Create multiple income streams to diversify your cash flow. It’s a great way to supplement and cushion your job income or to earn a living as an entrepreneur. This guest post is written by Kevin of 20smoney.com.
Financial security is something that most of us pursue, but many are failing to find these days. While financial security is achieved through a combination of sound financial practices such as budgeting, managing debt, investing and other personal finance activities discussed in this blog, there is one area that I’d like to talk to about today that frequently goes unmentioned. Today, I want to talk about how a second income stream can be a major catalyst in achieving financial security.
First, let’s quickly look at the economic environment. For quite sometime, unemployment was stubbornly high, which means that many folks were left without an income (and may very well still be in this situation). When times are uncertain, future income growth may be far from guaranteed as fewer opportunities are available in a shrinking economy. And this is the case when we’re fortunate enough to still be employed. We can weather a bad economy if we’re prepared, so it may be wise to try to be creative and to look elsewhere for ways to grow our income.
How Income Streams Can Give You Some Financial Security
A second income stream can be extremely beneficial for you and your finances. Consider the possibilities of having a second income stream. You can pay off your debt quickly, you can significantly increase your investing and saving, or you can do something that hardly anyone seems to do these days: pay off your mortgage. Financial freedom can be a reality in your life as a result of building a sustainable second income stream.
Now, building another income stream isn’t easy. It means that you have to essentially work outside of work. Your free time is precious and an important way to balance your work schedule, so working during this time on a second job/income stream can be a sacrifice. With some improved time management, however, it’s definitely possible to do this without killing your lifestyle. If we focus on the end goals (some of the financial benefits discussed above), we can find the motivation to be productive outside of work in order to build a second income stream.
Interestingly, many of us have the goal to be self employed or to become entrepreneurs, yet most of us view that as jumping off the cliff — going from employment to being our own boss. While many view this leap as an attractive option down the road, most fail to even consider the idea of building a second income while maintaining regular employment. I’m proposing building a second income stream over time while you’re employed. This significantly reduces the risk of having no income when you first start your own business.
Developing Multiple Streams of Income
When searching for income opportunities in your life, start with an analysis or inventory of your skills, desires and contacts. Let’s walk through each briefly.
#1 Your skill set is important because it will allow you to work on things that you’ll find easier to do –- if your skills or talents aren’t a fit for self employment, consider expanding your skills by picking up new ones.
#2 With regards to desires, building a second income stream in line with your interests or passions can largely dictate your degree of success. The reason I say this is because you need to remember that much of your work in this area will be outside of the regular job that you’re holding. By working in an area of interest (or an area that is already a hobby in your life), it makes it easier for you to spend time working. Pursue a second income stream in conjunction with your current hobbies or interests.
#3 Lastly, your contacts or your network can be a big component in finding ways for you to make money on your own. Consider your current co-workers, your clients, your neighbors, family members and friends. Do any of these folks represent potential customers, partners or someone who might help you launch your own income stream?
My Story: The Story of 20sMoney.com
For me, my background is in technology and programming and my biggest hobby involves dealing with the stock market. I have a good job that I enjoy so I wasn’t necessarily looking for complete self employment; instead, I was looking for a way to develop my hobby into something that could make money. The result is that I started my blog 20smoney.com. Over time, I’ve managed to figure out how to turn this small side project into a lucrative online income stream. Each month, I detail the revenue that I make from this income stream in an effort to encourage others to take action in their own lives.
Moving forward, building income streams might just become a reality for me, as a full-time income replacement. This would be a dream, but it’s not something I stress over. Again, I still hold my regular job, but currently, by bringing in $1,500-$2,000 per month from my website(s), I’m able to significantly improve my personal financial situation while keeping my eye on the possibility of being self employed down the road.
As you examine your own personal finances, it’s important to keep pushing forward in areas such as paying off your debt and sticking to a budget. As you make progress in these areas and you begin to master them, I would encourage you to start considering ways to increase your income in your life. If the opportunity just isn’t there with your job, consider a second income stream. The opportunity is real and the benefits are many. Good luck!
From the Silicon Valley Blogger: If you’re curious about just how successful you can get with an online hobby or business, check out my article on how several people are able to make a lot of money blogging. And if you’re planning anything that entails forking out money (e.g. multi-level marketing or franchising), just make sure you do your due diligence before you get started.
Created August 27, 2010. Updated June 14, 2012. Copyright © 2012 The Digerati Life. All Rights Reserved.
