For most people, an income will come from one source – a job. To increase that income you either have to do more hours at your current job, try to earn a promotion or look elsewhere for a higher paying job. There is an alternative, though. The most effective way to increase your revenue is to create multiple streams of income so you are not just reliant on one.
Multiple streams of income
The reason the rich keep on getting richer is that they don’t rely on just one income source. When they earn money they invest it. It’s not much extra work but over the long term it’s a lot of extra gain. Create extra streams of revenue and you will build wealth in your sleep (often literally). Here are some examples of extra revenue streams:
- Investing in shares
- Rental property
- Fixed income investments (e.g. bonds)
- Starting a 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)
A key point if you really want to build wealth is to reinvest your profits (not just key, crucial). If your shares pay dividends then keep the money separate and reinvest it when you next buy more shares. If you a receive rental income from a property investment which exceeds your expenses then keep it aside or use it to pay down the mortgage. The same rule applies to any extra revenue stream you can acquire. Let’s say you are able to make an extra £200 a month, over 5 years that’s £14,400 you will have put aside. If you were investing that money at an annual return of 5% and reinvesting all interest the figure would be £16,681.08.
By comparison, if you were spending half of what you made, therefore only saving £100 a month, and you were only earning 3% interest (adjusted to reflect reinvesting less of your profits) you would only have £6,474.02 after 5 years. Quite a difference!
Most people will look at more money equaling greater spending power. If you want to keep growing your wealth then you should look at it as 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.
If you don’t currently have more than one stream of income then look at where you can add a second. Once established 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 also being efficient with your time. You don’t need to try and go from one stream to seven overnight, just take it one at a time and you’ll soon see the impact that having additional streams of income will have.
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