The key to building wealth and achieving financial success is creating multiple sources of income. In fact, the average millionaire has several sources of income.
Having multiple income streams can give you peace of mind with your finances because you aren't relying on one single job or investment 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 money flowing in to prevent financial problems.
Wealth-building strategy for multiple sources of income
Part of creating multiple sources of income ideas is making a wealth-building strategy. Your 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 article focuses on number 3. Increasing your income allows you to pay off your debts faster, save more, and also 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 sources 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 different 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. That said, let's go over each of these 3 ways to create streams of income.
1. 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.
Specific examples of active income include your paycheck, commissions, bonuses, and tips. You can increase your earned income through active income streams in the following ways:
Get a better-paying job
In exchange for your time and skill, look for a job that pays you well. You might ask for a pay raise at your current job, or if that isn't an option, look for something in your field that will pay you better. This will help you make more money at your main job.
Get a part-time job
Getting a part-time job in addition to your full-time job is a good idea if you have the time. Some examples of things you might do include working odd jobs, working at a coffee shop, gardening or lawn care, or anything else you can come up with.
Check out these popular work-from-home jobs as a way to add on a part-time or even a new full-time job!
Side hustle or business
Starting a side hustle or full-fledged business is another way to earn more.
Start an Etsy store or YouTube channel. Try managing social media accounts, become a freelancer, try out blogging, etc. You can also follow your passions for your side gig and choose something fun that you enjoy doing, such as crafting, baking, or writing.
Increase your prices
Increasing the prices you charge in exchange for your time and services is a good idea if you are a business owner. Obviously, you'll need to keep your prices competitive, but if there's an opportunity to increase your pay you definitely should.
2. 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. It is commonly associated with real estate or business.
You can create multiple sources of income through passive income streams in the following ways:
Add a passive element to your business
Put in the initial groundwork to add a passive income element to your business.
For instance, an eCourse or automatically delivered service or product. Or you could create apps or a book on Amazon or an ebook. Something that does not require you to be involved after setting it up.
Then you can make money from sales or royalties without much more effort.
Become an affiliate for a product or service that you share with your network or audience base. A third party provides the service delivery, and you simply earn money for your referrals.
Invest in real estate
Investing in rental real estate and charging rents that not only cover your expenses but net you a profit is a great passive income source. There is of course the up-front cost, but the time you need to spend on real estate after you become a landlord is minimal.
Another original way to make money from real estate involves storage space. If you have extra space to rent out or you own an unused storage unit, you might rent that space to someone else and it's a good way to make money without spending a ton of time.
Peer-to-peer lending (P2P)
Peer-to-peer lending (P2P) is where you earn interest on the money you loan to others. It's a passive income source that does require an investment but it can pay off!
There are multiple sources of income ideas when it comes to passive income. The more you have the better! Be sure to also check out our list of awesome passive income books!
(Get more specific details about the difference between active vs passive income streams).
3. 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.
More specific examples of portfolio income include interest, capital gains, and dividend income.
You can increase your investment portfolio income streams by investing in company stocks, bonds, and various types of stock market funds. Do this with the goal of having your investments grow over time and, in turn, earning portfolio income.
When you invest your money, you make interest from the amount you add to the investment. That interest compounds and you earn more and more over time.
You might earn interest from mutual funds, index funds, or stocks, in addition to other sources.
Dividend income is money that a company pays you based on its performance and/or profits. Not all dividends are paid at the same frequency, though. However, it can still be a lucrative way to invest.
Some examples of what to invest in for dividend income include REITs (Real Estate Investment Trusts) and company stocks.
If you sell something you own and you make a profit (you make more money than what you bought it for), that's capital gains. You can acquire capital gains by selling investments, as well as physical assets like a house.
But this can get tricky when you consider capital gains tax, so consider this before you begin the process.
How to get started with setting up your own different sources of income
The more income you have coming from various sources, the more financial stability you have. Here's how to begin building your income sources.
Start with the lowest barrier to entry
When you're first starting out, it's important to increase your income quickly and easily. So start with the sources that have the lowest barrier to entry.
The easiest income streams other than your current full-time job, are things like investing and side hustles.
Investing requires some research but once you begin it takes almost no time at all. In fact, you can even put your investing on auto-pay and never even think about it.
Side hustles are also easy to start most of the time. You can begin with one that requires a minimal investment of time or money, such as dog walking or freelancing. You can even take on a part-time or weekend job easily.
After your new income source has time to make money and is going well, you can add another, and another, and so on.
Be patient and give each stream time to grow
It may take some time to build your income streams. But if you stay consistent with your efforts, you will eventually see a lot of progress.
Some income streams require money to grow, such as investing. Others, like a part-time job or side hustle, take time. Either the time to find a job or to create one.
Just remember that you are taking steps toward financial freedom, and your hard work will pay off.
Research every stream
Before you begin with your multiple sources of income, it pays to do your research. Be sure that you are diversifying your income properly, as well as your time.
For example, if you have a full-time job and a side hustle, then you may want to look into portfolio income streams next, which take more money than time.
Be sure that you understand each income stream before you start it and that you have the time for it. In addition, know what the costs will be and when you can expect to see a profit.
Having knowledge will help you know if you need to be patient as you build an income stream in order to make money, or if you should avoid it entirely.
You can build wealth with multiple sources of income so get started!
Having a combination of these different sources of income in place is a great idea. Not only will you have income from various sources, but you'll also have a nicely diversified portfolio. Which results in building wealth and is a key part of retirement planning as well.
There are multiple sources of income ideas, but it is important that you do your research in advance with every job or investment you pursue.
That 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 freedom and success.