Quite frankly, relying on one source of income is not wise. The average multi-millionaire has, on average, seven sources of income. Let that sink in for a bit.
Yes, not even multi-millionaires sit on their laurels from one source of income. It’s important to get into the mindset that one source of income just is not enough.
We all know someone who has more than one job probably out of necessity, but the reality is we should all have that extra thing, or as some call it a “side hustle”. Diversifying your sources of income enables you to weather the economic downturns that always occur. There are two types of income, passive and active. For the most part, they are very self-explanatory. But the main one that I would like to focus on is passive income, because most of us fall into the “active income” bracket, where we work a normal eight-hour shift. Passive income is what we all should be looking at. This is income earned from not working like rental income, stocks, bonds, and annuities. Think about it this way, passive income is income you’re making while you sleep and while you’re on vacation. However, passive income doesn’t necessarily mean zero work. It’s just that your income is not directly tied to the hours worked.
Now that you have some knowledge on the two different types of income, here are four reasons why you should have multiple sources:
1. Improve or sustain your current lifestyle
Who doesn’t want to have more money? It’s human nature to want to have more, whether to improve your current lifestyle or to be able to do more things that you love. Being able to travel and enhance your home are all goals we all have or will have one day. Additional income can provide for that. Having additional streams of income will allow you to take risks so your business idea can finally materialize. It gives you room and courage to explore without the worry of money running out.
2. Strive for financial independence and early retirement.
I don’t think most people want to work until they are sixty-five. Most people want to be in a financial situation where they can relax and enjoy their golden years of life either with their grandchildren or traveling. Having multiple sources of income can get you there quicker than you possibly imagine.
3. Pay off debt
Paying off your mortgage, vehicle, or credit cards is a great use for an extra income stream. If you can avoid paying tons of interest on a loan by making extra payments on existing debt, then you could be on your way to financial freedom.
4. Being prepared for uncertainties
This is something that is inevitable in life, so preparing for it is a necessity. I’m talking the unexpected, like losing your job. Let’s face it, no job is ever safe, especially in a tough recession. Having other sources of income can help you deal with a job loss much easier than being caught off guard. Even if your other sources of income can’t cover all your monthly expenses, it can still give you some room and time to figure things out.
Take some time and think about how you can produce more than one stream of income. I don’t expect you to come up with seven right away but begin by finding one. There is no magical limit as to the number of extra income streams you should create, but as long as the time you spend maintaining them doesn’t become too cumbersome and they produce positive cash flow, you’re good. The goal should be, “become so financially secure that you forget that it’s payday”.