Multiple Streams of Income

Most workers don’t have multiple streams of income. The salary is the only source of income. Their life revolves around their job. If the salary gets delayed for whatever reason by a few days, their finances are in crisis mode, and at the risk of a financial meltdown. They live pay cheque to pay cheque. The common question on the lips of these groups of workers is “Have they paid?”

Their salary determines their lifestyle. It determines where they live, what they do, what they can afford, and when they can pay for these items. Payments are deferred until after payday “I will give you at the end of the month”. Their lives are wrapped around the proverbial salary. The only increase comes through pay raises and bonuses. Their work is their life, literally.

In this situation, the worst that can happen is to be laid off from your job. This is a crisis of unimaginable proportions. Your life goes upside down. For retirees, whose end of a career is also well-known years ahead, the event often leads to a downgrading of the standard of living. The next phase of life involves living on stipends called pensions.

You need multiple streams of income

If you want to attain financial freedom, if you want to be rich, you need multiple streams of income. Income from diverse sources, especially the variety you do not have to labor daily for.

On average, one should aim for at least 3 streams of income. The more, the merrier. When one stream dries up, you can live on the remaining two, while getting another stream started. According to Robert Allen, the apostle of Multiple Streams of Income, one of your yearly goals should be to decide how many streams of income you plan to add to your life in the course of the year. It does not mean taking a second job. Having one job is stressful enough. It means leveraging on other types of income.

The three types of income

1) Earned income: Here, you exchange your time (your life really) for money.

2) Portfolio income: This income class refers to income from paper assets like stocks, fixed deposits, bonds, treasury bills, etc. It also refers to income from businesses you own.

3) Passive Income: This income class refers to cash flow from real estate investment, intellectual property like music, books, inventions, patents, etc.

Portfolio and passive income are the playgrounds of the rich while the poor and middle class sweat it out in earned income avenues.

Who you are, and where you are going determines the income class you focus on. It is obvious that if you want freedom, to exit from the rat race and live your dreams, you will focus on portfolio and passive income.

Whatever income class you choose, if you desire financial freedom rather than living from hand to mouth, paycheque to paycheque, always broke every month end and forever asking “Have they paid?”, grow multiple streams of income, so that you do not remain at the mercy of one income source.

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