I am a huge fan of having multiple streams of income. In fact, despite being the Diva CEO of Exquisite Air Charter (my main source of income), I remain a notary public who specializes in home loans (mortgage refinances, reverse mortgage, purchases, sales, etc…). I am a certified loan signing agent and that requires me to re-certify annually. Additionally, now that I have completed my MBA, I plan on exploring the opportunity of teaching as an online adjunct professor to undergraduate students. Lastly, I have a few websites that make some extra money.
Why have multiple streams of income
The concept of multiple streams of income has many supportive reasons. Here are just a few:
- Job Security: Technology is eliminating a lot of positions and the stable job theory isn’t as applicable today as it was 20 years ago. With multiple streams of income, job security doesn’t come from a single source. If technology, or the economy, impacts one source then you can rely on your “extra income” until you find a new primary source of income.
- Tax Benefits: Recently, many of my peers are reaching out to me to help them incorporate as they realize they actually need a side gig for the tax benefits. Let me explain why: The new Tax Cuts and Jobs Act of 2017 ultimately benefits those who receive income from self-employment (AKA work from home jobs that are 1099’d and online businesses). If you have self-employment income or set up an LLC or S-Corp, the income you receive from your own business can pass through to you as an individual (as a sole proprietor). This income receives up to a 20% deduction. Don’t take this for granted, however, we all should keep up with changes in tax law so we aren’t negatively affected should more changes occur.
- Pensions & Social Security: Do they still exist?: I cannot think of too many people I know who have jobs with a pension. As a matter of fact, I cannot think of ONE! You need a retirement plan! In fact, you need to understand compound interest and you need to make sure you are putting money away! I highly recommend you read MONEY by Tony Robbins and Rich Dad, Poor Dad by Robert T. Kiyosaki because both are really going to help you tremendously during a time when you need to plan for retirement yourself and not rely on the government and pensions. There is a lot of talk about Social Security being depleted as early as 2035.
- Pay Down Debt: It is so important to pay down your debt so that you can protect yourself from bad economies. More importantly, without a ton of debt, you can invest more and enjoy life more; starting sooner! Don’t put yourself in the position of having to work yourself to death (work til you die)! If you don’t read any other financial book I recommend, please read The Total Money Makeover by Dave Ramsey and consider The Total Money Makeover Workbook to go along with it.
So how do you achieve the goal of creating multiple streams of income? Do you focus on your earned income (AKA your day job)? Does it matter if you are a highly paid professional or you work part-time in fast food?
If you are a highly paid professional then you certainly have the advantage of earning the capital that can be used to accelerate your path to financial freedom but don’t let that fool anyone. Strategy can trump capital all day long! You see, it isn’t uncommon for high earners to have created high bills. It always seems like the more you make the more you create expenses/bills. Balance and strategy are your best friend.
Let’s review various streams of income!
Earned Income: We discussed earned income. This is easiest understood by saying that earned income is the exchange of time for money.
Business Income: This is self-explanatory; you own a business and are paid for the service you provide, the items you make and/or sell.
Interest Income: Savings account, a CD that you put money into, loan money to others (personal or business), etc…
Dividend Income: I love stocks that pay Dividend Income! For me, they are usually stocks that I would have purchased even if they didn’t pay dividends but the dividend is the bonus… I receive a distribution when the company I own stock in earns a profit.
Rental Income: This is one of my biggest goals. I want to earn rental properties. My ultimate goal is a diverse portfolio that includes single-family homes, multi-family homes, and commercial properties.
Capital Gains: This money is realized from the sale of investments. You may sell securities like stocks and the money you sale them for that is in excess of your original investment is capital gains.
Royalties / Licensing: I am not the most creative person in the world so I will likely never have this type of income but you certainly can. Let’s say you write a song or star in a movie. Every time the product is used/viewed/listened to, etc… you could be paid royalties. Similarly, if you create a product, you could enter into a licensing agreement and be paid a fee for every item sold.
I believe the way to build wealth is to start with active income (earned income) and build up to passive income. The two paths to passive income are to save more (live as frugal as possible) and to earn more (side hustles, home businesses, etc…). I will be writing about side hustles very soon. Get our feed or follow @thedivaceo on Instagram and Facebook so you will be the first to know when new blog posts are posted.
Would you like even more information on multiple streams of income? Here is a great book titled, “Multiple Streams of Income.”