{ 21 comments… read them below or add one }
Thanks for the great pep talk for those mulling over the idea of developing alternative streams of income!
We should ask ourselves: how many people do we know who have more than one source of income? The chances are, we might know an entrepreneur or two. I know a few people who have been pretty resourceful and now enjoy more than one stream of income as a result. But not everyone realizes the power of having multiple income streams. Or perhaps, it’s a matter of knowing how to make it work or trusting that this type of endeavor can work.
The beauty of building income streams can’t be denied though: if you have one job and you lose it, you’re down to zero income coming into your household overnight. This is why losing a job –- no matter how it happens -– is so stressful. But if you have a dozen sources of income and you lose one, you can see that it won’t worry you too much. Sure, you would still look to replace that lost income in some way, but it won’t provide you with an immediate cause to panic.
It can even be something you already do on a weekly or monthly basis but never think to monetize on it. A friend of mine is quite tech savvy and he found that a lot of people were asking him to help with their computer problems and such. Through a referral from a friend, he ended up landing a sizeable computer consulting gig during his free time. Basically, what I’m getting at is the opportunity can be sitting right on your lap.
Congrats, Kevin ! – I’m going to check out your reports next. That’s a nice chunk of change to have on the side. My online work is getting there, too – it pays for a significant portion of my monthly overhead, but it took a good year to really build that up. I agree that it takes alot of work – especially in the beginning when you don’t quite know what you’re doing yet.
I agree totally with this article. Plus, the way things are looking today, you are going to need more income in retirement. I think you need to look to the future as you build a second income stream. For example, a blog may be something you can do in retirement as well. However, you need to start now because these things do not happen overnight.
I have a question for Kevin.
I was looking through your archives and noticed you had a lull in posting for a while (maybe around 2009?). Then you came back and posted 2-3x/day since then. How did you overcome that lull, and how big of a difference did you notice in traffic once you started posting more frequently?
P.S. SVB, can I make a request? Could you add the subscribe to comments plugin for WordPress? I’d understand if you don’t want to, but it’s a nice feature that I appreciate myself. Maybe some other readers would as well. 🙂
@Paul,
Thanks for your suggestion! I’ll certainly add a subscription feature for comments and a few more functions soon. While awaiting Kevin’s response, I am tempted to respond to your questions as well. I don’t know a single blogger who hasn’t had those waves of “burnout” on occasion. I remember that it hits around every 6 months! Seems like life gets in the way sometimes. I’ve done a few things, such as write ahead and queue my posts in advance, accept guest posts, do some outsourcing and so forth. I already run my site(s) as a business, which means that I do have people working for me to do a variety of tasks. Some help me with creative tasks, some help me do marketing and others do administrative tasks. This way, I try not to “skip a beat”.
Also, you’ll notice a difference in traffic if you stop posting. If there’s a lull for an extended period, Google may visit your site less often to address updates. Some people report ~10% spikes in traffic when they publish a new post.
Of course, Kevin may be able to offer his own views on this as well.
@Paul – you’re right i did have a “lull” in there but it was mostly due to the fact that I was pursuing a couple other ventures at that time so I was kind of trying to do two things at once. Once I realized the other wasn’t going to materialized, I re-focused and yes started up the content big time and really started growing again.
Also, I dont’ get nearly as much traffic as say this blog, but I’m pretty good at monetizing and have been able to get some pretty nice deals. I’ve had numerous bloggers tell me they make the same amount of money with much more traffic than I have (SVB is not one of these bloggers 🙂 I don’t know how much this blog generates).
I’ll have another traffic & income report out next week based on August so be sure to check it out.
If you have any questions, shoot me an email anytime!
we must be financially free to enjoy life and not always being chased by the work that piled up …
Thanks to both of you, SVB and Kevin!
@SVB: You’re welcome for the suggestion. It’s just a nice way to keep comments flowing I think. It’s a lot easier to click a link in my email when I see a new comment has been written than to keep coming back to check manually.
I have had those waves of burnout, and I’m just coming out of one right now I think. I had a nice buffer of scheduled posts but now I’m back down to 3 or so. I’m working on fixing that though. I run my site as a business mostly, but it’s not nearly profitable enough yet for hiring other people. I am hoping that traffic and revenues will increase over the next year though. I’m entering my second year, so that’s exciting!
