Multiple Streams Of Income May Not Be For You

Odunayo Adeniji

odunjoy.adeniji@gmail.com

Once, I heard someone say that it is grossly unfair to earn your total income consistently from a single source. That he said, because the channels through which income from a single source (even several sources) exit are quite many. Whether daily, monthly or annually, we spend on food, clothing, rent, transport/travel, gifts/donations, data/internet subscriptions, club membership, tuition/training fees, and so on.

So, should all you earn flow in from a single dedicated source, and be expensed through several channels? Therefore, it is believed that having more than one source of income to offset these variety of expenditures is the best way to go. Arguably so, embracing multiple streams of income is the pathway to building wealth for financial freedom.

It is believed that just a handful of people ever have enough income to be financially free with just a stream of income. Whether active or passive, income should flow in from more than a single source. However so, not everyone can successfully manage more than a single stream of income.

Active Income

Active income, otherwise called earned, work or linear income, flows in basically through paycheck received in relation to work done. Examples of this include wages, salaries, commissions and tips. 

Active income is not limited to employees alone. Self-employed individuals’ net earnings also qualify as active income.

With earned income, you work actively, exchanging your time for money. This income may be gradually accumulated over time to secure assets (channels for diversification), which in turn bring in further proceeds. 

It is noteworthy that multiple streams of income primarily leverages on the resources created through active income.

Passive Income

This, also called residual income includes income that does not require your full presence to generate a return on your investment of time and resources. Little or no effort is required to earn passive income.

Monies made while you sleep is called passive income. That is, you do not have to be there 24/7 to drive such ventures to earn consistently from such. With passive income, your earnings flow is automated once the proper structures have been put in place. Periodic maintenance is minimal or not needed here by then.

Warren Buffet, one of the wealthiest billionaires in our world today says, ‘Never depend on a single income. Make investments to create a second source’. Now, if earning an extra hundred or thousand dollars would lead to a significant change of status for you, would you not want to explore such an avenue?  Is it therefore safe to say that building wealth is synonymous with multiple streams of income?

Forms of Passive Income

Opportunities abound in various sectors of every economy in the world that may be harnessed to earn passive income. 

They include (but not limited to):

• Interest on loans, bonds or fixed deposits
• Dividend on stocks/shares ownership
• Royalty from allowing other people the use of your idea(s)
• Sale of digital products like e-books, digital arts, music, online courses, blogging
• Commission on Affiliate marketing
• Multilevel marketing
• Capital gains on asset value appreciation
• Rental income
• Side hustle/gig (freelancing)
• Profit earned from buying and selling a product or service

Earning passive income begins with a deliberate decision to explore legitimate available options for making more money than you presently do. For instance, making money online is not just a cliché anymore. It is real that you can earn an extra income online, even while you rest. Many are daily cashing out on income streams online, other than the conventional wages/salary or contracts income.

To get the best out of passive income, there is the need to set aside some time to think on the options available to you; which can be maximized for increased income. However, passive income should be a plus to your active income. Never quit your job for passive income.

With persistence and dedication, passive income today might even become a mainstay for generating steady income in the nearest future. This steady inflow of passive income may ultimately lead to financial freedom.

Risk Diversification

An important essence of multiple streams of income is risk diversification. It is ability to create a portfolio of independent streams of income, through which you get to enjoy the benefits of financial security and stability.

In simple terms, risk diversification is putting your eggs in different baskets, thereby creating a safety net for your businesses or investments. Consequently, if an item in the portfolio goes bad, it does not affect others.

Why would you want to diversify your investments? It is just so do not have to rely on a single source of income all your life. Ray Higdon says, “If you don’t have any residual or passive income, or at least plan for residual income, you’re living a very risky life. There is no security in a job, even a high paying one…”

No one wishes for bad breaks. However, should you lose your job, having extra income sources can be a life saver.

Downside to Multiple Streams of Incomes

Earning income from several sources always sound very juicy and exciting. After all, who does not want an extra inflow of money? However, earning passive income is not without its downside or challenges. In reality, not everyone can handle multiple sources of income successfully.

1. To start with, multiple streams of income may be chaotic and this is deleterious. With so many side gigs fighting for your attention, you may become imbalanced. Every income stream requires time, skills and experience. Concentration on your full-time employment may become distorted as a result.
2. An initial outlay of funds is usually required to float the new stream of income; the amount of which will depend on the nature of the side gig/hustle.  For instance, it is exciting to anticipate the inflow of rental income from your investment in real estate, but its initial outlay is usually higher when compared with some other passive income avenues.
3. Beyond the initial outlay, other costs may be incurred to service the stream of income for continued productivity. This is particularly relevant with the acquisition of tangible assets. For example, owning a motor vehicle in transportation business will require paying for vehicle registration, periodic insurance premium, and maintenance as the asset experience wear and tear due to usage (depreciation).
4. Even after putting necessary structures in place for automated inflow of income from your investment/business channels, some streams of income do not last forever. Seasons come when some brooks dry up. You might not even notice when the cheese gets moved if you do not keep a close tab on the environmental factors that may affect your income stream. You never sleep on your oars expecting money to just keep flowing in automatically.

If you are not cut out to face the challenges associated with multiple streams of income, find out what works for you best and stay with it. It is more fulfilling that way, rather than to follow trend and have regrets later.

Your Defense

In the world of finance, return is always accompanied by risk. There is always a price to be paid to receive benefits. In making choices on which areas to diversify your investments, be sure to have adequate knowledge as to the risks and rewards that accompany your choices. This will help you avoid reckless risk taking and make informed decision.

A good way to make the most out of any type of passive income you chose is relevant information gathering. Right knowledge correctly applied yields results. Life is full of risks. So, it is your responsibility to acquire all necessary information to protect your portfolio of investments.

Do not invest your funds anywhere that you have not checked out the risk and returns involved, vis-à-vis your current financial situation, age, risk temperament, and your future goals. Be wary of investment opportunities that sound/look too good to be true. Usually in the end, they are too good to be true indeed! Do your due diligence.

Conclusion

If multiple streams of income is your goal, by all means go for it. However, I say, take it one step at a time. Master your first stream of income and be well established in it before spreading your tentacles. Additional income streams you create will thrive better when it leverages on the knowledge, skill/expertise and network you have carefully generated from your initial stream of income.

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