Investors are aware that diversifying their holdings lowers risk. Dorie Clark, a marketing consultant, adjunct professor at Duke University’s Fuqua School of Business, and author of “Entrepreneurial You,” “Reinventing You,” and “Stand Out,” says that diversifying your sources of income is equally crucial for reducing career risk.
“It’s a natural tendency to continue doing something more when you succeed at it,” she stated. However, it’s dangerous to put too many metaphorical “eggs” in one basket. You might not have a plan in place to deal with the loss of a significant client or the onset of a recession.”
Clark advises everyone to create various sources of income for themselves, including employees and business owners. Naturally, if you work a full-time job, you won’t have as much free time to explore side projects, and you must take care to ensure that you aren’t moonlighting or stealing clients from your employer.
“You need to find a way to make time consistently to work on something to create a revenue stream outside your day job,” Clark advised anyone considering pursuing a supplementary source of income. Even if having a side gig isn’t for everyone, the speaker noted that “it’s wise to have extra money, but you never know what could happen and you may need to rely on that money.”
Also, unless you’re extremely well-known in your field already, you’re not likely to earn a large income from speaking engagements or similar work. However, building the foundation for future income can be rewarding in the long-term.
How to Create Multiple Streams of Income
Creating new revenue sources demands a different way of thinking, whether you work for an organization or are an entrepreneur. Although having an idea of where you want to go in five or ten years can be useful, Shaw stated that having flexibility is more crucial when aiming for many sources of income.
These six options represent but a handful of concepts for multiple streams of income generation.
1. Consult with Clients
The easiest starting point for additional income is to share your expertise by offering consulting or coaching services, said Clark. “There are no start-up costs to this, because if you have a computer you can set up a website,” she said. “It’s also gratifying to experiment with ways to share what you know.”
For example, Clark said that someone who owns a bed-and-breakfast can train people who would like to open one.
“The skills you share don’t have to be related to your day job,” said Clark, adding that they can be related to a hobby or personal passion. “You can be a project manager by day and teach people about photography techniques on the side.”
Shaw’s business includes multiple streams of income from short-term coaching for entrepreneurs to fix their branding, long-term brand consulting for companies, one-on-one coaching for businesses and small coaching circles. His personal experience and research when building his own brand for his photography and for his coaching business with photographers expanded his expertise in branding. Shaw wanted to share his knowledge with others, which eventually became a consulting business.
2. Author a Book or Start a Blog
Both Shaw and Clark count revenue from book sales among their income streams. Many nonfiction authors prefer to wait until they have comfortably established a writing style, have a social media following and a firm idea of the theme and goals for a book before jumping into that medium. But even if you’re not ready to write a book, Clark suggests writing a blog, especially if you’re an entrepreneur.
“To go back to that bed-and-breakfast example, you can write a blog about your experiences running one and then monetize it with sponsorships or ads or a membership fee,” said Clark. “One couple I know started a recipe blog and charges a monthly membership fee for access.”
While a blog or a video blog may not generate much money at first, Clark said it’s an important way to attract potential consulting clients and to start building your personal brand that can help you lay the foundation for a book deal.
3. Start a Podcast
A podcast can operate like an audio blog with your personal insights on a topic or it can become a platform to interview other experts in your field and make connections. Clark said most podcasts need to have around 10,000 downloads per episode to attract sponsors. As you’re building that audience, a podcast can raise your profile and increase your brand recognition, helping you attract new clients and possible public speaking opportunities.
Shaw’s podcast provides income for him through sponsorships and by capturing the attention of potential clients.
4. Speak Professionally
While public speaking can be very lucrative for well-known individuals, Clark said most people aren’t well-paid at first.
“As you build your brand, public speaking can become more lucrative,” said Clark. “Writing a book and starting a blog or a podcast can help you become well-known in your field and become an attraction for audiences.”
Read Also: A Few Tips About Starting A Home Based Business
Shaw began public speaking when his consulting clients asked him to speak at workshops and conferences. Now his business includes keynote speeches and presentations on branding, marketing and adapting to a changing world. Public speaking may soon be Shaw’s primary source of revenue after nine years of adding extra income streams one or two at a time and building his brand through his coaching, his book and his podcast.
5. Host Live Events
Depending on your field and your ability, said Clark, you can organize professional how-to workshops for six people or run a conference for 300 people.
“You can be paid to be a facilitator for a mastermind group, which is a peer-to-peer mentoring group to bring people together to discuss their ideas and offer each other support,” said Clark.
6. Invest in Real Estate
When you’ve earned enough income to reinvest it, a common source of cash flow to supplement your income now and in retirement is to own one or more rental properties, said Paul DeLauro, manager of wealth planning for City National Bank.
