This week’s money myth focuses around a common myth around making money.
I used to believe having one source of income that continued to grow was the most important thing. For that reason, I focused on crushing it at work and increasing my W2 income. What I completely missed to realize was the fact that exchanging my time for money was the main problem.
Having a strong W2 is great while you are early in your investing career, but having many income streams is even more important. Look at some of the most well followed financially independent influencers are will see more than one source of income.
If you have all your eggs in one basket, what happens when that basket is gone? What happens during a recession or if your company is trying to cut costs?
I wish I would have read about creating more than one income stream earlier on in life. Now that I know what I know, my main focus is around creating more than one income stream that produces monthly cash flow.
What Is A Horizontal Income Stream?
A horizontal income stream is something that produces cash flow for you. Your W2 job is a horizontal income stream. If you invest in index funds, the dividends they produce is a horizontal income stream. Anything putting money into your pocket on a monthly basis is a horizontal income stream. To be clear though, this does not mean diversification. By all means, you can diversify your horizontal income streams, but that is not the point of this post.
Why Are Horizontal Income Streams Important?
Horizontal income streams are important because they focus on one thing: make sure your money is working for you as hard as you work for it. That is right, ever took a second to think about this?
Is your money working as hard for you as you are working for it? For most, I would argue probably not. I know I still have some money currently sitting in cash that I would love to have working harder for me. I do have it in a high yield savings account, but that is only earning me 2% interest.
There is nothing wrong with having one major income stream. If you like index funds, and that is all you know, by all means knock yourself out. From my perspective, I want to create more than one income stream.
My Current Horizontal Income Streams
I am continuing to work harder to create more income streams. At this point, I would say that I have 7 different income streams:
- W2 – my current job where I make the majority of my monthly income
- Full Home Airbnb – First full investment property that is not a house hack! I am excited to continue to see how this home performs as I get a few months further in and come out of the slow months of the year.
- House Hacking Room #1 – first bedroom in my current house that I rent to a long term tenant
- House Hacking Room #2 – second bedroom in my current house
- House Hacking Room #3 – third bedroom I created in my home that I rent out. Checkout this post to see more details on how I identified this opportunity!
- Dividends from my index funds and companies I invest in. I am currently invested in VTSAX, VTI, Starbucks, and Walmart
- High Yield Savings Account – as mentioned before, I earn 2% in a High Yield Savings Account with Wealthfront.
What Are My End Goals
My end goal will be to continue finding opportunities to add more horizontal income streams. The more the merrier if they are cash flow positive.
I will continue down the path of purchasing real estate, house hacking, and indexing. There are plenty of opportunities out there even with the current state of the market. I pulled most of my money out of the market due to the volatility. I am continuing to invest $1,200 every week into the market in low cost index funds. This will help my Dollar Cost Average back into the market while I have liquid capital for some real estate investments.
- Take a step back and determine how many horizontal income streams you currently have.
- One income source is not the best idea. Try to always have more than one income stream where money can flow to you.
- Buy assets, things putting money into your pocket, not liabilities.