Having multiple streams of income is important. The more lucrative income sources you have the quicker you can reach your financial goals. Multiple income sources help diversify your earnings, provide more financial security and freedom. But how many streams of income should you have?
Why Do You Need multiple Streams Of Income?
There are many reasons to create multiple streams of income. Whenever we create a source of income we are doing it in the expectation to make a financial gain. Be this from a job, business profits, investments or any other method of making money. Creating different income sources may help to achieve our financial goals quicker.
Having several different income sources provides better diversification and financial security. If one income source were to dry up then other sources will continue to provide financial gain.
For example, a job is one source of income, known as earned income. You may invest some of your wages to produce a supplementary income. If you were to lose your job you still have some money coming in from your investments.
Perhaps you want to have enough income to be able to quit your job and be self-sufficient. Or just have extra income for retirement or a rainy day. By setting up other sources of income you can achieve this. But what is the optimum number of income streams to have if you want to gain real wealth?
How Many Streams Of Income Does The Average Millionaire Have?
Whilst there is no magical number there are some interesting facts that show millionaires have an average of 7 different income sources. Of course having 7 sources of income doesn’t mean you will become a millionaire. Likewise having less than 7 doesn’t mean you can’t become a millionaire.
There are a lot of other factors at play including the actual type of income sources you use. Plus the amount of time, effort and capital investment you put into them.
How Many Should I Have?
Whilst we’ve seen there are lots of benefits to having multiple income streams, the more you have doesn’t always correlate to more money. The key is to find the income methods that you can really maximize consistent high returns from.
Passive income sources are especially beneficial as they require little active involvement to produce returns. Their passive nature makes it easier to create and manage many different income streams. Whereas active income methods require a greater active time commitment and involvement, although can still be highly profitable.
Passive income sources include;
- Interest income – received for lending money out such as cash savings, P2P loans, bonds etc.
- Dividend income – payments received as a shareholder of a company.
- Rental income – money received through renting out something you own such as property.
- Royalty income – fee received from licensing an asset for others to use such as intellectual property.
- Profit income – profits made from selling goods or services.
- Capital gains – this is the overall gain when you sell an investment, the difference between what you paid for it and what you sold it for.
You could aim to create an income source from each of these which will add diversity to your income portfolio.
Having more or less is fine, but 7 different profitable income sources is a good guide to aim for. You do not need to start them all at once, they can be gradually increased over time.
Most people will already have at least one income source, likely earned income, which is wages from a job. Start by adding one new income source to this and gradually expand.
Excess returns from one income source can be used to fund an additional income method. This provides even greater returns and so on.
What Income Streams To Start?
There are many methods to create both active and passive income streams. Some may require capital to invest. This is particularly true of investments such as dividends as you need to purchase stocks first to receive an income. Although you can limit costs by using commission free trading apps like Public.
However there are many, many sources of income that are completely free to create. You can check these out in our list of 50 ideas to build online income streams.
How Many Streams Of Income Conclusion
Many people will have at least one source of income, most likely earned income from wages or possibly profit income from a business. Adding more streams of income has many benefits including better financial security and potential to reach financial goals quicker.
There isn’t an exact number of income streams to have that guarantees wealth and prosperity. However millionaires have been found on average to have 7 different streams of income. So that’s a good number to aim for.
Passive income provides earnings with little to no active involvement so are preferable over active income methods. This is because they can usually be left to run automatically on autopilot to produce income. The main sources of passive income include dividend income, interest income, rental income, royalty income, profit income and capital gains.
Everybody has the ability to create multiple sources of income as many are free to start. Money attained through one source can be used to fund an additional source to bring greater rewards in future.
Get started creating your own income streams right away. Check out our list of 50 ideas for building online income streams.
How many streams of income do you have? Let us know in the comments and please don’t forget to join our newsletter to keep up to date with all our latest content.
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