Have you ever wondered how the rich keep getting richer? Or how someone was able to pay off their debt so fast or break out of the tedious cycle of the rat race?
Establishing multiple streams of income, also known as diversified income, is often one of the key causes of someone’s financial success. While living below your means and cutting your expenses will definitely help you free up more of your money, increasing your income and diversifying it will help you reach your goals and obtain financial freedom much quicker.
The Importance of Diversifying Your Income
The importance of diversifying your income can be grasped when you start to break out of society’s framework that claims you only need one job to become and remain financially stable. I’ve heard from so many people that working two jobs makes no sense and it would just burn a person out. In their minds, it’s best to just establish one very cushy full-time job with good benefits and a stable income each month. What more could an average person want?
At first, I used to think the same thing. I worked two part-time jobs for almost a year during college and it was anything but fun. Luckily both jobs were right across the street from each other but I remember having to get up early to be at one job at about 10a.m., and then run over to the other job to work the night shift until 10:30p.m. Those 12 hour shifts were not ideal and I did get burnt out pretty quick. On top of that, the money I was making was nowhere near amazing. But yet and still, if one job failed me and didn’t schedule me enough hours I always had the other job to depend on for money.
Eventually I let one of the jobs go and I choose to pursue my passion to write by picking up a freelance few gigs that allowed me to work from home. During my senior year of college, I was able to pay bills and fund leisure activities from my freelance income. Now that I have picked back up with freelancing, I’m able to cover about half of my monthly bare bones expenses from freelance income alone. Since I’m doing something I love, it doesn’t always feel like ‘work’ or a ‘job’ but it truly is.
A few friends still don’t understand why I freelance in addition to my day job but the goal is to diversify my income. Even though I have a very stable full-time job, I know that it could easily be gone in a heartbeat. If I lost my job or got let go, it makes me feel more stable knowing that I have freelance income to fall back on along with an emergency fund to get me through while searching for employment.
Diversifying your income makes it stronger, more dependable and easier to withstand change or hardships. If you want to diversify your income, there’s a correct way to go about it and there’s definitely a wrong way. Here are 4 tips to help you create a diversified income.
1. Choose Your Income Streams and Work Conditions
There are so many ways to make money which makes it odd that most people only use and rely on a single income source. To start diversifying your income you have to set goals for how much money you’d like to make and what jobs you’d like to do. You can always try the two jobs route that I took, but I wouldn’t recommend it unless you are truly passionate about both jobs and not just in it for the money. The best way to build a stable long-term income is by doing something that you genuinely like and can tolerate.
You’ll also want to consider your working conditions including whether you’d like to work at home, outdoors, at a facility etc.Diversifying your income is the perfect way to pursue several interests that you may have.
Do you like to fix electronics, make crafts, dance, exercise, cook, babysit, write, design graphics, tutor kids or coach others? There are plenty of hobbies and areas of expertise that you can transform into a profitable side hustle to generate extra income aside from your primary job.
2. Diversify Your Income Streams
Once you choose your additional stream of income or side hustle, you can certainly diversify your service offerings to create an income that’s even more flexible. For example, if you decided to offer babysitting services for families in your neighborhood, you could also offer tutoring services or pick up a few longer shifts as a nanny as well.
As a freelance writer, I see tons of other writers diversify their freelance income by offering additional services like editing, content management, social media management, coaching and virtual assistant work. The possibilities are seemingly endless when it comes to expanding your service offerings so that you are not just getting paid by one source.
3. Start an Official Business
If your side hustle really takes off, you may want to start a small business. It may sound intimidating at first, but this helpful guide can help you get started. If you’ve been successfully side hustling and growing your income month after month, you are practically running a business so why not make it official?
Business owners hardly ever receive their income from a single source. Whether it’s from sales, advertising, partnerships or sponsors the income is usually always diversified and that makes the business more stable.
4. Don’t Forget About Passive Income
Passive income is my favorite type of income because after you’ve established a source of income you don’t have to do much more to continue making money. Passive income can be generated while you’re on vacation, working another job, or even sleeping. Not all passive income is created equal though and some income streams take longer to get off the ground than others.
Starting a blog takes plenty of time and effort before you can start to see passive income from it when you start utilizing ads and affiliate marketing. Investing in your very own real estate property, writing a book or creating long lasting products that you can sell for years to come are other ways to earn passive income. While investing in the market to generate passive income is definitely worth it, it will take several years.
Have you ever tried to establish various different sources of income? If not, which one of these methods would you prefer to start diversifying your income with?