Multiple streams of income, one of those mystical phrases which always pops up in articles about millionaires or success habits.
Today’s article looks at what this term means, why most people misunderstand it, and how you can properly diversify your earnings.
The Biggest Misconception About Multiple Streams Of Income
For years I, like many people, made a huge mistake. I counted different aspects of the same business venture as multiple streams of income. I’d look at my earnings and think “wow, I have eBooks and affiliate links, and ad revenue. Look at all these income sources!”
In reality, these things are all tied together.
One problem and everything is at risk.
Fast Money Is Volatile Money
(While This Video Is About Poker, The Principles Apply To Day Trading Or Online Business)
I’ve made more in one hour of gambling than most people make in an entire month.
Exciting?
Sure.
Sustainable?
Not at all.
When it comes to fast money, you’ve got a handful of opportunities to win big each year. And even some of those can blow up in your face.
This goes for everything: sports betting, investing, selling something online, etc…
Likewise, what works once doesn’t always work again. I’m currently reading Eduction Of A Speculator, by Victor Niederhoffer. Niederhoffer turned a few thousand dollars into millions, then lost it all by pressing his luck.
“That’s all high-risk stuff,” you might say. “What does this have to do with online business or selling eBooks?”
Well, consider this: How many websites from 1999 are still popular?
What about 2009?
Or 2014?
Tastes and technologies change fast. You don’t want to be 35 years old and moving back with mom and dad because your daily newsletter flopped.
Likewise, online income is cyclical. Winter months see higher sales, while summertime tends to lag.
If nothing else, you might as well diversify for better cash-flow.
How To Diversify Your Income
Assume that whatever you’re doing today will be obsolete within 10 years.
That’s probably not the case, but it is a good thought exercise. It’s also a smart way to plan out your future.
With this in mind, here are several ways to diversify yourself.
1. Start A Secondary Business
This is the easiest way to diversify, and it’s something everyone should do. Once you understand the basics of Internet business, it’s easy to build a second site, product, or brand.
The only downside here is that you’re still tied to trends and specific consumer behaviors.
2. Invest
YouTube is filled with clickbait videos titled “How To Buy Real Estate For $20” or “Become A Business Mogul For Less Than $100.” Every one of these boils down to investing in stocks, bonds, REITs, or similar assets.
The biggest downside to investing is that you need a lot of capital before seeing results.
Writing a PDF eBook costs $50 – $100 for editing and a nice cover. Sell 10 copies a month at $19.99 and you’re making $2,400 a year in passive income.
For similar dividend stock or bond payouts, you need $50,000 – $80,000 in investible income.
That said, throw enough money into investments and you eventually reach a tipping point where you’re returns cover all your expenses.
3. Buy Real Estate Or A Blue Chip Business
Criminal overlord Freeway Rick Ross once said that the greatest drug dealers (the ones who never got caught) reinvested their dirty money into legitimate blue chip businesses.
Likewise, Peter Lynch suggests that wealthy investors buy gravel pits and other mundane, low-volatility enterprises.
The biggest advantage with these businesses, or real estate, is that you don’t have to worry about becoming obsolete. People need a place to sleep, and there’s always a demand for fresh gravel or lawn care.
Closing Thoughts
Multiple streams of income need to be separate from each other. If you own a YouTube channel your ad money, affiliate links, courses, etc are all tied to the same platform. Or if you run a website, everything on that site is still tied to the same venture.
Understand this and then start putting your eggs into multiple baskets.