Setting Up Multiple Streams of Income

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For most people, an income will come from one main source – a job. To increase that income you either have to do more hours at your current job (and lose out on down time), try to earn a promotion (if there’s one is available) or look elsewhere for a higher paying job (easier said than done). If significantly increasing your main source of income is not an option then what else can you do? As well as finding ways to save money, the most effective thing you can do is to try to set up multiple streams of income.

Multiple streams of income

The most substantial way to increase your income over time is to create multiple streams of income so you are not reliant on just one. One of the main differences between those who build wealth over time and those that don’t is the ones that do put their money to work. The money invested generates extra income, which is then reinvested, and the cycle continues. It’s not much extra work but over the long term it’s a lot of extra gain. Create extra streams of income and you will build wealth in your sleep. Here are some examples:

  • Investing in stocks and shares
  • Investing in rental property
  • Buying fixed income investments (e.g. bonds)
  • Starting a side business
  • Renting out a room in your house
  • Renting out a garage or parking space
  • Writing a book/ebook
  • Buying and selling (e.g. eBay)

Once you have extra income streams in place the next step to building wealth is to reinvest the profits. When I receive a dividend the I leave the money in my share dealing account. The the next time I buy shares I include the dividend money so I can buy extra shares. That dividend money is now generating its own money. If buying shares is something you are interested in doing then be sure to learn how to value a stock.

If the rental income from a property investment exceeds your expenses then keep the surplus aside to be reinvested (or pay down the mortgage). The same rule applies to any extra income stream you can create. Let’s say you are able to make an extra £200 a month, here’s how your returns would look like over 5 years and 10 years if you were to continuously reinvest your profits:

Total invested (5 years / 10 years) = £12,000 / £24,000

Returns @ 5% = £1,618 / £6,998.41

Total Gain = £13,618 / £30,998.41

And if you were able to generate a 10% return:

Total invested (5 year/10 years) = £12,000 / £24,000

Returns @ 10% = £3,434.35 / £16,291.52

Total Gain = £15,434.35 / £40,291.52

In the first few years interest is building moderately but once the power of compounding takes over the increase is much more dramatic. After 10 years, a sizable amount of the money you now have is your return on investment.

Most people will see more money equaling greater spending power. If you want to keep growing your wealth then you should look at it as meaning greater investing power. The example above highlights just how much extra investing power you have if you are saving and reinvesting your profits. Not only that but you also have a much greater ability to seize an opportunity when it presents itself.

Summary

If you don’t currently have more than one stream of income then look at where you can add a second. From there you can look to add further revenue streams. Some will be easier than others and some will require a lot more work than others. It’s important to consider both risk/reward and effort/reward to ensure you are making sensible investments and being efficient with your time. You don’t need to try to go from one revenue stream to seven overnight. Just take it one at a time and you’ll soon see it making an impact. Take it to the next step by reinvesting your profits and the impact will be huge.


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