Diversifying Your Income Streams
As we all know, having a source of income is necessary for survival. A source of income is essential for paying bills, putting food on the table and keeping a roof over our heads. This source of income is referred to as earned income. Without earned income, most people would not be able to make ends meet or be able to cover their basic living needs.
For most people their earned income is just enough to cover bills. Some individuals are able to cover their bills and maybe a vacation, while some others manage to put away some money towards their retirement, and maybe even indulge in a second vacation. Oftentimes earned income is enough to meet our monthly expense needs and maybe put some money away for a rainy day.
So what happens when it rains too long? What happens when unexpected changes impact that income? What happens when illness strikes, or a pandemic hits out of nowhere? What happens when your company downsizes or your business closes? Unforeseen issues can and do happen. The best way to weather unexpected financial turmoil that can happen is to be well-prepared. The best way to prepare is to diversify your income and to have multiple sources of income.
There are several ways to improve your personal finances and increase your income in addition to the earned income that you make through your job or business. The seven additional income streams that we will briefly discuss below are great ways to diversify and create passive income. It is our hope that after reading each of these you have a better understanding of what additional income streams are out there and which may be of interest to you.
Passive Income - Passive income is when you are generating income even when you are not directly working on anything. An example of this is when people are purchasing your goods or services even when you are not actively selling. A great example of this is people purchasing coursework that you created. This coursework can be purchased over and over again, long after you created it. This is income that can be made even while you are sleeping. Although this is considered passive income, there is work required in the initial creation and setup of this income stream and periodic review, inventory, marketing and bookkeeping are needed to actively generate this source of revenue. It is not 100% passive, but it is a good source of income with minimal ongoing effort.
Profit Income - Profit income is money you make when selling goods or services for more than it costs you. An example of this is opening an online business and selling t-shirts or keychains for more money than you purchased them for. Consulting services or training videos are other examples of ways to create profit income.
Interest Income - This is money you earn from money that you have invested. An example is the interest you receive through the purchase of bonds, CD’s and mutual funds. This is the money that is paid to you for lending your money to a bank or finance agency. This could also be considered another form of passive income. You do not need a large amount of money to get started. You can use any money that you may have sitting in a bank account that you are not using for bill paying. You will make more money if you invest it wisely than if it is just sitting in a bank account.
Rental Income - Rental income is money you receive from property that you own. This income option does have upfront costs and ongoing maintenance costs. However, if you have the means to be able to do this, it is a great source of income and a great way to invest money in something that will provide you a monthly payment and most likely gain value over time.
Dividend Income - Dividend income is money you receive when you buy shares of a company that is turning a profit. When you purchase these shares, you become a part owner in that company and therefore are entitled to dividend payments. Investing in the stock market, if done well, is a good way to create an additional source of passive income.
Capital Gains Income - Capital gains income is money you receive from selling your assets, such as land, property, stocks or other large assets. This income is often taxable so in order to receive income through capital gain, you have to ensure that you are selling your asset at a price that covers all your out of pocket expenses, (i.e. - initial costs, taxes, closing costs if it's a property and any other fees). Once your capital investment and all your costs/fees are covered, what remains is capital gains income.
Royalty Income - Royalty income is generated by allowing someone else to use something you have created or designed. People or companies will pay you to use something that you have patented or copyrighted. Writers, musicians, inventors or franchise owners are often the recipients of royalty income. This again is another form of passive income. Once the initial item is created, you can make ongoing passive income from it.
Diversifying your income should not only be considered for personal financial growth. Business owners should consider doing the same with their businesses. If you have a brick and mortar building, you should consider opening an online store. If you provide services, such as electrical or plumbing services to residential customers, you may consider adding some commercial contracts to your customer pool. You may consider subletting a portion of your space to someone else and create rental income. Creating multiple streams of income within your company creates a bigger safety net should there be a downturn or change in the economic well being of your business, organization, or the economy as a whole. Creating additional lines of income for your businesses or organization takes effort and commitment, but it will give your business or organization increased sustainability, opportunity for growth, not to mention the ripple effect it will have on your bank account and on your lifestyle.
In conclusion, in order to secure your financial well being it is important to diversify your income. Considering the fact that there are only so many hours in the day and part of the day should be spent enjoying the company of family and friends. Diversifying your income and having passive income is essential. Spending some time deciding upon and working on a plan to diversify your income will create for you not only financial security, but can open the door to such things as a dream home, vacations, paid off credit debt or school loan debt, not to mention the peace of mind that extra income brings to the table.
Just think what you may accomplish if you took those two hours at night that you watch TV and use it to build a side business or learn about investing in stocks. Remember the start-up costs or investment doesn’t need to be expensive. It just needs to be well thought-out, well planned, and well executed. You have to work on it regularly until you have it off the ground and periodically thereafter. You should also always have a clear understanding of your financial well-being and what your money is doing for you.
If you, your business and/or organization needs support with planning and organizing your current or new business, please check out HIVE Connex's Services, and schedule a complimentary consultation to determine your business needs. Please contact us via email at HIVEConnex@gmail.com, dial (267) 420-2076 or contact us.
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