Different Types of Income Streams

Different Types of Income Streams

There’s a lot of talk in the world of personal finance about the importance of having multiple income streams. On a high level, having multiple streams of income helping you reach your financial goals sounds pretty great. However, it can be tough to know where to start – especially if you’ve only ever worked a traditional 9-5 job. When you start building a strategy for creating different income streams, it’s important to know a few different things:

1. Why these different streams of income are important, or what goals they’re going to help you achieve
2. What types of income streams are available to you
3. What types of income projects make the most sense for you and your family

As always, the most important thing on this list is your why.

Why Should You Have Multiple Income Streams?

For most people, the income they receive from their full-time job is enough to cover most of their budgeting basics. Some months may be tighter than others, but they often feel stuck because they’re not sure how to consistently live more comfortably without asking for a raise every 3-6 months. This is where having multiple streams of income can help.

Developing different streams of income empowers you to reach your goals more quickly, protects you against the possibility of losing one income stream, and helps you to grow your wealth for the long-term. All of these things can be part of your why for developing multiple streams of income, but you should also think through tangible reasons and benefits that are relevant to you.

For example, are you looking to grow your cash flow each month to travel more? Do you want to use the extra income you’re earning to save for your child’s college education? Are you working toward a short-term savings goal, like a home purchase? Do you have a hefty debt load that you want to pay off ASAP? Knowing your unique “why” will help you to stay motivated, even when building multiple streams of income feels overwhelming or tiring.

Primary Income

If you’re single, your primary income is the only primary income you have to think about. However, if you and your partner share finances, one of you likely acts as the “breadwinner.” Many of my clients are women and are also the breadwinners in their families, but that’s not always the case. Regardless of who the primary income is coming from, the income itself usually checks a few boxes:

  • It covers all or most of your expenses
  • It’s a W-2 income, or a steady income from self-employment
  • It’s the most reliable of your income streams

Primary income is usually the paycheck that comes from your full-time job every other Friday. The benefits of having a steady primary income are that you can typically always count on it as a baseline for your budgeting and financial planning. However, if you’re 100% reliant on your primary income, you run the risk of financial instability if you should ever lose your job or become unable to work.

Passive Income

Many people look to increase their passive income first, for obvious reasons. Our full time work can be exhausting. When we pile on all of our other responsibilities, there aren’t very many hours left in the day to grow multiple, active income streams. Figuring out how to incorporate passive income into your financial plan is one of the best ways to start increasing your cash flow and growing toward your goals. However, not all passive income is created equal.

The Passive Income Myth

The idea of passive income is incredibly appealing for most people. In today’s world with increased access to resources and tools through Pinterest, podcasts, different blogs, and social media – there are hundreds of thousands of people out there selling the idea that they’ve “made it” overnight using passive income strategies. They might be promoting their recent blog, their sponsored podcast, or an affiliate program they’re participating in. There are two things to keep in mind here:

1. Nobody is an overnight success.
2. The “passive” income strategies they’re promoting usually aren’t 100% passive.

The truth is that passive income takes time in the vast majority of cases. Building a blog, selling affiliate courses, or selling an online product or services requires a big investment of time up front. With time, that investment can start to pay off, with minimal ongoing work from you. However, on the front end, these are definitely not “passive” income streams.

Interest and Dividends

One of the only true ways to earn passive income is to grow the money you currently have through investing. Dividends are the share of the profit you bring home as the part owner of a company (which you are when you purchase stock). Interest, on the other hand, is money you earn on a loan you give to a company. When you buy their stock, you’re technically loaning them funds, and those funds earn interest over time. Investments that earn interest, or pay dividends, tend to grow. The key is spending time in the market, and investing for the long-term rather than seeking a quick pay out.

Although you may need to spend some time up front coordinating your investments or working with a financial planner who manages them for you, adjusting your portfolio quarterly or annually to stay on track to meet your goals is by far the least time-consuming of other so-called “passive” income strategies you could pursue.

