Originally uploaded by mutenostrilsyndrome
Have you ever wanted to live without needing a paycheck? Or have you ever wondered what would happen if you happened to lose your job? Having only one source of income ties you directly to that source and makes you dependant on it. Having multiple income streams means that if any one of them vanishes you’ve still got the others in place so you don’t have to worry. A single source of income is prone to vanish at the worst of times, especially now that the American economy seems to be sliding into a recession and layoffs are constantly in the news.
If you’re conscious about your money and have been paying attention to the markets lately, you may have heard people mention that now is the time to make sure you have alternate income streams. The first question that really needs to be answered is what is an income stream? Very simply, it’s something that brings you income. For most people they have one income stream, their job. Alternate income streams are activities that you set up to bring you money from an additional source. For businesses this is essential in order to remain viable, but it also applies each individual in order to not be reliant on any single source of income.
There are two types of income: Active and Passive. An active source of income is something that requires you to commit your time and energy in return for money. A perfect example of this is a job. You spend 40 hours a week working for a paycheck; if you don’t go to work you won’t get the pay. Passive income on the other hand, is income that requires little, if any, input from you as a person. Some examples of passive income streams are dividends from stocks owned and interest on money in the bank. There are many more types of passive income but those two examples require no input from you and continuously generate income.
Personally, I would much rather have money coming in from passive income streams than active ones. I would love to have all the time in the world to travel and pursue activities that I want to pursue rather than go into an office. Another aspect to consider is, how many income streams do you have in place? If you have only one income stream, from your day job for example, you’re forced to maintain that job to pay for your bills. You are tied to this income stream and if you happen to be living from paycheck to paycheck this income stream becomes incredibly important. This type of reliance is what most people live with day to day. This is also one of the reasons that you want to set up alternate income streams.
Although your day job might be enjoyable and something that you’re passionate about it does not guarantee that you’ll get money from it all the time. I know the nay Sayers will argue that their job is secure but the reality is no single source of income is every guaranteed. Most of the time I like my day job but I am also tied to it because I have few other sources of income. In the back of my mind I worry about not getting paid (which happened lately) and the impact this would have on my life.
I’ve been working on a side project lately that would become an alternate income stream. Because I don’t have an extra 40 hours per week to concentrate on this project its slow in being set up but I’m making sure that when everything is in place there will be little need for my input. This will become a passive source of income for me. With a little planning most side projects can be set up this way. If this project works out the way I would like it to then my day job won’t be the only source of income that comes into my bank account.
Side businesses and projects are not the only means of setting up alternate sources of income. Saving money in a high interest saving account will do the trick. It might not be very glamorous but even 4% interest is extra income. There are many ways you can go about setting up alternate sources of income its just a matter of preparation.
Having alternate income streams means that you aren’t tied to a single job and don’t have to worry about the what ifs and issues if it happens to vanish. I think everyone should consider setting up a few income streams even if they are simple. If you can take the money you make and have it start making money for you then you won’t need to work as hard to maintain your lifestyle.