Multiple income streams are the most efficient way to build wealth. In fact, the richest people on the planet are rich because of their diversified streams of income. On that note, the first question that comes to mind is this: how many income streams do you need?
Well, the answer is seven.
All the highly paid professionals, on average, have 7 diverse categories of income streams. They are able to earn the required capital to invest in a stream. Moreover, they can strategically throw that money into diversifying their stream channel further.
With that in mind, here are the seven streams of income that you should have and why.
This is your full time, nine to five, day job or your career –this takes up most of your time and energy in exchange for a major source of reliable, steady income that pays the bills, keeps a roof over your head and your tummy full.
A start-up for providing services or a product is one of the most popular ways of generating income today. The profit that you can gain from the startups keeps your business operating as a form of re-investment, attracts outside funding, and increases company value –thereby increasing the net worth further.
This is the stream of income you tap into when you lend your money out to CD, P2P, real-estate, crowd funding or saving accounts. The advantages of this channel of income include the easy application process, minimal credit score impact, fixed interest rates, transparent monthly payments, the absence of prepayment penalty and the ability to invest as both individuals and institutes.
This stream of income involves the cash generated by owning company shares. Dividends can be a source of income, or use them to buy more shares of the mutual fund. Dividends result in a steady, less risky, less aggressive and reliable stream of income.
If you own something, you can rent it out in exchange for monthly payments. This has been a traditional mode of income generation and some of the major advantages of this form of income include a steady, direct income stream and substantial growth in the property and equity value down the years.
These are the profits that you make from selling capital assets, which include property, land, computers or vehicles and reduce your tax liability. Capital gains have the advantage of potentially lower tax rates and deferred taxation, although the latter may be limited to certain entities and income types.
ROYALTIES & LICENSING
This form of passive income revolves around you creating a product or an idea, and having people pay you a small fee for using it. This product can be a course, an image or a design.
The plus points of this form of income are that you don’t need to find money to commercialize your product. This allows you to leverage an expert’s experience, infrastructure, and involvement to break into new markets and generate revenue because the licensee manufactures, packages and distributes the product. All the while, you retain your ownership of your intellectual property.
DIVERSIFICATION IS KEY
It makes the most sense to diversify your streams of income. Unless you find one that is particularly profitable for you –in that case, go for it. However, we would suggest not putting all your eggs in one basket. Diversification is the key here to build long-term wealth.