We live in a time where having a job no longer guarantees financial stability. Having only one source of income can be risky and many people are only one paycheck away from financial ruin.
Research shows that the average millionaire has seven streams of income. If you have ambitious financial goals, you may not be able to achieve them with only one income and should consider ways to create additional streams.
We are going to cover two different types of streams of income: active and passive income. Active income is money that you work for while passive income requires upfront effort then you can reap the rewards of your labor.
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Passive Income
Investments
Have your money work for you. As Warren Buffet said, “If you don’t learn how to make money in your sleep, you will work until you die.” Having investments is important for the long term but it also gets you out of the mindset that the only way to earn money is by working for a wage. It doesn’t matter if you are a janitor or a corporate executive, if you are working a job for someone else, your income is determined by the amount they are willing to pay you. Earning money consistently through investments is very satisfying. Here are some options that you have for investing your money:
1. Stocks
It is very easy to invest in the stock market today with an index fund or ETF. Investing in a fund gives you the opportunity to invest in a large range of stocks. This gives you diversification with a lower barrier to entry. Also, now that most brokerages have eliminated fees, it is possible to diversify by buying individual stocks.
2. Bonds
Fixed income is a great way to generate a monthly return. Government Treasury bonds are the most secure and thus have the lowest return. Corporate and Municipal bonds are also an option. Depending on your risk tolerance you can get great returns from these as well. Similar to a stock ETF, there are bond ETFs that allow you to diversify and mitigate your risk. Since the upfront cash needed to invest in bonds is high, a good rule of thumb is to stick to bond ETFs unless you have at least $50,000 to invest in bonds. This will allow you to diversify your investments while not overextending yourself in a specific asset class.
3. Real Estate/REITs
Real Estate Investment Trusts (REITs) are an alternative way to investing in the real estate market. This is good for investors that are not interested in getting their hands dirty or dealing with the day to day operations of real estate investing. REITs are required to pay out 90% of their income to unitholders. Most REITs are available on the stock exchange but there are also eREITs like Fundrise. Fundrise is a great platform that allows you to create a portfolio based on your personal goals. REITs and eREITs like Fundrise are great for new investors that want to invest in great opportunities but don’t have certified investor status.
If you have the knowledge, patience, and cash to invest in real estate directly you could consider buying and holding property. You could do short-term rentals like Airbnb, or be a landlord for long-term residential and commercial properties. If you have property managers that handle the day to day operations, this can be a passive investment that brings in income for you every month.
4. Peer to Peer Lending
If you are a certified investor, peer to peer lending is an option for you. You are essentially serving as a bank and lending money for a given rate. While P2P platforms have different screening techniques, but it is important for you to always do your own due diligence. With P2P lending, there is potential risk that someone defaults and cannot pay you back. Different platforms for peer-to-peer lending are: Peerform, Lending Club, and Prosper.
When investing there is always the potential for profit or loss. Never invest more money than you can afford to lose.
Active Income
5. Side Gig
Even if you are living comfortably within your means, it may be worth it to have a side gig of some sort as an extra stream of income. Some examples of side gigs are, DoorDash, Instacart, Uber, or Lyft. You could also participate in market research focus groups or surveys. See what market research firms are in your area and sign up for their email list to be notified of potential opportunities.
Become a virtual assistant on Upwork. There are plenty of businesses looking for flexible assistants. If you have specialized experience in a specific field, you can do contract work as a consultant. This a great way to build your network and develop your skills.
6. Start your own business
Are you a subject matter expert in a certain field? Do you have a passion for something that can create value for others? Be your own boss and start your own business! Wealth is built through ownership. If you don’t find a job that works for you, create your own job!
7. Create Your Own Product
The options below require upfront work with passive results – Create a product, then reap the benefits of your labor.
Shutterstock
Produce high quality photos and sell them on Shutterstock. Each time someone uses one of your photos, Shutterstock will pay you.
Write a book
Are you knowledge about a certain topic? Write a book about it and sell it to the masses. You don’t even have to go through a publisher. It is very easy to self-publish your own book through Amazon KDP.
YouTube
Have a hobby that you are passionate about and want to share it with the world? Create content on YouTube. You can make YouTube a profitable business for yourself by running ads on your videos and working with sponsors.
How many streams of income do you have? What types of streams are your working on building? Let us know in the comments!
