on reducing your expenses.
So let's talk about different multiple streams of income ideas that can increase your income and accelerate your wealth-building journey.
Top 3 ways to create multiple sources of income
There are three ways to earn multiple sources of income, and they are active income, passive income, and portfolio income. Each one takes different amounts of effort. You want to diversify your income streams similar to the way you would your investments. Check out these 3 ways to create streams of income.
1. Increasing your income through active income streams
Active income is defined as the income you receive for performing a service or for trading your time for money. The money you earn from working for an employer or working in a business every day is a form of active income. This is because you are trading your time and your services for the money you earn. Of course, active income is more time-consuming when it comes to creating multiple sources of income.
Examples of active income
Specific examples of active income include your paycheck, commissions, bonuses, and tips. You can increase your income through active income streams in the following ways:
- Getting a better paying job in exchange for your time and skill
- Getting a part-time job in addition to your full-time job
- Starting a side hustle or full-fledged business
- Increasing the prices you charge in exchange for your time and services if you are a business owner
Check out these popular work-from-home jobs as a way to add on a part-time or even new full-time job!
2. Increasing your income through passive income streams
Passive income is defined as income your assets earn for you without exchanging your time or services for it, i.e., your active participation is not required and is commonly associated with real estate or business. For instance, receiving rent from real estate each month where no major effort has taken place for you to earn that money is a type of passive income.
Examples of passive income
More types of passive income include royalties, interest income paid on bank account balances, network marketing, affiliate marketing income, and other types of business income.
You can create multiple sources of income through passive income streams in the following ways:
- Putting in the initial groundwork to add a passive income element to your business. For instance, an eCourse or automatically delivered service or product, e.g., a book on Amazon. Something that does not require you to be involved after setting it up.
- Become an affiliate for a product or service that you share with your network or audience base. Still, a 3rd party provides the service delivery, and you simply earn money for your referrals.
- Investing in rental real estate and charging rents that not only cover your expenses but net you a profit.
- Peer-to-peer lending (P2P) where you earn interest on the money you loan to others.
There are multiple streams of income ideas when it comes to passive income. The more you have the better!
3. Increasing your income through portfolio income streams
Portfolio income is income that you earn from your investments. For instance, the money you earn from selling stocks in your stock portfolio at a profit is considered portfolio income.
Examples of portfolio income
More specific examples of portfolio income include interest, capital gains, dividends, and royalties.
You can increase your income through portfolio income streams by investing in company stocks, bonds, and various types of stock market funds, with the goal of having your investments grow over time and, in turn, earning you portfolio income.
Build wealth with multiple sources of income
Having a combination of these different multiple sources of income in place is a great idea. Not only will you have multiple streams of income you'll also have a nicely diversified portfolio. This results in building wealth and is a key part of retirement planning as well.
There are many multiple streams of income ideas, but it is important that you do your research in advance with every income stream or investment you pursue. This way, you are well aware of what you are getting into, including any associated risks. Therefore, learning more about investing and income streams will set you up for financial success. You can learn more by enrolling in our completely FREE financial courses and worksheets!