@Kevin: When I read your income reports I noticed you are doing an excellent job monetizing. How were you able to get the ad deals you have? Without those, you wouldn’t be making much based on what I’ve seen in your reports. Thanks for taking the time to respond to my questions!
My own strategy to earn extra income is to buy income producing assets (dividend stocks, oil trusts, MLP). This takes more time to develop into a meaningful stream of income than say online income. But, if you do it correctly, the income comes in with no effort at all. Can’t beat that.
This article is encouraging. I do want a second, third or fourth source of income (not counting my wife’s). I would like to live off of one bread winner and or be in a position to retire early or not fear losing my job. I am working on it and it includes a strategy to reduce costs, control debt, create multiple sources of income, extreme saving, and investing wisely.
Please guide me. I need to recover from my debt.
I always enjoy a well written and informative article as opposed to all the common rubbish that’s out there. A second income is something we’re all striving to build, it seems. Why not start putting some of the ideas to use already?
I like the idea of developing multiple streams of income. Here’s how I’ve done it:
My spouse and I both used to have regular jobs, so we had one income each. It was a pretty good income until my spouse was made redundant –- at which point that income was cut in half. Luckily, we received some good redundancy pay which gave us a cushion for a while, but it was still a shock.
But that event led us to moving and starting our own online business. I do some freelancing and consulting, we have an eBay business and we are also building up our own stable of websites which bring in an income for us. That third income is small at the moment, but we expect it to continue building up over time.
For some people I know, three streams of income are just the tip of the iceberg. In my case, I try to keep tabs with different clients for freelancing jobs, which could help me to minimize the risk of income loss. Having many known clients and paying projects at hand can serve as a cushion. It’s a simple numbers game really –- and that’s where having more than one source of income really makes a difference.
Have you noticed that many folks become entrepreneurs due to necessity? It’s common for someone to start out with a hobby that they turn into a business when things take off. For example, a lot of bloggers start out with hobby sites.
There are a lot of ways to make money within and beyond the internet. There are also additional ways to create streams of income beyond the world of business. You can develop new streams just by opening new investing channels for yourself.
I think it’s a great idea to try to monetize a hobby or something you are already really skilled at doing. That seems way safer and enjoyable than chasing the next shiny thing you hear about on the Internet. The second income stream, no matter how small, really helps to increase your financial security.
I have a small side income right now. I’m working like crazy trying to grow it into a full time income or at least a sizable second income. After I collect some savings I want to jump into full time work at home. I’ve made more progress in the past few months than since I started! In addition to my web projects, I’m also looking into real estate investing.
@Tabby,
Now is an excellent time to start looking into real estate investing or to start sniffing out deals in this area. I am doing the exact same thing — working on building out web properties while diversifying into real estate properties as well. It’s a great combination that keeps you in the driver’s seat of your work life.
I work with several clients. If I lost any one of them, it wouldn’t unduly worry me. And since I constantly look for new business anyway, I know I am being proactive in maintaining and protecting the income I already have. But it’s important to have an emergency fund, just in case you need the cash to tide you over during leaner times.
You may not think that you are in a position to have more than one stream of income but that’s not true. However, you need to be motivated. The truth is, if you have an internet connection, then there are a few strategies you can take to start making some extra cash.
I agree! A lot of people get the motivation to work for themselves or develop streams of income due to necessity — perhaps they were laid off or need more money to supplement their lifestyles. But you certainly don’t need to be in a bind before you can get going on this idea. I would start building an income stream before I actually have to. Be aware though, that there may be some risk involved when trying a new idea out. But no pain, no gain, right?
Don’t automatically assume you have to earn extra money this way though. Explore all the possibilities, and figure out what your best move is from there. In a sense, having several streams of income coming into your household is an insurance policy. It protects you against 100% income loss.
So think about how this method of earning money could affect your life for the better. Many people have succeeded in this endeavor. Anyone can, if they work at it.
I moved to a lake in the country and work from home. Having a diversified income has made this possible for me. I wrote an ebook about my personal experience which is on my website passiveincome247.com. My sources of income are rental properties which someone else manages, a software company I run from home, teach part time for fun at a local college, invest for dividends, and joining every class action law suit I can find (just kidding about the last one). Basically, besides winning the lottery, the only way to break free of the cubicle is to start where you are and begin to replace your income with diverse sources while also cutting back your current expenses. It took me years, and I fight to stay here every day, but the destination is truly worth the effort of beginning the trip. I hope you enjoy my book.