Everyone dreams of having multiple income streams but most people fail to act on them.
Having an assortment of income streams can help you to reach financial freedom and live a more flexible life.
In this post, I'll explore the 7 streams of income, how to start multiple income streams, why you should strive to have more than one source of income, how much money each income stream can make you, and much more. Let's get started!
What is a Stream of Income?
A stream of income can be anything you use to make money. It could be your day job, a side hustle, a small business, investments, or virtually anything else you use to earn cash.
But did you know there are 7 streams of income that some of the richest people in the world use to make money? That's right! Below I'll explore some of the most common methods people use to earn money.
What are the 7 Streams of Income?
Below are the 7 streams of income you can use to build wealth. It’s well known that most millionaires have money coming from many sources – so you should too.
Earned income is the most common type of income that most people utilize. This income is made primary from your employment or job.
Most people will rely on this income stream to keep their finances afloat. While there's no doubt this can be an extremely powerful income stream – it's wise to grow other income streams simultaneously.
Your active income has an upper limit and the more money you make the more difficult it will be to reach that limit. Unless you are capable of becoming a CEO for a large corporation, there's a good chance your income will remain below 7 figures for the majority of your career.
By using a passive income stream to supplement your active income you can reach over 7 figures in income with the right strategy and some discipline.
Rental income is an income stream that is built by renting things out. It could be something as large as an entire home, or something smaller like a lawn mower.
Like some other streams of income, rental income is a form of passive income that can help you to earn income without having to actively work for it.
With rental income each month you will earn money from payments made by renters to use your property or equipment.
Many investors can make a great deal from rental income and real estate investments. If you want to make rental income check out these things to rent to earn money.
Dividend income is generated through dividend paying stocks. This is one of the most passive streams of income because you will not have to do any work to make money.
By investing in dividend stocks you can expect to earn a dividend payment on a regular basis that can either be reinvested back into stocks or you can spend it how you'd like. Your dividends will be deposited directly into your bank account making it extremely easy to manage.
There are many diversified funds of dividend paying stocks that can help you to keep your assets diversified and optimized for returns. Wealth generation with dividend income is extremely simple.
To get started, register with the Stash app below. As a bonus, you'll get $5 completely free to invest in your favorite dividend paying stocks.
If you want to make more money – dedicating some time and energy to royalty income can be an excellent idea.
Also known as licensing income, royalty income can best be described as money that is generated from the use of your property. Try to think about music, books, and sometimes from a business that you founded.
When compared to active income streams, licensing income is completely passive. You'll generate a royalty payment for each product that is sold.
For example, when it comes to books, you might receive a royalty payment of $5 per book sold. If you sell 100 books each day, this would amount to $500 of income.
If you want to reach seven streams of income – royalty income will need to be considered.
Related: How to Make a Living Trading Stocks
If you want to grow 7 income streams you can't ignore business income. Businesses can be considered one of the riskiest investments you can make but they also have the largest income potential depending on your core business.
You'll likely need a small lump sum of cash to start your business but it can grow exponentially by growing your business.
Business income can also be known as profit income. Profit income is cash that is made by selling a product and earning a profit from it.
Interest income is generated by lending money. This could be in the form of peer to peer lending or other lending activities.
Interest income is a form of passive income that can be a great supplement to your primary income stream.
Interest rates will determine how much money you can make from this income stream. For example, the interest rate on a savings account might only pay .4% annually.
Some of the most common examples of interest income include:
- Interest from a savings account or bank account
- Peer to peer lending
- Certificate of Deposits
- Money market accounts
Capital gains income is accumulated when you sell investments like a stock or other piece of property. Selling appreciated assets is one of the basics of personal finance and investing. For example, selling stocks owned from your brokerage account would be considered a capital gain.
Appreciated assets that are sold can generate enough income on their own but by taking advantage of multiple streams of income you can make some serious cash.
Whenever you earn capital gains by selling assets you'll be required to pay capital gains tax which can be either short term or long term.
How to Start Growing Your 7 Income Streams
Below are some steps you can take to build your income and make more money. Even if you make small investments – this money will compound and grow exponentially over time. You'll want to start by saving money and keeping your expenses low so you have some cash to invest.
Invest in Stocks
The stock market is a great method to generate passive income from your money. While you won't get rich overnight, it's a reliable method to grow wealth and reach financial freedom.
To get started, I recommend downloading the Stash app. This easy to use platform allows you to invest in all of your favorite stocks, index funds, mutual funds, and much more. As a bonus, new users will get $5 completely free to invest. Register below to get started!
Once you have chosen a platform that best suits your needs, I would recommend investing in well diversified investments like an index fund, mutual fund, or ETF. These types of investments are best described as a group of stocks and other investments that can be bought and sold via the stock market.
Your returns on these funds are pretty strong at 8% annually. Best of all, this is a completely passive way to make money.
If you want to grow your dividend income, you have a few options. You can purchase individual stocks that offer strong dividend payouts or you can purchase an ETF that holds many dividend paying companies. I would lean towards the latter as it will be much more diversified than individual stocks.
Invest in Real Estate
If you want to focus on rental income – real estate is one of my favorite ways to make passive income. If you want to generate routine monthly income – real estate investments are the way to go.
Real estate is a great passive income stream you can use to build true wealth. When compared to other streams of income rental income can be one of the most fun ways to make money.
So how do you start investing in real estate?
