If there is anything 2020 has taught us, it is that jobs are not safe, and at any moment, our financial status can change. The days of job security are gone. If you have one form of income and nothing to fall back on, you’re taking a financial risk. Imagine receiving a call tonight saying your job was downsizing and your position was no longer needed, or your company went bankrupt and it had to shut down.
The truth is — we have no control over the future of our job. Everyone is always replaceable. A job could be here today and gone tomorrow. It’s time for us to stop being comfortable with one form of income.
Why Multiple Streams Are Important
Here is why having multiple streams of income is important:
Limited Job Security.
No job is 100% secure. If you’re not working for yourself, you’re working for someone else, and only the owners know what goes on behind closed doors. You’ll never find out about the downsize until they’re ready for you to know. You won’t know someone has bought out the company until they want you to know. You won’t know they’re in bankruptcy until they want you to know. What I’m saying is you don’t know what tomorrow brings on any job. It’s here today, gone tomorrow.
Income Security.
Truth be told, most people live from paycheck to paycheck. Having an additional stream of income will help keep you financially stable from one pay period to the next.
Rising Health Care Costs.
Have you received a medical bill lately? The cost to walk through the door has even gone up. Company health insurance is not always enough. Sometimes you need supplemental insurance, especially if you have conditions that keep you in a doctor’s office. Having an additional stream of income can assist with this.
Pensions are a thing of the past.
Gone are the days when you could depend on a job’s pension to take care of you 30 to 40 years down the road. Nowadays, working 30 to 40 years on a job barely gets you the iconic watch. If you want any type of retirement, you have to build it yourself, and an additional source of income can help you do that.
Living Comfortably.
With the rising costs of everyday living — food, clothing, shelter, gas — it’s worth having another stream of income just to be able to catch up with the cost of living.
Paying Off Debt.
It’s great to have a plan in place to be able to pay down your debt. You’d have even more opportunities to pay it down faster if you had more income to work with. Having an additional stream of income can make that happen.
The Elimination of Social Security.
No one knows how long social security benefits will be around. And even if it is here when you are of age, don’t rely on it to be your sole source of income. At the rate the cost of living is increasing, your social security benefit will be a drop in the bucket, barely making ends meet. Having an additional source of income can help build the type of retirement fund you deserve in your best years of life.
Active Income vs. Passive Income
Now that you understand the importance of having multiple streams of income, let's look at the two different types of income: active and passive.
When you make money, it will fall into one of two categories — active or passive.
Active Income
Active income is a one-time money transaction you earn in exchange for what you do. For instance, if you work for someone and they agree to pay you hourly wages. You are working to earn money for each hour that you work. You only receive income once for every hour. Meaning if you don’t work, you don’t get paid. Some common examples of active income are hourly wages, salaries, commissions and tips. Most of us are familiar with this type of income and may consider one of these as another stream of income, so we’ll spend the rest of our time on passive income.
Passive Income
Passive income is income you consistently earn now and in the future on work you’ve already done. In essence, earning passive income is getting paid for work you’re no longer doing or others are doing it for you. This is literally making money while you sleep. When considering multiple streams of income, consider ways to earn passive income:
Earning Interest from Investments
Building money through investments is smart for down the road. Earning money on investments is one of the most powerful forms of passive income. This takes discipline and the commitment to consistently invest, sometimes aggressively. By the end of the investment period, you could have a million dollars or more, with a lot of that coming from interest alone.
Affiliate Income
This is money you receive as a referral commission. When you use social media to promote other people’s products and cause someone to click on your link and purchase that product, you earn income. And all you did was post about it. Many companies offer ordinary people the opportunity to become affiliates to earn commissions for helping to sell their products or services. This is a great opportunity for anyone who loves to blog.
Investing in Real Estate
One of the best ways to earn passive income is to purchase property, fix it up and then put it back on the market — to rent. When you do this for a property that’s already paid for, you are earning income monthly for a property you no longer have to pay a mortgage on, just keep maintained. This requires a lot of upfront investing initially to obtain the property, but passive income is money you’re earning for years to come, so the investment is well worth it, especially if you have multiple properties to rent.
Online Course Sales
If you have a large social media following and a valuable skill that people need, this is a great way to earn some passive income. Creating a course, marketing it, and having it available for people to purchase is income you will see for years to come.
Why Passive Income is Important
Passive income takes years to build, so initially, a lot of work and time is needed to kick it off. But money doesn’t usually fall into the laps of people who don’t want to put in the work. If any of these passive income opportunities interest you, consider working towards it.
Once the work has been done, your physical presence and effort are no longer needed to make money. If you start early enough, this is the perfect additional income for retirement.
Conclusion
At the end of the day, there are so many reasons why having multiple streams of income is important. Whether it’s active income, passive income, or a combination of both, the time to ensure financial security is now.