If you want to build wealth, developing multiple streams of income should be a priority.
In addition to the pay from your full-time job, you could be making extra money from a side hustle, other business ventures, as well as from investments.
We’ll take a look at the different types of income, why it’s essential to be making money in a few different ways, and how to develop multiple streams of income so you can secure your financial future.
The Different Types of Income
While there are many different ways to make money, not all of them require the same effort or time commitment. We can break them down into three distinct types of income:
Active income is earned by working and investing time. The money you make is a direct result of the time and effort you put in. If you stop working, the income will also stop. Of course, your full-time or part-time job falls into this category.
Most side hustles are also examples of active income. The hours may be more flexible than a full-time job, but your ability to earn money through the side hustle still requires you to put in the time and work.
As the name implies, passive income is money you earn without having to work for it. The money will continue to come in, even while you’re not actively working on it. You can think of passive income as “set it and forget it” or automated income.
Although it’s “passive,” that doesn’t mean that no work at all is involved or required. Many passive income streams require work up front, sometimes a significant amount of work. But once that work is done, you can pull back on the time and effort you put in, and the income will continue to flow.
Many types of passive income do require you to put in some time or effort to keep making money. However, that investment of time should be minimal for it to be considered passive income.
The key is, the income is not directly tied to the amount of work or effort you’re putting in. There is some leverage in place that contributes to the ability to generate cash flow.
Passive income is generated from royalties, dividends, and interest. Businesses that pay you a percentage of revenue or profits every month are also considered passive income streams. An online business that you set up a year ago may continue to make money each month with minimal ongoing effort.
Portfolio income is earned as a result of your investments. You may have an investment portfolio that generates cash flow through dividends or interest income thanks to the money you’ve invested in the past.
Your investment portfolio can also include the cash you’ve put away in savings accounts, bonds, or CDs. The money will still be working for you while it’s sitting there earning a little bit of interest every month (although not very much with the current interest rates). You’re not doing anything to earn the money, but it continues to flow for you anyway.
Portfolio income requires zero effort, separating it from passive income streams that may require a small time commitment. That means there is no limit to how much you can grow your portfolio income since it requires no time or effort from you.
Why is it Important to Have Multiple Streams of Income?
We all know that having multiple income streams is good, but let’s look at three specific reasons why this is true. These reasons may be enough to encourage or inspire you to make it a priority to add a new source of income.
Increase Your Income Potential
Generating cash flow in several different ways gives you the potential to increase your overall income. Instead of your full-time job accounting for all of your income, you could see a significant boost by making money in a few other ways. Even if those other sources only account for a small amount of money, it can all add up (especially when you’re investing the extra money, which we’ll cover later).
Let’s look at it this way. If you have a salary of $75,000 at your full-time job and you have a side hustle that generates $1,500 per month (a very realistic number), that would increase your income to $93,000 per year. That’s an increase of 24% just by doing some extra work in your spare time. If you add some portfolio income by investing the extra money you’re making, the numbers get even better.
Security Through Diversification
We’ve seen in the past that anything can happen. No one expected a worldwide pandemic to cause the unemployment rate in the U.S. to skyrocket like it did last year. Thankfully, most people who lost their jobs are back to work now, but not all of them are.
You may associate a promising career and a full-time job with security, but there really is no such thing. There are always forces outside of our control that could wreak havoc on our financial lives at any time.
One of the best ways to improve the security of your income is to make money in a few different ways. If something unexpected happens and you lose your primary source of income, at least you’ll have some money coming in through other methods.
Work On Things You Enjoy
Some people love their full-time jobs, but most people work out of necessity more than passion. We work because we have bills we need to pay and a family to support.
Of course, you have some say over what you do for a living, but most likely, there are other things you’d prefer to do with your time if you had the option.
One of the best things about having a side hustle is the freedom to choose what you pursue. There are plenty of different options, and it’s entirely possible to decide to work on something you like doing. The work is much more enjoyable and a lot less like a job when you’re doing something fun.
