Step 32: Multiple income streams

Step 32 of the 100 steps mission to financial independence: Multiple Income Streams
Step 32 of the 100 steps mission: Multiple Income Streams

Up until now we have made great progress in the areas of our savings, debt and reducing our spending in order to increase our cashflow on our way to financial independence by putting extra money towards a secure financial future. We are now going to move away from these areas for a little while and start with a new theme as there is another way to increase your cash flow: by increasing your income.

The vast majority of people see income as the money that they get from their job, and we have already touched upon income increases such as a bonus or pay rise in previous steps as a way to increase your money. Whilst income from a job is normally not only a very decent provider of money as well as a financially secure way to guarantee a steady and satisfactory income, it doesn’t have to be your only way of bringing in money.

There are in fact 7 (!) different sources of income and whilst each source has its own advantages and disadvantages, there is something to say for building so-called multiple income streams over time, which gives not only greater security and protection against financially adverse times but also more satisfaction.

So let’s have a look at those seven different income streams:

  • 1. Earned income from a job – money you earn by working either in your own company or for someone else. This generally involves one getting paid for their time.
  • 2. Profit from selling products – money you make by selling products at a higher price than the cost price.
  • 3. Interest income – Money you get from lending money to others, such as to a bank, the government or through investments with initiatives like crowd funding.
  • 4. Capital gains – Money you get as a result of selling something that you acquired at a much cheaper price than what you are selling it at.
  • 5. Dividend income – Money you get on shares that you own if the company made a profit they can pay out.
  • 6. Royalties – Money you receive on products you have made or from franchises of your brand
  • 7. Rental income – the rent that you collect from renting out assets that you own (usually property).

Most people consider the first type of income – a wage from a job – as the only one they will only ever acquire, whereas a minority of people might aspire to become an entrepreneur one day, thereby working towards a profit income. There are only few people who look beyond these two streams of income, and I too had never even thought about different streams of income I might be able to pursue, until I started my own mission to financial independence.

This doesn’t mean that one needs to pursue all streams of income (apparently even millionaires don’t tend to have an income coming in from all of these seven sources – some argue that what millionaires are good at is to focus on 1 income stream, become exceptional in their area and make loads of money in that way).

What is interesting here however is the realization that money doesn’t have to come from just your job and they offer a nice way to supplement your income (and if you want with time they might even replace it). Some of these streams are easier to achieve, either in time, risk or even startup capital needed. Some are an active income source (where you trade your time for money), others are a passive stream (where you put in hardly any time), and some are in between (where you put in a lot of time at first but hardly any after a while). Some have a limitless income (there is a very high limit to how many of your products you can sell), others a limited income (there is unfortunately an upper limit to the time you have available to trade in for money: There are only so many hours in a week that you can work and even if you decide to work all the hours of the week, i.e. 24 hours 7 days a week – which is obviously not healthy, nor sustainable or desirable – there is still an upper limit of 168 hours).

In the next few steps we are going to look at all of the above possible income streams in detail, to find out more about each stream and to identify whether this might be a possible income for you to consider and work towards to in the future.

For now however, we keep it simple and start with an overview of all that you already receive in each of these areas.

Step 32 – Multiple income streams – in detail:

  • Get your notepad, excel spreadsheet or Evernote document out and list the seven income categories.
  • Next to each category indicate your monthly average income that you get per income:
    • Earned income – wage(s) from your job(s)
    • Profit income – profits you get from selling products. This is only if you get the profits directly, not if your company keeps the profits, even if the company is yours.
    • Interest income – average monthly income on money lent to others (from banks on savings accounts, but also personal loans, from government Treasury Bills or bonds, and startup loans you have given).
    • Dividends – look at investment statements of shares you own.
    • Capital gains – Any profits made from selling something at a higher price than it was purchased at. Examples include stocks sold, your house or car sold etc.
    • Royalties – if you have a franchise, you might be paid by others using your brand’s name, the same is true for music, books or other products that you have made and that are being sold or used by others.
    • Rental income – if you rent out a building or other assets.

In most likelihood there will be quite a few categories here that you score a whopping $0 on… It might even be in 6 out of the 7. Don’t worry if that is the case. This is your journey, you’ll learn, start and improve along the way. Hopefully the next few steps will show you where you might want to (and are able to) expand your income into (which most likely isn’t in all 7 of them anyway!).

I hope this has at least made you aware of the various ways of making money, even if you get income from just one source. The next few steps will guide you towards a potentially new plan when it comes to creating more than one income stream. Stay tuned!

Read more about my 100 steps mission to financial independence or simply decide to take control today and join us on our step-by-step quest on how to make your finances work for you, starting with step 1.

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