Active Income

Many additional income streams that people choose to incorporate into their financial plan are relatively active. Although the revenue might be recurring, these revenue models require work on your part. How much work you’re willing to pour into these active income streams is entirely up to you! Some will require more than others, and some will be more enjoyable for you than others. Typically, I recommend that people pursue active income streams that energize them. This is especially true if you’re already working full time and have a limited amount of hours in a day to dedicate to this secondary income stream.

The “Side Hustle”

Most people who are pursuing an additional stream of income pursue a side hustle. This side hustle is a job or freelance work that you take on in addition to your full time career. In many cases, people’s side hustle evolves into their full time job, especially if they pursue something they’re passionate about. I’ve seen side hustles take many different forms. A few ideas might be:

  • Starting a monetized blog
  • Growing your social media presence and promoting products through affiliate programs
  • Selling a course or online product
  • Repurposing items and selling them for a profit on Facebook Marketplace, Craigslist, or eBay
  • Picking up freelance writing, editing, or graphic design work
  • Dog walking and pet sitting through the Rover app (or by advertising around your neighborhood)
  • Selling handmade products through sites like Etsy or in-person at your local farmer’s market
  • Purchasing a rental property and becoming hosts on sites like Airbnb or VRBO, or renting it out to long-term tenants (remember: this is a lot more labor-intensive than it sounds)

Side hustles can be tough work, but if you pursue work that you love doing, it will help keep you motivated even when you’re feeling the strain of working in addition to your full time job.

Adding Income Isn’t the Only Way

Although having multiple streams of income can help you achieve many of your financial goals, it isn’t the only way to free up cash flow, build your savings, or pay down debt more quickly. In fact in some cases it makes more sense to find ways you can cut expenses rather than burn yourself out trying to grow your income. Everyone’s situation is unique, which is why it’s so important to create a comprehensive financial plan that puts you on track to meet your goals without totally sacrificing a comfortable lifestyle, your values, or time with the ones you love.

Episode 61: Money Questions You Should Be Asking Your Parents

Episode 61: Money Questions You Should Be Asking Your Parents

Family
Family
Episode 61: Money Questions You Should Be Asking Your Parents
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HOW DO I TALK TO MY PARENTS ABOUT THEIR MONEY AND RETIREMENT?

One of the fun parts of being a financial planner is getting to field and answer questions from clients and readers all around the country. In these Work Your Wealth episodes I’ll be taking time to address and answer questions I’ve come across from readers and clients throughout my career. Today I’m answering the above question.

HERE’S WHAT YOU’LL LEARN FROM THIS EPISODE:

  • What you should be asking yourself now as it relates to your parents and money
  • The importance of talking to your parents about THEIR money
  • Money questions we’ve been asking our parents
  • A few ideas to open up the money conversation
  • How personal money stories can ease the conversation with parents about their money
  • Why you’re asking these questions about your parent’s finances
  • Why your parents should visualize how they see retirement
  • Different revenue streams you should be aware of for your parents
  • How your parents healthcare plan could affect you
  • The biggest cost retirees face in retirement
  • Why you want your parents to have an estate plan set up
  • Items to look for in an estate plan
  • Why you need to ask, “Will you need my help?”
  • The reason you should ask your parents about their retirement finances
  • How to plan now to help your parents in retirement

LINKS WE MENTIONED ON THE SHOW:

LET’S CONNECT!

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Episode 60: Overcoming Industry Stereotypes in Your Career with Shannah Game

Episode 60: Overcoming Industry Stereotypes in Your Career with Shannah Game

Career
Career
Episode 60: Overcoming Industry Stereotypes in Your Career with Shannah Game
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Do You Feel Like Career Stereotypes are Standing in Your Way?

***This is part 2 of a back-to-back podcast. To listen to part 1 visit Shannah’s podcast at Millennial Money Podcast.***

This week I sat down with CERTIFIED FINANCIAL PLANNER™, podcaster, lecturer, and award-winning financial strategist Shannah Game who is on a mission to revolutionize how millennials think, act, and feel about their finances.