Even aside from the extra income, you may find a side hustle very rewarding because you get to do something you enjoy.
How To Develop Multiple Streams Of Income
If you’ve decided that you’re ready to start working on some additional ways to make money, here are the basic steps you can follow.
Step 1: Focus On Your Job First
Your full-time job probably accounts for the vast majority of your income. It’s essential to keep this in mind and continue to prioritize your job. You don’t want your career to suffer because your efforts to make money in other ways are taking away from the focus on your primary responsibilities.
Focusing on your job may mean that the number of hours you’re able to devote to a side hustle is limited, but that’s ok. It may also impact the specific schedule and times that you’re able to work on the side hustle since you can’t be doing two things simultaneously.
You may also be able to increase your overall income by getting a raise at your job. Take a look at what you’re making now, the raises you’ve received in the past, the responsibilities you have, the results you’ve produced, and the amount you could make with a similar job at another company. If you feel like higher pay is justified, consider asking for a raise. See our article Tips for Negotiating a Better Salary for plenty of guidance and advice.
If you cannot increase your income from your current job or employer, you may also want to consider changing jobs. Unfortunately, sometimes the best way to get a raise is to move to a different employer.
A higher-paying job will allow you to make more money without working additional hours. This would increase your overall income and leave time for a side hustle that could raise your income even more.
Step 2: Choose A Side Hustle That Fits With Your Interests And Schedule
Once you’ve maximized what you’re able to make through your full-time job, the next step is to increase your income with a side hustle. There are countless different ways to make money in your spare time. Ideally, you’ll be able to use your existing skills or experience and work on something you enjoy.
Choosing a side hustle that interests you is crucial because after working a full-time job, you’ll quickly hate your side hustle if it’s not fun. By incorporating your interests into a side hustle, you’ll be much more likely to have long-term success with it and less likely to quit and give up.
You’ll also need to consider your schedule and the hours you can devote to a side hustle. Some side hustles are more flexible than others, and regardless of your existing schedule, you’ll have some options.
Step 3: Develop An Investing Plan For The Extra Money You’re Making
Once your side hustle is generating money, you’ll see an increase in your overall income. Since the purpose of this is to grow wealth, it’s essential to use that extra money wisely, which involves investing.
With a solid investing plan, you can add portfolio income that won’t take any time or effort from you.
Some investments produce dividends that can be paid out in cash, increasing your income or cash flow. These investments are ideal if you need to supplement your income or look to live off your investments (retire). However, if the extra income isn’t critical to you right now, it’s best if you opt to reinvest the dividends. Reinvesting will allow your portfolio to grow and compound faster, creating better long-term results.
In just a minute, we’ll take a look at some specific types of investments you might want to consider.
Side Hustles For Extra Income
While there are many ways to make money in your spare time, let’s take a look at a few of our top recommendations.
1. Start A Blog
Blogging can be an excellent side hustle for several reasons, including:
- You can start a blog on the topic of your choice, meaning you can work on something you enjoy.
- Blogging offers a very flexible schedule, and you can work on the blog whenever it fits around your existing commitments.
- The startup costs are extremely low. The only expenses that are absolutely required are a domain name and web hosting. You can get started for less than $100 for the first year.
- The income potential is outstanding. A blog is a legit online business that could turn into a full-time income.
- There’s potential to earn passive income. Building a successful blog requires a lot of work, but there are some passive elements to it once you have an established audience. You can increase your income while cutting back on the hours you work.
It’s important to point out that there are also some downsides to blogging. The most significant drawback is that you’ll need to be willing to put in a lot of work before you see the payoff. Most bloggers don’t make much money in the first 6-12 months. There’s a lot of upfront work, but it can pay off down the road.
If you want to start a blog, see How to Make Money Blogging as a Side Hustle.
2. Work As A Virtual Assistant
Working as a virtual assistant (VA) is one of the best side hustle options right now. Many businesses and entrepreneurs are looking to outsource more work to reduce costs, and there’s high demand for quality VAs.
