I see people talk about income streams every day on the internet. The key point they’re missing is that the average person has more income streams than they think. I would venture to say the average person has at least 3 income streams.
Millionaires are often said to have an average of 7 different income streams. There’s no doubt that the more streams of income you can develop, the faster you can accumulate wealth.
We’re going to identify what income streams you already have, and what you might be able to add. Many of us are almost halfway there!
Common Income Streams:
Earned Income - Taxable income earned from trading time for money. Typically an employee-employer relationship.
Interest Income - This can be earned many ways, the most common is through interest earned in your savings account
Dividend Income - If you’re invested in a 401k, it’s likely that you’re earning dividends on your investments without realizing it.
Employer 401k Match - Employers will sometimes match your investment contributions up to a determined amount (ex 100% of your first 4%).
Let’s take a look at how we can maximize these common income streams before worrying about moving on to the more uncommon income streams.
Maximize Common Income Streams
Before worrying about the more complex income streams, I believe we can significantly move the needle by maximizing your common income streams. Income is your greatest ally in building wealth.
We can maximize our earned income in many different ways. Here are some ideas:
Work towards a promotion
Work more hours
Work a commission based job
Learn a new skill or trade
Earn a degree
Look for higher-paying jobs
Work two jobs
My wife is a great example. She’s a teacher and is earning about $54,000 per year. When she completes her Master’s degree (online) she will earn about $7,000 more per year. She’s maximizing her earned income.
We can maximize our interest income rather easily. If you’re using a traditional savings account you can move your money into a high-yield savings account.
Most high-yield savings accounts will offer interest rates above 1% depending on the state of the economy. Sometimes the interest rate will exceed 2%. On a $10,000 emergency fund, that’s $200. Much better than 0.09% average interest rate.
Hopefully, you’re investing for retirement. If not, start here. I recommend first investing in your 401k to earn an employer match if available. Second, I like to max out my Roth IRA by investing in low-fee index funds.
A dividend is a sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits (or reserves).
Dividends are commonly “reinvested” into your investment which just means that the money earned will automatically go towards purchasing additional shares (which leads to more dividends).
Once in retirement, people can live off this dividend income. Whether reinvested or not, it’s an often looked source of income.
We can maximize this income by choosing funds or investments that increase dividends yields, often referred to as “income funds.”
More Complex Income Streams
Once you’ve determined your current income streams and taken steps to increase their effectiveness we can now look at some more complex income streams.
Complex Income Streams:
Business Income - Income generated from running a business.
Rental Income - Income generated from owning property that others rent. Commonly, owning physical real estate.
Capital Gains - Income from the sale of stocks or investments.
Royalties - Income from products you license like songs or books.
These more complex income streams may or may not fit your lifestyle, but they have the power to supercharge your income.
Honorable Mention Income Streams:
Credit Card Rewards - Rewards for using a credit card. Typically cash or points towards travel
Reward Apps - Apps that give cash rewards for shopping at certain stores or buying certain items (ibotta).
Side Hustles - Creating crafts to sell at bazaars, doing odd jobs for cash, etc…
These aren’t as powerful as the income streams listed above, but they can be added to any income stream flow and generate some additional cash for you if used responsibly.
Combine Income Streams
I like to see how I can combine many of these streams. By adding one of them, I can potentially add more. Think of a river that has many streams coming off of it.
Here’s an example:
You can start a website like this one under an LLC. You can now benefit from owning a business when it comes to taxes and you have business income.
Your website can then generate income in many ways (ads, products, affiliates, etc…). You can use the content you’ve written to write a book and self publish on Amazon (earning royalties).
Take those earnings and invest them into a low-fee index fund that pays out dividends.
Here’s another example:
You can increase your income by getting an education or working a second job. Invest that extra income in a Real Estate Investment Fund like VNQ. That index fund will payout a quarterly dividend.
REITs are required to pay out 90% of their income to their investors so you’re actually getting rental income as well (although after passing through fees).
Here’s a final example:
Whoever does the grocery shopping can put the groceries on a credit card that pays in cash rewards AND they can use the ibotta app to earn cash for shopping.
Use the cash rewards on the credit card to pay down the balance (or save for Christmas gifts) take the ibotta cash generated and invest it in a REIT or other low-fee index fund (see above example).
Our Family Income Streams
My family has several different income streams and we’re always working on making them more efficient.
Our income streams:
2 full-time incomes
High yield savings account interest
Dividend income (reinvested)
Employer 401k match (x2)
Rental income (through REITs)
Credit card rewards
Side-hustles (Kayla sells epoxy tumblers for cash)
We have about 10 streams of income. About 7 are a significant boost to our net worth each month.
I believe most of us have more income streams than we thought. They may not all be obvious, but no matter how small, they can add up.
Take stock of what income you are currently generating (no matter how small) and see if you can make it more efficient or maximize it in some way.
After that, it may be worth it to explore additional income streams. I recommend having some diversification, but you can have several of the same income streams if you wish.
The more income streams you can have, the better protected you will be from the loss of one of your streams of income.
If you found this article helpful, please consider sharing it with a family member or friend. At the very least, leave a comment below or connect with me on Instagram.