What Are The Benefits of Having Multiple Income Streams

Person holding a wad of cash that they earned from multiple income streams

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The average millionaire has seven income streams, according to The College Investor.

When you think about it, having multiple sources of income makes sense because the more sources you have, the more cushioned you are in case one source dries up.

In this article, we’ll go over the importance of having multiple sources of income as well as common sources of income you can add so that you’re not only making more money each month but also so that you don’t become too reliant on a single source.

Let’s jump right in.

What Does it Mean to Have Multiple Income Streams?

To have multiple income streams means that you make money from multiple places.

One source could be your full-time job, as is the most typical source of income.

Other sources of income could include:

  • Money you collect from dividends in a stock market account.
  • Royalties on a book or eBook you wrote.
  • Rental income from a property you own and rent out.
  • Interest from your savings account.
  • Sales from a part-time online business you run.

Generally speaking, building up one source of income at a time makes sense, but you certainly don’t have to.

For example, after receiving a paycheck, you could take a portion of your check and buy dividend-yielding stocks, increasing that income source. 

You could start a side hustle, such as a blog, and monetize it with ads and affiliate marketing.

Having multiple streams of income protects you as, say, you lose your full-time job, and that was your only income stream. But, then, you would suddenly have no income and be reliant on your savings to get by until you found a new job.

If you had other sources of income and you lost your job, then you would be in less trouble and would have more leeway to get by while you sought another job.

Why Having Multiple Income Streams is Important

As mentioned above, quite possibly the most important reason to have multiple income streams is to protect yourself if you lose a stream of income.

Another great reason is that having income coming from different places enhances how much money you make as a whole.

If any of your sources are passive or mostly passive, then you’re earning passive income around the clock regardless of how many hours you work at your main job.

In fact, if you have enough passive income from different sources, and the passive income covers all of your living expenses, you can effectively retire because you would have reached financial independence.

What Are the Benefits of Multiple Income Streams?

There are quite a few benefits to having multiple sources of income, as we’ll discuss below.

More Money and a Path to Financial Independence

When you only have a full-time job as your source of income, you are capped at how much you can earn based on the hours you put in. 

Having outside income, such as dividends, rental income, interest, business income, and so on, allows the money to be earned whether you’re working or not.

Eventually, if you have enough income streams that pay you enough, and they’re all unrelated to work, you reach financial independence, making work optional.

A Faster Way Out of Debt

Credit card debt, auto loans, mortgages, student loans, personal loans, and other types of debt slow down your ability to generate wealth. 

Having multiple sources of income generally means having a higher total income overall. That means you can pay off debt faster, which saves you money over time as you’ll pay less in interest when you pay down your balance quicker.

Assume your full-time job goes to your living expenses, and you make an additional $200 per month in profit from a rental property. That extra $200 could go directly to a credit card or other loan.

Some people focus on paying off debts with the highest interest rate first, while others focus on paying off debts with the lowest balance first.

Both methods work, and utilizing multiple income streams can help you live a debt-free life.

Safety and Protection from Loss

As mentioned, having several sources of income protects you from financial hardship. 

If you only have one source of income and lose it, you must rely on savings or your credit card to get by until you replace that source of income.

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More income streams mean more ways you earn money. The more ways and the more you earn, the less likely that losing a single source will affect you as significantly.

Retire at a Younger Age

Having multiple sources of income generally means you’re earning significantly more money than simply working at a full-time job.

If you have enough income from all sources combined, then you may be able to retire earlier as each source grows.

Even if you choose to continue working, the option to retire is a nice one to have.

Some people who reach financial independence choose not to retire and instead keep working. 

Build Wealth Faster

When you make money from many sources, your net worth generally increases faster as you’re generally making more each month than if you only had a single income.

You’re able to pay down debt quicker and accumulate assets faster. If you acquire income-producing assets, those assets create more income for you and your money compounds.

Income-producing assets include:

  • Dividend-yielding stocks and bonds

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  • Rental properties
  • Businesses you own, whether you operate them or not
  • Anything you regularly rent out for a profit

The younger you are when you start building wealth, the higher the wealth potential you have, as you have more time for your money to grow.

Earn Money at Home

Because many sources of income outside of your job can be earned passively once they’re set up, you can earn money regardless of where you are.

For those who like to travel or stay at home, having several income streams means earning money without being at an office or other place of employment.

What are Examples of Multiple Income Streams?

We’ve gone over some examples of income outside of one’s full-time job but let’s reiterate here and provide some more detail.

A Side Hustle

A side hustle is something you do for money outside of your regular job. It’s often something where you’re your own boss and that you do on your own schedule, versus working a part-time job for another employer.

Here are some examples of a side hustle:

  • Flipping local items that you buy and selling them online for a profit
  • Blogging
  • Freelance work such as graphic design, writing, or web development
  • Driving people around with Lyft or Uber
  • Delivering groceries on Instacart

Stock Market Investments

Stock market investments that provide an income include dividend-yielding stocks, bonds, and dividend-focused ETFs.

These are generally considered standard for the average person, as anyone with a 401(k) will often have their money invested in stocks and bonds.

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Real Estate Rentals

Real estate rental income is another common stream of income. If owning a rental property is outside of your budget, you can consider crowdfunding with a company like Fundrise.

Fundrise is the first investment platform to create a simple, low-cost way for anyone to access real estate's historically consistent, exceptional returns. With as little as $10, you can open a Fundrise account and start investing in real estate.

Sign up here.

Peer-to-Peer Lending

A relatively new option for a source of income is P2P lending. Instead of borrowing from traditional lenders like banks, people use online services to borrow from other people. 

You can earn this way via the interest you collect when people borrow your money. Get started with P2P lending on Prosper but check out this article to see if P2P lending is right for you.

Content Royalties

Writing an eBook or creating a course can provide consistent income every month. Make many of them, and you could create quite a lot of recurring revenue for yourself if your books do well.

How to Build Up Multiple Income Streams

It takes time to build multiple sources of income. Some sources require time to build, others require initial capital, and some require both.

The trick is to focus on one stream at a time, such as building up a business or loading up a stock portfolio.

You can even have one source of income feed the next one, and then have the next one feed the one after that.

For example, you could write an eBook, and any time you earn royalties, you could buy shares of dividend-yielding stocks. Then, when those stocks pay dividends, you could use that money to invest in crowdfunded real estate.

Wrapping It Up

In this article, we discussed the importance of having multiple sources of income and provided some examples of what they are and how to build them.

Consider the risks of only having one source of income and then think about budgeting money aside each month to grow one or more other income streams.

That way, you can cushion yourself against loss and grow your wealth.

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