American businessman and author Robert G. Allen said it best: “In today’s uncertain economy, the safest solution to be wealthy, be in total control and enjoy freedom for you and your family is to have multiple streams of income.” This quote rings even more true now that millions have experienced job loss due to the ongoing coronavirus pandemic.
Given this situation, the only option is to adapt and work even smarter in order to thrive. Having multiple income streams can increase your cash flow and help you achieve greater financial security and financial freedom.
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Tips for Building Multiple Streams of Income
1. Define your goals
Get crystal-clear on why you want to diversify and increase your cash flow. Whether it’s to pay off debt, save up for a new car, or increase your funds for retirement, having a goal will place a purpose behind your new venture. This will keep you focused, determined, and grounded.
Identifying the amount that you need to be earning in response to your goals is a good way to determine your income-generating (and budgeting) strategy. Make your goals specific and time-bound. For example, if you plan to add $10,000 to your retirement fund by the end of the year, you’ll need to earn an extra $834 every month (if you were starting in January).
Revisit your goal regularly and update your progress. This way, you’ll be able to see the gaps and devise solutions to address them.
2. Bank on your strengths
In order to increase your chances of success, it’s important that you engage in income-generating activities you know you’ll be competent at. Having a side hustle can help you brush up on the talents, skills, or interests that you may not fully exercise in your day job. Say you’re a banker with a knack for writing. You could parlay your unique skill set into freelance financial writing for blogs and publications. You could even publish an e-book or start your own blog.
3. Reach out to your network
The saying “It’s not what you know, but who you know” very much applies when you’re looking for additional income streams. Let your circle know the services that you’re offering as well as your rates. They might be able to give you good leads or point you to the right resources that will equip you for your sideline.
Aside from lead generation, reaching out to your network could facilitate collaborative relationships, resulting in additional income opportunities for both parties. Networking is also a great way to gain valuable insights from your peers and get acquainted with potential partners, investors, and advisors.
4. Learn the difference between passive income vs. active income
Part of the planning process is figuring out the right income-producing activities. Generally, there are two forms of income that allow you to increase your cash flow on top of your regular income.
This is the money you earn with minimal effort or indirect involvement. Oftentimes, you would be required to make a big upfront investment in the form of money or time. But once the preliminary work is done, income should come in regularly without much effort from you.
This is money that you earn in exchange for your labor and time. Sources of active income include full and part-time work and project-based work. Generating this type of income requires active participation and takes some time to scale.
How to Earn Passive Income
1. Affiliate marketing
Affiliate marketing is when you earn money through an affiliate link that is posted on your social media page or website. When people click on that link to purchase a product while they’re on your page, you will get a commission from that sale.
The investment on your part is the time and effort needed to make engaging and original content that drives your target audience to your page and turns them into paying customers for your affiliate partners. You’ll also need to optimize your content for your affiliate links. This includes using the right keywords to target your audience and placing the link in appropriate sections of your content or website. Once your content is published, you can earn even while you’re asleep or on vacation.
Cryptocurrencies are vulnerable to fluctuations so there is considerable risk involved if you choose to invest in these digital assets. The price of many types of cryptocurrencies (including bitcoin) have fluctuated rapidly over the years, making it a relatively unstable investment.
Crypto cycles peaked in 2011, 2013, and 2017 when investors who bought the currency for small amounts during the earlier years saw their investment skyrocket in value. Many investors attempt to leverage crypto cycles by buying when prices are low, then selling when prices peak to turn a profit.
If you want to earn money in the short term, you would have to understand the language through which cryptocurrencies operate. You can earn either through mining or trading. But if you want to minimize your risk, consider holding on to your cryptocurrencies and selling when they peak in the cycle.
eCommerce sales as a share of total global retail sales continues to grow. According to Statista, e-retail sales accounted for 14.1% of all global retail sales in 2019—a percentage that is expected to increase to 22% by 2023. eCommerce continues to grow as a viable source of income, particularly now that the coronavirus pandemic has forced millions of people to minimize their travels and rely on online stores to purchase goods and services.