Shannah Game is host to the universally popular and top-ranked iTunes podcast, “Millennial Money” with listeners in 164 countries and over 4 million total downloads. Millennial Money has helped millions of listeners demystify money topics in a playful and approachable way and features interviews with musicians, authors, chefs and entrepreneurs to help inspire listeners to go out and achieve their dreams regardless of their budget.

Aside from her podcast, she is an entrepreneur at heart, starting her first business, Hometown Cinema, Inc. at 19 while in college at Indiana University that helped over 130 students get jobs and internships in the entertainment industry. Shannah is a Lecturer in Finance in California State University Northridge, where she empowers students to take ownership over their money from a young age. She is also the owner of a company that creates original personal finance media content and is an accomplished financial writer and speaker. Her financial expertise has been highlighted in articles for Women’s Health, Money Magazine, Teen Vogue, MSN Money, Reuters, Bankrate.com, Refinery 29, CNBC and Yahoo! Finance to name a few.

HERE’S WHAT YOU’LL LEARN FROM THIS EPISODE:

  • Shannah’s unique roa to becoming a CFP®
  • How Shannah’s career path lead her to become a professor for Cal State Northridge
  • What led to Shannah launching Millennial Money Podcast and the unique topics discussed
  • Men and women’s different perspectives on money
  • The strides that are being made by women in a male-dominated industry
  • How Shannah empowers women through her podcast
  • The importance of a solid support system
  • The power and significance of a great mentor
  • How to fight for yourself against industry traditions
  • Shannah’s opinion why there aren’t more women in financial planning
  • Why you should embrace your inner salesperson
  • How Shannah approaches money topics with her students
  • Why Shannah uses real life financial experiences when teaching
  • The teaching style Shannah’s students are most receptive to

LINKS WE MENTIONED ON THE SHOW:

GET SOCIAL WITH SHANNAH AND LET HER KNOW YOU HEARD ABOUT HER HERE!

ENJOY THE SHOW?

 

Episode 61: Money Questions You Should Be Asking Your Parents

Episode 53: What to Know About Infertility & Your Finances

Ask Mary Beth
Ask Mary Beth
Episode 53: What to Know About Infertility & Your Finances
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WHAT SHOULD I CONSIDER ABOUT INFERTILITY TREATMENTS AND MY FINANCES?

One of the fun parts of being a financial planner is getting to field and answer questions from clients and readers all around the country. In these Work Your Wealth episodes I’ll be taking time to address and answer questions I’ve come across from readers and clients throughout my career. Today I’m answering the above question:.

WHAT YOU’LL LEARN FROM THIS EPISODE:

  • How many people experience infertility
  • Our story with infertility and how it affected our finances
  • What you need to know to be better prepared if you are going through infertility issues or looking at adoption
  • Questions to ask ahead of time around fertility treatments so you don’t derail your financial situation
  • Where to start when you find out you and your spouse do have fertility issues
  • Questions to ask your insurance company to better identify what you will/will not have to pay for out of pocket
  • What to do and how to approach the initial consultation
  • What you should bring with you to every meeting
  • More questions to ask your insurance provider.
  • The importance of knowing your limit (emotionally, financially, and length of time) if you are having fertility issues
  • Why it’s important to approach the situation with a more conservative financial limit

LINKS MENTIONED ON THE SHOW:

LET’S CONNECT!

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Episode 61: Money Questions You Should Be Asking Your Parents

Episode 37: A Brief Financial Pep Talk

Behavioral Finance
Behavioral Finance
Episode 37: A Brief Financial Pep Talk
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In today’s episode I’m recapping a recent blog post I wrote giving you the pep talk you may need around your money. If you’re in need of a loving (and brief) kick-in-the-pants around your finances, this is for you!

LINKS MENTIONED ON THE SHOW:

LET’S CONNECT!

ENJOY THE SHOW?