Between rental properties and crowdfunded real estate with platforms like Fundrise – it's easier to get started than you think growing your real estate portfolio.
You won't need thousands of dollars to get started either. With Fundrise you can start investing in real estate with just $500. Register with the link below to become a real estate investor!
Start a Business
Business income is one of the least utilized types of income but it has the largest income potential.
Small businesses can be some of the best ways to generate income outside of your normal earned income.
Earning money from a business can be one of the most challenging but rewarding methods to grow your income. You'll need to understand various business aspects like sales, marketing, operations, and more if you want to grow your business.
One of the most forgotten about aspects of owning a business is the equity that you can build with it. If you are capable of building your business that makes a nice income, you can always sell it to make capital gains.
Start an Online Business
Starting an online business like a blog or website is one of my favorite ways to make money. The risk is low and virtually anyone can get started.
You'll need to start by purchasing a domain name (I recommend using Namecheap). Next you'll want to purchase website hosting (I love SiteGround). Finally, you'll install WordPress on your site and pick a theme to use and start creating awesome content. It will cost you around $100 a year to blog, but you can earn well over $12,000 each year from blogging so why not give it a try?
Advance Your Career
Your active income streams can be extremely powerful when used correctly. By advancing your career and increasing your salary you can invest this additional cash into more passive income streams to grow your money.
Some of the easiest ways to increase your earnings are:
- Ask for a raise at your current job
- Find a higher level position in the same field
- Switch companies in the same field
- Learn a new skill and change career paths
By using these methods you'll be capable of growing your earnings quite quickly. Some people are capable of landing a 30% increase in pay just by switching for a new company.
Take Advantage of high Interest Savings Accounts
Everyone needs a savings account – so why not get the most for your money? With a high yield savings account you can earn 5 or 10 times the national average in interest.
My favorite is CIT Bank. It's completely free to open and you'll earn significantly more than other bank accounts. Register with the link below to get started!
What's the Difference Between Passive Income and Active Income?
Passive income is money that you generate passively. In other words, you won't have to actively work for it. Some passive income example, like blogging, can make money without having to work an hourly rate to earn it. With these sources of income you can make money while you sleep.
Active income is generated when you must work for your earnings. Active income is mainly a job or career. Whenever you work you are paid hourly for your time working. That's not to say that active income is less superior. Sometimes you can make good money at your job. The goal is to use your active income to invest in passive income streams.
Why You Need Multiple Income Streams
Having a single income stream can be a recipe for disaster when it comes to your finances. Below are some reasons you should strive for multiple streams of income.
Reach Financial Independence Faster
Having multiple income streams will allow you to expedite your journey to financial independence.
By having 7 income streams you won't need to rely on a single source of income and you can reach financial freedom much quicker.
Live with More Flexibility
By growing passive income streams you can have much more flexibility with your life. Passive income is one of my favorite income streams because you won't have to actively work on it like other methods.
There are many examples of passive income but some of my favorites include:
- Renting Things Out
Making money while you sleep will allow you to live wherever you want and work whenever you want.
Related: Make Money on Autopilot
Multiple income streams allows you to take advantage of compound interest and start building wealth. Many millionaires will have at least a few income streams they use to generate extra money each month.
By having other streams of income outside of your primary job, you can start making money and accumulating wealth in no time.
How Much Money Can You Make By Having Multiple Income Streams?
By utilizing several income streams your earnings can be virtually uncapped.
Let’s take a look at the most common income type, earned income to see how much money you can make.
By starting out your career you might earn $40,000 a year. Not too bad. As you move your way up the corporate ladder you might land another job that pays $60,000 a year. Even better. 5 years later, you land an even better job that pays $85,000 a year. A few years after that you land a job that pays $110,000 a year. Awesome. Perhaps you become a executive at a company that pays $1,000,000 a year. That’s a great income.
But you’re still capped. Even the highest paid CEO’s can only make a certain amount of money without utilizing another income stream.
Let’s look at another example of someone who takes advantage of multiple income streams.
Let’s say you have earned income amount to a total of $50,000. If you own a rental property, you can also generate some additional cash from this income stream. If your property cashflows $350 a month, this can amount to a total of $4,200 annually in rental income growing your total income to $54,200 annually.
To take it a step further, if you have dividend income that amounts to a total of $10,000 annually your total income would jump to $64,200.
After a few years, your income can grow even further as each income stream grows.
While this is a small scenario, it's possible to make hundreds of thousands of dollars from some passive income streams like blogging.
How Many Streams of Income do Billionaires Have?
Most millionaires and billionaires will have at least 7 streams of income. Between their business, job, rental properties, and dividend income – they make money in a variety of ways.
Billionaires hold many income producing assets that make them (and keep them!) rich.
While you might think it's impossible to become rich – by starting a passive income stream when you are younger you'll be surprised with how much money you can make.
Final Thoughts on the 7 Streams of Income
Having 7 streams of income comes with tremendous benefits that are unmatched by any single source. And it's easier to get started than you think.
Whether you dedicate your resources to interest income, profit income, or capital gains, it's wise to focus on only one stream at a time before making the jump to five or more streams of income.
Reaching 7 streams of income is going to take some careful planning and hard work but it can be well worth it.
If you dream of becoming a millionaire – utilizing 7 streams of income is a great ways to reach your goals.
How many income streams do you have? Comment below!