A single source of income might be enough to provide for your basic needs. However, let’s face it. Having multiple income streams is more likely to make you financially secure than putting all of your eggs in just one basket.
Your chances of becoming rich are at best sketchy. Financial emergencies happen now and then. Hence, if your only hope is that the pay-check will come sooner than it did last month, you might be swimming in murky waters soon.
There is only one way to be rich; make more money or cut back on your expenses. But as you might have discovered, a few bucks stuffed under the pillow won’t be making you rich anytime soon.
This is why you need to create different sources of income.
Multiple income streams will help you create and diversify your wealth portfolio, thus effectively securing your finances. How many of the 8 income streams listed below do you have?
Royalties are one of the best ways to create a passive stream of income. The term refers to income that accrues to you by extending to others the right to use your product, service, or invention.
Many organizations and individuals leverage heavily on Royalties as one of their main streams of income. For example, Microsoft rakes in billions of dollars annually as royalties from companies using its software. J.K Rowling – the author of Harry Potter, was also estimated to have made more than 1 Billion dollars in royalties from her book. How do you tap into this stream of income?
- Create a successful product or invention.
- Patent your work.
- Allow others to use it based on a legal agreement.
One of the typical ways to earn interest is by putting your money into a bank. When you save away a particular amount in the bank, the money does not sit idly in your account. Instead, the bank uses your money for business purposes and rewards you with a percentage of the returns.
The same goes for fixed deposits.
However, to truly exploit the power of interest income, try putting your money in a dedicated saving scheme or an investment.
Buying government bonds is also an excellent way to take advantage of this type of income stream.
Dividends are a type of income paid out to shareholders in a company at the end of each sales quarter. Buying shares in profitable companies is a way to generate a steady flow of income streams that can be accumulated as spare cash.
Cash dividends are not the only kind of dividends. However, you can also be paid dividends in the form of more shares. Dividends have a real potential to explode your income in the long term. For example, a few thousand dollars investment into Amazon in the nineties would be worth millions now.
To invest in dividends paying stocks, all you have to do is research about top profitable companies, examine their stock quotes, and buy. You can do this either directly from the company or by hiring a broker.
4. Rental Income
Rent Income refers to money made by leasing out of your property – buildings or space, to a third party.
In acquiring properties to generate rental income, there are several factors to put into consideration.
The most important, however, is the location. Your real estate location determines whether it will be a money-spinner, an asset, or a liability. You will also have to look into the management of your property.
Unlike the first three sources of income, rental income is not totally passive.
You will need a significant amount of capital to get started and keep your properties in good shape. However, rental income can give you the needed cash flow for other income sources, thereby expanding your income portfolio.
5. Capital gains
You make capital gains when you sell an asset that has increased in value. This asset can be real estate, shares, or investment. You can even acquire a domain name for a few bucks and sell it later at a higher price (Domain flipping).
The key here is, you are selling above the initial cost of your investment, and as such, you make money only if you sell. These types of income streams can be a viable option for you if you have many assets that were acquired at a significantly lower price.
You can also buy assets in anticipation of a rise in their market price. However, you should be aware that capital gains are taxable by law, so be sure to understand the legal framework behind your transactions.
The remaining three streams of income are somewhat similar, and as such, many people get them mixed up.
Profit refers to the amount of money you have left after successfully subtracting costs, expenses, and even taxes from your actual revenue. This income stream is your reward for any entrepreneurial and business activities you carry out.
There are different ways to make a profit-income. For example, you can create and sell an online course.
In this case, your profit income would be how much you make from your online courses’ sales minus the cost of creating the course. Consistency and targeting a niche market is often essential in creating a stream of income that is profit-based.
7. Earned income
Earned income is easy to understand with the background knowledge of profit. Earned income is the total amount you make from any business activity you carry out before removing your profit.
Why are these types of income streams important?
It is the determiner of how much stakeholders or investors in your business make and get. The lesser your earned income, the more potential stakeholders and investors are scared off.
This cripples your ability to make more profit income and will put a tight leash on cash-flow to other income streams.
If you work at a day job, your earned income is the amount you get paid at your workplace.
8. Residual income
This is the best stream to create passive income. Creating a residual income strategy does not require a high capital investment, and it can also make money for you while you sleep. Affiliate programs such as Amazon or ClickBank, YouTube, or any form of digital marketing are easily your best bet for creating residual income.
Creating wealth means you need to have a significantly larger cash inflow to offset your daily expenses. By opening up new income streams, you will raise your financial status and make more money.