Did you know that really rich people depend on more than one source of income, not just one?
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The reality is that a total of 54% of Americans live paycheck to paycheck – that’s 125 million American adults, according to LendingClub and PYMNTS. Of this group, 21% struggle to pay their bills, which means they have no more money after spending what they earn. In addition, about 40% of those with annual income over $ 100,000 live paycheck to paycheck. Of those earning between $ 50,000 and $ 100,000, 53% live paycheck to paycheque. Research has also indicated that 72% of those who earn less than $ 50,000 a year live from paycheck to paycheck.
The solution? Diversify your sources of income, according to the author of Rich habits. Of the 233 wealthy individuals Tom Corley interviewed for his book, 65% had three sources of income, 45% had four sources of income, and 29% had five or more sources of income.
Do you think having multiple sources of income makes a lot of sense? Let’s see how you can make it happen for yourself.
Multiple income stream sources
Does the concept of multiple income streams seem completely foreign to you? It is quite possible that it has never occurred to you before. In school, no one teaches you how to look for multiple sources of income – usually teachers and professors train you to pursue a career, pursue that particular option, and save for your retirement through it. a job.
So how do you diversify your income? How do these income streams work? Let’s take a quick look at a few options, although by no means an exhaustive list.
If you invest in stocks, you can earn dividend income from your investments. Dividend income refers to the payments you receive from a company when it pays all of its shareholders for owning shares. You can calculate the return on dividend income by dividing the annual dividends paid per share by the price per share. Mature and established companies will most likely pay dividends.
Income earned from employment
Yes, this is the one your teachers trained you for. You want to add it to the mix because it might give you the most security, especially if you’re trying to launch multiple income streams early on. Think of it this way: you’ve already diversified your source of income if you and your spouse or partner are each working at a job. It’s a good start !
Billionaire Andrew Carnegie once said that 90% of millionaires got their wealth by investing in real estate. Whether that percentage rings true (it can be a bit hazy), there’s no denying that many millionaires still view real estate as one of the best investments, especially because it is so versatile. You can flip a house, rent it, sell it when it appreciates, develop the land further, add plots, subdivide it – the list of options is endless. In addition, you can also consider buying land as another source of income.
A little more difficult to obtain, royalties on something you have filed or written could become a source of income. Consider author JK Rowling of Harry Potter fame: The New York Times estimates the novels have grossed at least $ 7.7 billion. Rowling could have earned at least $ 1.15 billion with a standard 15% copyright reduction, and that’s without its theme park royalties, movie royalties and more. Obviously, this is an extreme example, but it could happen. She has one of the most amazing wealth rag stories of all time.
Consider all the areas where you can profit from selling an asset. You can earn money on tangible assets, such as real estate or even a vehicle, or intangible assets, such as stocks and bonds. You realize capital gains when the selling price of an asset exceeds its purchase price.
On two-thirds of working millionaires were self-employed in 1996, according to The millionaire next door. Next, the self-employed made up less than 20% of workers in America, but made up two-thirds of millionaires. The book says that three out of four considered themselves to be entrepreneurs.
It was true then and it is still relevant today.
Investments and savings
We have mentioned dividends and capital gains before, but it is important to mention the root causes of the accumulation of dividends and capital gains: savings and investments. Whether you invest in stocks, bonds, mutual funds, retirement accounts, and more, you can benefit from stock returns that historically have earned around 10% per year over the past century.
How to focus on the right income strategy
What does all of this mean to you? Should you be tackling all of the income types listed above? Focus on two or three? Here’s how to decide.
Tip 1: Take a look at the options.
What are you most attracted to? How can you see the list of options that work together? If you don’t like the idea of real estate, then don’t. Concentrate on a secondary activity and the capital gains of your investments. If you no longer want to work at a regular job, focus on buying property and starting your own side business. You must do what is comfortable for you.
Tip 2: Develop a savings mindset.
First of all, save at least 10% of your income each year, although you will save even more if you want to become a millionaire faster. To diversify your investments by choosing the right one asset allocation, automatically investing every month and staying disciplined gives you a head start.
Tip 3: Develop new skills.
What are you good at How can you develop it further? Whether you enjoy tutoring kids, editing essays, or coaching football, develop skills that you can turn into a side activity. If possible, turn these opportunities into passive income strategies that allow you to earn money while you sleep. Continually reinvest money in your side business to generate new sources of income.
Tip 4: Partner with others and reinvest.
Eventually, you may get to a point where you can’t do it anymore or don’t want to do it yourself. Reinvest your cash to grow your business. In this way, you can continue to develop your side activities or your passive investments.
Be like a millionaire: choose your strategy
Millionaires may have got it all – just like diversifying your investments, millionaires often rely on more than one way to make money.
Now that you have the ideas, it’s up to you to choose the right route for you.