You could offer many different services as a VA, and chances are, you already have some skills that you could put to good use. Your services might include things like:
- Managing social media profiles for your clients.
- Moderating Facebook Groups or online forums.
- Writing, editing, or proofreading blog posts.
- Creating images and graphics to be used with blog and social media posts.
- Customer service by email, online chat, or phone.
Those are just a few examples, and there are many more possibilities.
Working as a VA also allows you to create your schedule and work hours convenient for you. It’s something you can do part-time for a few hours per week or scale up and turn it into a full-time business.
If you’re interested in starting a profitable business as a VA, Gina Horkey’s Fully-Booked VA is an excellent resource that would be a wise investment for your money.
One great way to make extra money is to freelance. Many people start freelancing part-time by doing something they’re skilled at and enjoy, like writing or graphic design. It can be a fun job that pays well while working on your schedule around other responsibilities.
Chances are, you already have some skills and experience to use as a freelancer.
At first, it might seem impossible to find clients as a beginner freelancer, but it’s not as difficult as you might think. Most freelancers can get their first few clients through their existing personal or professional network. There are also many websites (including Upwork and Fiverr) designed for the sole purpose of connecting freelancers and clients.
Freelancing would be classified as active income and doesn’t have the same potential for passive income that you would get by starting a blog. However, freelancing can be one of the most lucrative side hustles because you have the potential to earn an excellent hourly rate. Many of the most popular services for freelancers, like writing, design, coding, and marketing, are valuable services. Many clients are willing to pay well for a talented freelancer that provides quality work.
Purchasing access to a course could be a very worthwhile investment if you want to start a business as a freelance writer. Earn More Writing, created by six-figure freelance writer Holly Johnson, is one of the top courses available for freelance writers.
4. Start A YouTube Channel
Online video is extremely popular, and the amount of time people spend watching videos on their mobile devices is constantly increasing. Starting a YouTube channel is an excellent side hustle option to take advantage of this trend.
Creating a YouTube channel offers many of the same benefits as starting a blog (the ability to choose a topic you like, unlimited income potential, the possibility for passive income). The difference is, with a YouTube channel, you’ll create video-based content instead of written content.
YouTubers can make money in a few different ways:
- Advertising. YouTube’s Partner Program allows you to make money from the ads display in your videos.
- Sponsorships. You can find sponsors on your own and charge them for a mention in your videos.
- Affiliate Programs. Promote the products and services of other brands within your videos and the text description of your videos.
YouTube for Beginners is a course from Skillshare that was created by an experienced and successful YouTuber. It teaches everything you need to know to start and grow your channel.
5. Write And Sell E-books
Another option is to become a self-published author by writing and selling your own e-books. Becoming an author is easier than ever, thanks to platforms like Amazon’s Kindle Direct Publishing. You can write your e-book and get it in front of Amazon’s massive audience to earn extra money.
As an e-book writer, you can write about whatever topics interest you or whatever you know well. You can also write many different types of e-books, from fiction to fantasy to educational.
While Amazon is a popular platform, you can also sell your e-books on your website or blog. If you have a long-term approach, building your own website is a good idea since you’ll be in complete control, and you won’t need to split the revenue with Amazon. Services like SendOwl and ThriveCart make it very easy to sell your digital products.
Writing and selling e-books also provides the potential for passive income. You could write an e-book that continues to generate revenue for several years. Once you’ve written the book, most of your work is done. Of course, you can scale up by writing multiple books to increase your earning potential.
From First Draft to Bestseller is a detailed and thorough course that teaches how to make money as a self-published author.
Investments For Creating Streams Of Income
So far, we’ve looked at increasing your income through your job or a side hustle. Once you’re making more money, you’ll need to use it wisely to have a long-term impact on your finances.
The single best thing you can do with your extra income is to invest it. Investing allows your money to grow, and many investments have the potential to make money for you passively.
Although there are endless options for investing, here are some of the best choices if you’re looking to create passive portfolio income.
