The average millionaire has seven streams of income, or so “they” say. No one knows who “they” are but this is a concept that is commonly talked about. I’m not sure if this magical seven number is anywhere near accurate but having multiple streams of income is obviously advantageous. Besides, who wants just one stream of income when you can have seven? But is seven too many? How do you handle seven different income streams? Let’s first talk about the different types of income.
There are two ways to get earned income. Either by working for someone who pays you or by running your own business. In other words, income that you actually work for. Earned income is extremely limited by time. You can have multiple earned income streams but you are limited by a 24 hour day and earned income jobs are typically paid by the hour. To earn a decent earned income wage you’re most likely going to need to be full-time somewhere and commit at least 8 hours per day to a single stream of income. This is generally someone’s primary, if not their only stream of income.
Unlike earned income, there are thousands of ways to earn passive income. Passive income is money that you receive with minimal to no work involved. Some popular examples of passive income are owning rental properties, interest, lottery winnings and of course my favorite, earnings from a Dividend Portfolio. The biggest advantage to passive income streams is that you can be earning income from 10 different streams all at the same time, even while working for your earned income. Passive income is a great way to supplement your regular earned income simply because it’s so hands off.
Balance Is Key
Most of us aren’t yet fortunate enough to live solely off our passive income. If you are one of the lucky ones then congratulations and I can’t wait to join you! For the rest of us, we need a balance between earned income and passive income. I work 40 hours a week (at least) and use most of the money I earn to add to my passive income streams. I do a lot of things on the side for extra earned income that is just icing on the cake. For me, building additional passive income streams has been a challenge. It has never been as simple as investing into stocks and collecting dividends. To me that is the number one, true form of passive income. The rest of my forms of passive income aren’t so passive. They require a ton of work to get them started. They are more of a earned income now, passive income later type of approach. If you’re able to add some other truly passive streams to your income that’s great! I’d love to hear about them!
Room For Growth
There’s a good reason why most millionaires have multiple streams of income. Unless you’re making over $100,000 per year and have extremely low expenses then chances are you won’t ever achieve millionaire status. The beauty of passive income is that it generally has a much larger margin for growth. Things such as stocks, dividend growth, appreciation on property all can dramatically increase your net worth. Making it possible for someone with an average earned income to become a millionaire too. In my opinion, creating multiple streams of income is extremely important to ones financial success. Especially passive income streams. If you can create 3 streams of passive income that earn you just $500 per month collectively you’ll already be making an extra $6,000 per year. That’s a substantial amount of money per year with the possibility of growth and with minimal work involved!