There are several ways to start selling online. Some choose to come up with original products, while others act as distributors of products from one or many suppliers. Selling used goods straight from your house is an option, too. Another viable means of earning passive income is to adopt the dropshipping business model.
Those who choose to start their own dropshipping business won’t have to shoulder any inventory or worry about shipping the goods to customers as these will be handled by their suppliers. You also won’t need to make a huge upfront investment compared to those who choose to develop their own products.
You just have to set up your own online store on the platform of your choice (such as Shopify or Magento). Then, connect with reliable suppliers for your items and set up ad accounts for your store on Facebook or Google. Dropshippers who are able to identify and sell winning products could earn large sums of money.
4. Peer-to-peer (P2P) lending
A peer-to-peer (P2P) loan lets borrowers take out loans from an investor through third-party intermediary websites such as Peerform, Upstart, and Prosper. Each website sets the terms and rates, which will vary based on the credit score and history of the applicant. Your income will come from interest payments from the loans.
As an investor, you would have to open an account with your third-party loaning website of choice and deposit a sum of money which can be distributed among several loans. You can choose to have each loaning process entirely automated, though the option to negotiate with your borrower is possible too.
With P2P lending, you would get a higher growth rate for your investment than with a savings account. But the catch is that you’d run the risk of default since the loan is unsecured.
5. Online courses
Online courses offer on-the-go learning for every conceivable industry: from photography to marketing, gardening to classical music, personal development to international law. E-learning by nature is available anywhere, anytime, and doesn’t require qualifications for people who want to take it.
This high level of accessibility has created considerable appeal. Based on a report released by Statista, the global e-learning market is expected to grow to over $243 billion by 2022.
So if you have expertise with any subject, consider monetizing it by packaging it as an online course. There are numerous platforms that allow you to create and sell online courses.
Depending on your subject matter, you can offer various formats for your lessons. Some courses do a mix of videos and PDF files, followed by quizzes after every module. Once you’ve put in the time and effort to set up your course, you can relax and wait for the income to stream in.
6. Dividend stocks
A dividend is the distribution of a portion of a company’s profits or reserves. When you own a stock in a company you could choose to receive dividends as cash payments, other property, or shares of stocks. The amount you’ll receive will depend on the value of your stocks and the total sum of profit that will be divided.
If your company is open to its employees buying its stocks, grab that opportunity and invest, especially if you see that the company is growing rapidly (as is often the case with startup companies). You might be in for a hefty cash-out once the company goes public.
7. Savings accounts
Having a savings account is the most passive way to earn money. The only involvement you have is whenever you deposit money into the account. This is not ideal for increasing your cash flow but is good for stashing an emergency fund and making it grow long term.
While there is a standard interest rate depending on your location, a number of banks (especially digital banks) offer higher interest rates per annum. You also have the option to put your money in an investment firm.
8. Certificates of deposit
When you have no immediate reason to use a portion of your money and you want it to compound instead of laying dormant in your account, then purchasing a certificate of deposit (CD) would be a good way to invest. Similar to a savings account, a certificate of deposit is issued by a bank or investment firm. The money that you invest in a certificate of deposit will earn through interest.
You should determine how long your term is before you withdraw your money from the deposit. There are also different types of CDs to choose from. Just be wary not to withdraw it before its maturity date since that move will be subject to a penalty. Once your CD matures, you’re guaranteed to get the amount that you deposited plus the appreciation provided by the interest.
9. Bond ladders
Similar to certificates of deposit, bonds are investments that you can passively earn from until their maturity dates. Unlike CDs, the issuers are mainly companies that are trying to raise funds for expansion and operation, rendering it a riskier investment than CDs.
But the key difference between the two is the effect that interest rates have on their value. If interest rates are high, a bond decreases in value. But if interest rates are low, it’s the CD yield that receives a negative impact.
