The Rich Don’t Have One Income Stream
The rich don’t have one income stream, they have several. The road to wealth is with multiple income streams. Think about it this way; if you work one job and are suddenly let go, you’ve lost your only source of income. If you lose your job, but have two different side hustles, you have some money to keep you afloat as you search for another one.
More income streams = more security. However, there are only so many hours in a day, and you don’t want to be working for all of them. Enter passive income. See there are actually two different types of income, passive and active.
Passive Income & Active Income
Passive income and active income are the two types of income streams, and both are necessary to build wealth.
Active income is where you are essentially trading your time for money.
Passive income doesn’t necessarily relate to the number of hours you work, it is often the result of doing work once and then continuing to receive income from it long term. However, there are lots of different types of passive income.
As active income is trading time for money, your 9-5 would be an example of active income, if you stop showing up to work (and don’t have Paid Time Off), you don’t get paid. You might also have a side hustle resulting in active income. For example, driving for Lyft, working as a freelance writer, or getting a more typical second job, like bartending are all producing active income streams.
Lyft is a great active income for those looking to make extra cash because you have control over your schedule and can choose when you work. Keep in mind, you have to drive your own car. While this puts wear and tear on your car, you can use your mileage as a tax deduction. Personally, I use QuickBooks Self Employed (<-- use my link to get 50% off) to track my mileage and deductions when I’m driving for Lyft.
If you’ve read any of my income reports then you know that I make a good chunk of my income from freelance writing. One of the great things about freelance writing is that thanks to the internet you can do it from anywhere. Meaning anyone who writes well can pursue this kind of work.
The other thing I love about freelance writing is that so long as you get the work done by deadline it does not matter when you actually do the work. Unlike working as a VA that often requires working during the day and for specified hours. While you do have to answer to client, you have a great amount of control over the work you do.
A Second Job
This could be bartending, or working retail, or some other typical job. It typically involves someone else deciding on when you are scheduled to work. You may or may not like this better if you have trouble motivating yourself to work a gig like driving for Lyft..
Passive income is often marketed as making money while you sleep. While it certainly can be that it usually requires some active work upfront that hopefully results in on going dividends. You likely are earning some passive income right now, even if you don’t it.
Pat Flynn of Smart Passive Income does a fantastic job explaining this and different types of passive income you can build on his podcast, Smart Passive Income. Some examples of passive income could be interest earned on your savings account, sales from digital product, or if you have a blog, income from ads revenue.
Selling Digital Products
While selling digital products requires active work upfront, once it’s created you can continue to make money from it for however long you market it to sell. Marketing can be somewhat automated allowing you to make money in your sleep. Additionally, because it is digital there is no limit on the number of sales you could make.
If you own some rental properties you can hire a third party to managed the property for a cut of the profits, leading to passive income for you. There are many blog posts and websites that talk about the benefits of rental properties as passive income. Paula from Afford Anything makes her living with real estate investing.
One of the best ways to earn passive income is through investment gains. This is most commonly the money your money earns being invested in the stock market. It comes from interest payments, dividends, and sold assets.
Interest on Savings Accounts
Similar to investment gains except you know the interest rate and what your money will be earning when you keep it in a savings account. Most decent savings accounts will have an interest rate of around 1%, not a ton but better than nothing.
Ads on a Blog
If you have a blog, adding ads can be a really easy way to earn some passive income. Though how much you earn can vary greatly. I spent about 15 minutes in July setting up ads on both of my sites. In August, I made $30 in income from ads, not a lot but again every bit counts.
You Can’t Do It All
As great as all of these income streams sound, you can’t do it all at once. When you are first starting out trying to build up extra income streams, it’s easy to want to do everything. Not only will this make you burnout, but it can also cause unwanted stress and time constraints.
This means it is best to focus on one income stream at a time. Once you’ve got one going pretty well so that it’s on autopilot, then start building another one. None of it will keep working if you are completely burned out and unable to do any work. One step at a time, one income stream at a time will lead you to wealth.
It Gets Easier
Instead of starting a ton of income streams at once, start with just one. Once you get a nice flow and control over that income, add on another. By adding extra income streams this way, you are slowly introducing them to your routine, and setting a pace for yourself.
For example, when I first started with extra income streams, I started with freelance writing. I then decided to add another income stream. So I started driving and when life gets too busy, I take breaks from driving for Lyft. I also have been steadily working to increase from my blog.
If you look at my last income report, you’ll see that I earned income 6 different ways and this doesn’t even include interest from my savings account or gains on my investment. However, I don’t necessarily earn income from 6 different streams each month, it can vary. I know my limits, and make the necessary changes when needed.
Income Always Starts As Active
As great as passive income sounds, you do have to put in some work at the beginning. If you want to sell digital products, you still have to set up a shop, create the products, and list them for sale. Once that’s going, it can turn into passive income, but it still takes time up front.
Same thing with rental properties. Even with a 3rd party management company, you still have to go through the process of buying the home, getting it ready to rent, and setting up the management company's standards.
So if you think that one day after you start working on another income stream it will be passive think again. You will need to put in the work now to reap the benefits laters.
Before starting down the path of your next income stream, make sure you have enough time to turn your active income into passive income. It’s great once the ball is rolling, but you have to get it to roll first.
Wrapping it Up with a Bow on Top
With so many options for extra income, it can be tempting to want to dive right into all of them. But starting with just one extra income stream to start will be ensure you don’t burnout and allow you to build.
My advice? Start with an income stream that you are the most comfortable with. If you love writing, try picking up some freelance writing gits first. If you don’t mind driving people around or customer service, get a second job or apply to drive for Lyft. The opportunities are endless, but all you need is one to start.