The advantages of having multiple income streams

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Traditionally, the majority of us earn a living from one sole source of income. One company, one salary, one means of generating money to support all of our financial needs.

The problem here is that there is a huge reliance on that one source of income. What happens when unexpected things happen? Injuries, job cuts, changes within a company, increased stress in the role, a global pandemic - losing that single livelihood is devastating.

Multiple income streams mean more flexibility with your finances. This is in the form of one or more business projects and investments to create a financial portfolio.

Types of income streams

Sources of money fall into either active or passive income.

Active income refers to money made from a salaried job - money that required significant time and energy to earn. Passive income is made with very little effort, and once set up, it generates money on its own. This includes dropshipping, stocks and shares, affiliate marketing, and book sales.

What are the advantages of having multiple income streams?

Worrying less about money

Finances are top of the list of anxieties for many people. The 2022 Consumer Pulse Survey by McKinsey found that on average, 53% of European survey respondents said rising prices are their main worry. The survey studied 1,000 responses from each European country. The UK led with 67% most concerned about inflation prices, Spain with 55%, France with 54%, Germany with 48%, and Italy with 42%.

The invasion of Ukraine, unemployment rates, extreme weather conditions, and Covid-19 were all significantly less worrying for all European respondents than money.

The invasion of Ukraine, unemployment rates, extreme weather conditions, and Covid-19 were all significantly less worrying for all European respondents than money.

Similarly, in a survey of 3,000 Australians by the ANU Centre for Social Research Methods, there was a five-point surge of those with financial distress between November 2020 and February 2021. Money worries surpassed Covid-19 concerns, with almost 79% of the respondents highly-satisfied with the management of the pandemic in Australia.

Gaining financial freedom cuts this anxiety down, giving you time to focus on your health and family, and enjoy your life.

Starting a cycle of wealth

One big myth is that most millionaires inherited their money. While it is true that some millionaires are lucky to be born into generational wealth - families that successfully keep their fortune going for several generations - most millionaires are self-made.

The 2019 Millionaire Outlook Study by Fidelity found that of 1,102 millionaires surveyed, 82% created their wealth themselves. Tom Corley, author of "Rich habits: The daily success habits of wealthy individuals" in 2021, also discovered the same. Of 361 ultra-rich he surveyed, 76% were self-made millionaires.

These individuals now have the opportunity to start a cycle of generational wealth.

Working smarter, not harder

Full-time employment is good for saving money, which is needed to start investing. However, 40 hours a week doesn't leave anyone with time for a side project after commuting, cooking, spending time with friends and family, exercising, and doing weekly chores.

The effort required for this income is taxing. A huge chunk of your week is devoted to one income stream.

Becoming financially efficient means optimising the use of passive income. Spend less time on only one source of income and instead get to a place where you can split your time between projects.

The sweet spot is finding ways to make money that give the maximum output for minimum input. It's not uncommon for high-earners to devote 10-20 hours a week to one active income, and the rest of their work week to manage 2-3 side gigs.

Giving yourself financial options

Diversifying income streams prevents putting all your eggs in one basket. With more sources of income, you can worry less if one performs poorly, as you have the other streams to make up for it. This is how the wealthy make their money and keep it safe from unexpected misfortune.

Tom Corley discovered that 65% of self-made millionaires in his questionnaire had three streams of income, 45% had four, and 29% had five.

Earn from your talents and interests

Many self-made millionaires that built their wealth, invested in businesses that interested them. Working full-time for an employer limits your options and forces you to work on products you might not truly engage with.

It's easier than you think

The notion that becoming very wealthy from your own efforts, without family fortunes to help you, is written off as a pipe dream by most. However, in today's digital world, you have tools available to you that with some time and effort, can change your life financially.

Consider YouTubers and TikTok influencers. They start with a camera, laptop, access to the internet, and something they are interested in that they want to share with their audience.

By simply prioritising your time, having discipline, and taking advantage of what you have available to you, building wealth is accessible to most people.

Devote time to educate yourself, research, find a mentor, learn how to set up a business online, and learn how to invest. You only need to start small and begin to add new income streams with time.

Final words

Achieving financial stability and having the life you want is yours with the right mindset.

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