Real estate has proven to be an excellent investment option, and many millionaires and billionaires have made their fortune primarily through real estate.
There are several different ways to invest in real estate, including owning rental properties, flipping houses, REITs, and crowdfunding.
Investing in real estate can be done on a small scale, or you could make it your full-time job by owning and managing several income-generating properties.
If building portfolio income is your goal, be sure to invest in ways that don’t require any work or effort from you. Being a landlord can require a lot of work, so it’s better as a side hustle than a source of portfolio income.
Crowdfunding is an excellent option for anyone who wants to invest in real estate without the headaches that come with managing properties or dealing with tenants. Here are a few of the leading platforms:
Fundrise makes it easy to add real estate to your investment portfolio. You can get started with as little as $500. Investors’ money is pooled together, and Fundrise purchases, improves (in some cases), and manages properties before eventually selling them, hopefully for a nice profit.
Rather than investing in a single property, you’ll be investing in a portfolio of properties.
With an investment of $5,000, you can choose from three different core portfolios: long-term growth, supplemental income, or balanced.
Read our Fundrise review for more details.
Groundfloor is another platform that is ideal for those who are new to real estate investing. You can get started with as little as $10.
Unlike Fundrise, where you’re investing in a portfolio of properties, Groundfloor allows you to choose specific projects that you want to invest in. Most of them are residential house flips. You can earn an average of 10%+, but there is more risk since your investment is in a single project that might not go as planned. However, with the low minimum investment, you can build in your diversification by investing in several different projects rather than just a single one.
Fundrise is ideal if you’re looking for a low-maintenance way to invest in real estate. Groundfloor presents an excellent opportunity as well, but you’ll need to spend some time reviewing and choosing the projects to invest in.
Read our Groundfloor review for more details.
Dividend stocks are a great way to generate passive streams of income. When a company earns a profit, it can either reinvest it into the business, pay dividends to shareholders, or a combination of both. Dividends can be received as cash or used to reinvest in the stock (to receive even more dividends).
Many companies have established long track records of paying out dividends to investors. Investing in these companies is an ideal way to create portfolio income.
You can invest in dividend stocks by using any platform that allows you to trade stocks. Here are a few of our favorites:
Robinhood was the pioneer of the movement for commission-free trades. You can trade stocks, ETFs, options, and cryptocurrency with the Robinhood app.
Those who are new to investing will appreciate the ease of use that Robinhood offers. You’ll need to do some research to find the companies you want to invest in, and this list of dividend stocks is an ideal starting point.
Read our Robinhood review to learn more.
Webull is a Robinhood alternative that also offers free trades. One of the main differences is that Robinhood allows you to purchase fractional shares of a stock if you don’t have enough money to buy a full share. Webull does not currently support fractional shares.
Another key difference is the advanced reporting and data that are available with Webull. Robinhood’s ease of use means that it’s missing out on some of the features that experienced traders may appreciate.
Read our Webull review to learn more.
The term “alternative investments” can include many different types of investments outside of stocks and bonds. Here are a few that you may want to consider (you can see our article on alternative investments for more options):
It may not be the first investment that comes to mind, but farmland has an excellent track record of producing double-digit returns with below-average risk or volatility. FarmTogether is a crowdfunding platform (for accredited investors only) that allows you to invest in specific farms throughout the United States.
Wine is another type of alternative investment that has historically produced solid results with very little correlation to the ups and downs of the stock market. Vinovest makes it possible to invest in an algorithmically selected portfolio of wines for as little as $1,000.
Fine art has the potential to be an excellent investment, but very few people have the money to purchase a piece of blue-chip art that may be worth millions of dollars. Masterworks allows anyone to invest in art for as little as $20.
Build Multiple Streams Of Income To Build Wealth
If you want to build wealth, you need to know how to develop multiple streams of income.
The steps and tips covered in this article will get you started, but you’ll need to have some persistence and patience to have success. The sacrifices you’ll make will be well worth it. Your long-term financial situation will drastically improve thanks to the diversification of your income.
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