This topic hits hard with everything currently going on in the world we live in today. The COVID epidemic has created over 30 million Americans who have now filed for unemployment in the last 6 weeks. Think about that. 30 million people are now trying to file for things like the Paycheck Protection Program to try and replace the sole income source they were reliant on to keep food on the table.
That is an extremely scary statistic. If this doesn’t wake up most of Americans to understand the importance of creating multiple income streams, I don’t know what will. Having many income streams is critical to your long term financial success. This got me thinking, if I were to get displaced from work tomorrow, would I be okay?
What I Mean By Many Income Streams
Before jumping into why multiple income streams are important, let’s first define what an income stream is. Here is the simple way to think about it. Your 9-5 job is one income stream. You trade your time at your employer for either a hourly wage, salary or sales commission. For the majority of Americans this is their sole source of income. A side hustle like cutting peoples hair for money or flipping things on Facebook Marketplace are also considered income streams. Anything you do that produces monthly cash into your pocket is considered an income stream.
Now let’s jump into the three reasons (although there are many more) having multiple income streams is important.
If You Were Fired From Your Job Tomorrow, How Would You Make Ends Meet?
Have you ever thought about this? Most people don’t. The majority of people are reliant on one source of income. This source of income is typically their 9-5 day job. There is nothing wrong with this approach if you are employed and want to remain employed the rest of your life. There is one major problem with having only one source of income. What happens if you were fired from your job tomorrow? Your entire income would be gone in the blink of an eye. You had no backup plans.
Your employer was in 100% control of your financial future and the ability for you to pay your bills. Being reliant on one source or income is a scary proposition to live in these days.
Multiple Income Streams Allow Financial Protection
When you rely on one income stream you aren’t in full control of your life and financial future. The more income streams you create allow for additional diversity in how you fund your lifestyle. I currently have 10 sources of income. The majority of my income comes from my W2 job, but I have been continuing to increase the amount of my income derived from cash producing assets. This has allowed me to continue taking even more risks in my day job and in some of the investments I have made.
Without multiple income streams, I would feel like my only out would be to bust my ass at work and get promoted. Over time, this would provide great wealth, but it would also be something I would be doing to make someone else rich. I don’t know about you, but I want to focus on my financial success right now. The financial success of a big corporation I work for doesn’t really benefit me too much.
Helps You Make More Money
Who doesn’t love making more money! Another huge advantage of multiple income streams is making more money. Having another income stream will never take money out of your pocket; and having more money will open up many options of what you could do with it. You could do things like:
- Pay down high interest debt
- Invest more money weekly into the stock market
- Save for an emergency Fund
- Save for a down payment on a house hack!
All of these things become possible when you can create an additional income source you didn’t previously have. If you have the one income source from your 9-5 job, the only way to make more money is usually through getting a promotion.
I’m all about working hard at your W2 to get promoted, but why not do both?
- The world we live in today has made it extremely clear of the importance of having multiple income streams.
Evaluate how many income streams you currently have. If it is one, that is fine. The goal is to understand if you are reliant on a single source and if you can figure out ways to create more income streams
Having control of your financial destiny with many income streams allows you more financial freedom. Period.
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