“Instead of selling your starter home, keep it and use it as a rental property,” she said. “Or buy a rental property now if you have the resources to do that.”
Developing multiple revenue streams requires creative thinking about what you can do, followed by practical thinking about turning your skills and your passions into money-making opportunities. If you’re interested in exploring new sources of income, find a mentor who can help you identify opportunities in your field, Helmich said. That person’s success can help guide you toward the same positive outcome.
7. Look into Investments
Investments can be difficult.
The value of investments as a secondary stream of income depends entirely on your circumstances. Specifically, how much money do you need to make and on what timeline? This is what often gets investors into trouble.
If you are thinking for the long term, building and diversifying an investment portfolio may be the single best way to create a secondary stream of income. You can seek out income-oriented assets, such as bonds and stocks known to pay dividends. You can build an active portfolio that steadily grows through capital gains. The options are strong and endless. Carefully managed with a view toward the future, this can be a great way to supplement your financial goals.
And don’t stop at stocks and bonds either. Investing can mean far more than traditional securities. Do you know someone who is looking to launch a business? Ask how much money they need. Have you considered REITs, a lower-stakes way of getting into the real estate market? How about peer-to-peer lending sites, which often post great returns? Investment is a wide field of opportunity.
However, if you need money for day-to-day expenses, investing can become very dangerous. Many investors in that position look for quick profits. They sink their money into penny stocks, cryptocurrency and day trading of derivatives, and most of the time wind up worse off than when they started.
Here’s your rule of thumb: Invest. Do invest. Build a good, diversified portfolio, and use investments as a fantastic stream of income for a timeline measured in years. Do not rely on investments to pay your bills or other short-term obligations though. If you need reliable money quickly, seek out a second job or gig work.
What Are The Different Streams of Income?
For decades, companies have been expanding their sources of revenue. They diversify their company’s operations into other industries in an effort to create new revenue streams. Any business may diversify. For example, a flower shop can start a separate wedding floral company or accept mail orders. Entering a totally new business industry is the most effective kind of diversification. However, that can be costly and requires a lot of work.
The Virgin Group is a great case study of an expanding and diversified business. Virgin was founded by Sir Richard Branson as a record company and has subsequently grown into a variety of industries, including aviation, travel, mobile phones, and much more.
Dealing with property management businesses is one of the best ways for an electrician to acquire additional sources of revenue. Private homeowners may be their primary clientele at the moment, but management firms frequently require more tradesmen. An alternative approach would be to begin providing basic electrical courses and instructing people on how to use electricity safely.
In addition to diversification, there exist alternative means of earning revenue, referred to as the “seven streams of income”:
Earned income
Earned income is your primary income stream through a job. The majority of us start here, and many go no further. For most, earned income is very limiting and has attracted the acronym, Just Over Broke!
In other words, you earn just enough to survive. Of course, some jobs pay exceptionally well, but these are exceptions, not the norm. To go beyond a job and start your own business requires taking risks and moving into profit income.
Profit income
By selling a service or product for more than they cost, you use the basis of profit income. You could open a retail store and sell products, offer professional services and charge for your time, or combine the two.
It is one of the hardest steps to move from earned income to profit income, but it is the dream of many employees. Becoming self-employed or an entrepreneur can be a difficult road, and there are risks.
Interest income
If you or your business has spare cash sitting in the bank account, it is losing money. There are many ways you can put your money to work and earn a passive income stream.
Maybe invest it in a savings scheme and use the power of compound interest to gain a passive income. Buying government bonds is another safe investment that will generate interest.
Dividend income
When you buy shares in a company, you become part-owner of that company and entitled to dividend payments. Well-timed investments in companies can generate excellent passive income streams.
Rental income
Property investment is an excellent way of protecting your money and generating an income from rent. There are two downsides to this income stream. First, it requires a substantial investment initially, unless it is part of an investment scheme. Second, releasing the cash can be time-consuming and costly, so if you may need the money quickly, this is not for you.
Capital gains income
Buying and selling assets can provide you with an income known as capital gains. For example, if you buy stocks and shares worth $100 and then sell them on for $120, the capital gain is $20.
It is essential to consult an accountant first about capital gains, as each country has different rules. Depending on the asset sold, the capital gains tax may wipe out all of your profit.
Royalty income
This is a passive income stream generated by designing, building, or making something unique and charging people and businesses to use it. Musicians are a prime example. In most cases, musicians are signed to a particular label, such as Virgin Records. The record company pays to record the musicians, produce the records, market them, and sell them.
The musicians receive a royalty payment for every album sold and every time it is played to the public. Famous musicians, such as Elton John, make millions from the royalties for playing his music.
Finally
Creating multiple streams of income can be a strong way to improve your personal finances. Whether you’re trying to boost your savings or build toward a goal, this is a move that many of the most financially successful Americans make.
