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. So what? Well, 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? I’m a firm believer in the power of passive income. The truth is, without it, it’s very difficult to become wealthy in today’s society. A large percentage of the wealthy’s income comes from passive income. Take Warren Buffet for example, he earns about $7,000 per minute from his dividends alone. Per minute!!
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, start a website, owning a business, lottery winnings and of course my favorite, income from an investment 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 and eventually it can even outpace your earned income.
Room For Growth
There’s a good reason why most millionaires have multiple streams of income. Unless you have a very high income or a very high savings rate then achieving millionaire status on a single earned income is nearly impossible. The beauty of passive income is that it generally has a much larger margin for growth. You might get a two or three percent raise at your job each year, which feels great, but chances are it won’t ever amount to enough to make you a millionaire. Things such as stock growth, business growth and appreciation of property can all 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, specifically passive income streams, is extremely important to ones financial success. If you could create 3 streams of passive income that earn you an extra $500 per month collectively you would be up $6,000 per year. If you invested that money for 10 years and earned 6% interest per year that would turn into almost $100,000. That’s a substantial amount of extra money with the possibility of growth and with minimal work involved!
If you haven’t already begun building yourself a passive income stream, what are you waiting for? Get out there and do something that you can look back on in 10 years and thank yourself for!