If you want to minimize the risks of your bonds, you can use the bond ladder strategy to spread your bond yields into different dates of maturity. Since bond markets are subject to fluctuating interest rates, diversifying your bond holdings can manage the risks of this situation while also giving you a steady cash flow throughout the year.
10. Property rentals
There are several ways to earn in real estate—and the most common way to earn passive income is to rent out your property.
The situation differs from person to person, but the easiest scenario is to rent out property that you already own. This could be an extra room in your house, an attic or storage space, a parking space, or a vacation home in another state that you rarely use.
The other scenario is to buy a property for the sole purpose of renting it out. This is where the big upfront investment comes in. It would be in your best interest to buy a property with cash instead of credit. The goal is to increase your income and not your debt, after all.
Aside from the cost of buying the property, you’ll also need to factor in maintenance costs, homeowner’s insurance, and HOA fees when determining your rental fees. You would also need to have between three to six months’ worth of emergency funds to cover for expenses should there be delays in payment from your tenants, vacant periods in between renters, or emergency repairs.
How to Earn Active Income
1. Uber or Lyft
The income that drivers earn from ridesharing apps like Uber or Lyft has decreased significantly over the years. Nevertheless, if you’re resourceful and efficient, you’ll be able to maximize your profit.
Since this gig is under the service economy, try to go above and beyond your services. Be consistent in taking care of the basics: cleanliness, politeness, and promptness. And if you can add some extra elements, like having good music playing in your car or having a box of tissues or mint candies at your customers’ disposal, then this will increase your chances of getting a good tip.
You can also partner up with local businesses to have their ads displayed on your car and you’ll get a fee or commission in return.
2. Freelance remote work
Engaging in output-based remote work is ideal when you have a day job but want to increase your income without being tied to a fixed work schedule.
A lot of freelance work revolves around commissioned work from clients. The key to attracting clients is to put up a portfolio of your work online. Social media platforms like Instagram and Behance are great digital spaces to showcase creative work for illustrators, photographers, art directors, and interior designers.
On the other hand, writers and digital marketers can make their portfolios on WordPress, Squarespace, Wix, or Lumos.
Read up on articles and forums about industry rates and talk to people in the same profession on how you can best execute the following:
- Pricing your work competitively
- Making a Freelance Contract Agreement
- Dealing with different types of clients (including high-maintenance and difficult clients)
3. Side hustle business
A lot of people nowadays see side hustle businesses as a way to monetize their hobbies. A lot of young professionals engage in weekend pop-up markets around their area to earn extra cash on top of their regular jobs.
Whether you like cooking healthy meals or have a penchant for planting fresh herbs in your backyard, you can definitely turn any of your pastimes into a lucrative business. You can choose to participate in weekend farmers markets, run a community store with your family, or sell your creations on Etsy.
4. Consultation services
Consultation services span a wide range of specialties. Whether you’re an expert in developing business systems and processes or strategizing effective marketing campaigns, you can certainly tap into your specific skill set and use it to enhance your cash flow.
As a consultant, you can choose to either earn money on an hourly basis or on a per-project basis (which is why it’s important to know the optimal fees for your services).
A lot of new consultants think that pricing their services well below the industry average is a good starting point. However, this could result in a clogged consulting schedule with low returns. Low pricing also hurts the whole freelance consultation space as a whole because it lowers the expectations of clients about the quality of the services. Keep up to date with current industry rates and keep your fees aligned with those rates.
If your skills are more in line with teaching, then you can monetize it through tutoring. You can choose to do it in person (within your neighborhood) or online. There are several platforms that host tutoring services. They also cater to different types of expertise and different levels of students.
Rates could vary depending on the platform so make sure to go through all of them to get an idea of where you can best offer your services. Non-professional teachers and professors don’t have to worry since most of these platforms don’t require a certification. As long as you pass the requirements or tests, then you’re ready to start teaching.
Achieve Your Financial Goals by Diversifying Your Income Streams
From the extensive list above, you can customize an income generation strategy that suits your skills, schedule, and preferences. Having a mixture of active and passive income will truly diversify your income streams and help you achieve your financial goals.