Why Have Multiple Streams of Income?
By Steve Gillman
In addition to being the title of a popular book, the concept
of multiple streams of income is just plain a good idea. Let's
take a closer look at this financial metaphor.
You can easily see the value of having many different streams
of money flowing into your life. Like a town that has more than
one source of water, you are more secure if you have many sources
of income. Any one of them can go dry and you'll still be okay,
unlike the employee who has just his paycheck (or the town that
relies on one unpredictable water source).
That much is easy to understand, even if you haven't yet started
working on developing those multiple streams of income. But the
other part of the metaphor is found in the nature of the stream
itself. It flows automatically according to gravity, bringing
an ever fresh supply of water. This is very different from a
lake or pond, isn't it?
Imagine for a moment if you are a farmer and you had to water
your fields by carrying a bucket at a time of water from a pond.
There would be a severe limit to how much you could grow. There
are only so many hours in a day to work, after all, and you can
only carry so much.
Now imagine if you could divert a stream to irrigate your
land. It would take a lot of work perhaps, to build a ditch and
install the necessary equipment. But once you did that the water
would come automatically, allowing you to grow much more, and
freeing your time to develop other ditches and so grow other
That idea of irrigation is essentially the same concept as
the idea of residual income. Just like water comes without additional
effort once you do the right kind of work initially, so does
money come in with little or no additional effort once you do
the right kind of initial work. In case you doubt this, let's
look at some examples of these streams of income.
Examples of Streams of Income
I used to play chess with an insurance salesman who was retired
at 50 years old. How was he able to quit working at such a young
age? By selling policies that paid him a commission every time
the holder renewed them. Every year people renewed their policies
and he got a percentage. He probably worked hard to get to that
point, but then the income stream flowed without additional work.
At the start of 2005 I built a website on how to remove carpet
stains, putting in one long hard week at the computer (I had
been a carpet cleaner at one time). I mostly ignored the site
in the years that followed, and still only spend less than a
dozen hours a year maintaining it. Meanwhile almost $20,000 has
flowed into my bank account from this site and it still comes
in at the rate of more than $500 monthly.
My wife and I sold a mobile home on a lot a few years back.
We are taking payments on it, which allowed the buyer to get
into it more easily (he bought it as an investment and is renting
it out). Selling it that way allowed us to get a higher price,
and we get good interest as well. The money comes in every month.
We have to renew this income stream eventually, of course, perhaps
by buying another property and selling it for payments again.
I get a newsletter from a man who buys high-dividend stocks.
He doesn't worry about where the prices of the stocks go from
month to month, because the dividend checks just keep coming
in. The work here is in the research necessary to find solid
companies that are unlikely to cut their dividends. Then once
you invest a chunk of money the stream flows without much additional
effort (occasional research and new investments are a good idea).
Rental real estate, dividend paying stocks, secured loans,
renting a room in the house, making automated websites, selling
things that pay ongoing commissions, writing a book, licensing
an invention for royalties - these are just some of the ways
to develop multiple streams of income. A job works too, but that
is perhaps the most insecure source these days. Keep the job
for now, but why not start creating a few other streams of income
that flow your way?