There are lots of different ways to look at income, but the long and short of it is that you want to build up multiple income streams. Multiple income streams not only helps you to build wealth but also security in what can be a volatile economy.
Multiple Income Streams are Essential for the Self-Employed
This is especially important when you are working for yourself. While typical 9-5ers might have 2-3 streams of income (their job, a retirement account, and a side hustle), the self-employed often have and need more. They don’t just have one line of work or client that earns their income.
Now whether you want to consider each client, a different income stream is up to you, however, I prefer to view different services as diverse income streams.
For example, while I am a freelance writer, I don’t just write blog posts, I also:
- write sales copy,
- write email broadcasts.
- offer blog coaching
- implementing affiliate marketing and
- running ads.
Bothe affiliate marketing are forms of passive income that once I get them going, need very little maintenance to bring in income.
Beyond selling services and ad space on your website, you might also consider creating and selling a digital product, while you need to market the product it can sell at any time actively and you can sell endless copies. This could be a course, ebook, printables, worksheets, planners, or tutorials, just to name a few.
Active vs. Passive Income
Before moving on, I’m going to take a quick second to explain the difference between active and passive income.
Active income is when you are, trading your time for money. For example, if I don’t have a client and article to write then I’m not getting paid. I get paid for the work I do and how much I earn depends on how much work I do.
Passive income, on the other hand, doesn’t require direct action and isn’t limited based on how much you work. An easy example would be interest earned on an investment or savings account. You didn’t have to do anything, but you still earned money.
Keep in mind that there aren’t many income streams that are truly passive, most require at least a little bit of action up front. But with the best passive income stream the amount of work doesn’t correlate to how much you can earn.
For example, you could create a digital product, and a sales funnel that helps your product to sell on autopilot. It’s now earning money with minimal action required of you. However, you had to put in the work (actively) to create the product and sales funnel.
Other common income streams include real estate investments. This is where you buy a house and then rent it out. You’re not only have an appreciating asset, but rental income to boot. Many will then use their profit to invest in other rental properties to continue to build that source of income.
How Many Income Streams SHOULD You Have?
The more income streams, the better, but not to the point you are running yourself ragged. Millionaires typically have at least seven different income streams.
But no one goes from having one income stream and then the next day having seven. It takes time to build up seven income streams.
You may find that for your goals, four or five income streams is enough, or you may want more than seven. There is no one right answer for how many income streams you should have; the best answer is that you should have more than one. Why?
Because, “52% of Americans could not cover an emergency expense of $400 without selling something or borrowing money. (wallethacks.com)” That’s pretty crazy.
But a digital product selling on auto pilot could potentially cover that, letting you relax a bit.
How to Build Up Multiple Income Streams
So how does one get to for example, seven, income stream? You build up one at a time. You start with one, once it’s well on its way (though you’ll always monitor it), you start on a second. Then you work up to a third income stream and so on.
Why Not Build Multiple Streams All at Once?
There are a few different reasons you would avoid creating multiple income streams at once, first and foremost you can easily spread yourself too thin.
Next thing you know, instead of multiple income streams you are left with half-finished projects left and right that earn nothing. And exhausted from hustling all the time, which could literally lead to death. Yup, a study by the World Health Organization found that long working hours attributed to heart disease and stroke.
Second, building an income stream is a learning experience, by focusing on one at a time you can apply what you learn and have better success and likely faster with the next income stream you build.
The more income streams you have, the more secure your finances are and thus the more secure your lifestyle. However, having multiple income streams doesn’t happen overnight, you have to build them one at a time, even if they will eventually lead to passive income.