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For most of life, I thought that I would graduate college, get a job and work until 65 years old. I thought that if I played my cards right and was smart with my money, I would be able to retire maybe by 60. But after I graduated from college, I realized that I didn’t want to work at a 9-5 job for 40-plus years of my life. I wanted to be able to do what I wanted and still generate an income.
Single Stream of Income
Many of us have one source of income during our adult lives: our job. If we were to lose our job, the source of our money dries up. Many people refer to this source of income as an income stream. With me being a professionally trained artist, I’ve created what this income stream looks like below.
As you can see, the income from your job is your sole source of income, or the river in the above masterpiece. The problem is that if there is a drought, the river dries up. Same thing if you lose your job – your sole source of income dries up.
For most people, it’s not until we hit retirement age where we actually take advantage of more than one source of income. Retirees collect Social Security and they also live off of their investments. Some might even work a part-time job during retirement just to stay active, while others may benefit from a pension. Below is what this looks like.
Here we have two additional streams of income. As such, we have smaller streams feeding the main source of income. In this example, Social Security would be the main source of income, while investments and a part-time job would be the smaller streams. While it doesn’t appear to the naked eye to be making a difference, the additional income streams do make a difference. If one of our streams were to dry up, we still have other streams of income providing for us.
Creating Multiple Streams of Income Earlier
Getting back to my story of not wanting to work a 9-5 job my entire life, I realized that having a sole source of income would not cut it. If I only lived off of one source of income, my job, I would get to retire, but not as quickly as I want to. After all, when you think about it, most people retire once they can afford to do so. They have that one stream of income that, if they were financially smart, they could afford to retire in their 60’s or 70’s.
If on the other hand, they added additional streams of income, they could afford to retire earlier. This is the route I am taking. As you can see in my final masterpiece below, I have many additional streams of income. My job is currently my main source of income, however, I have additional streams as well:
Some of these streams are just that, a stream. But others are smaller rivers. All of them feed into the main river of income, which causes it to swell and grow in size.
Being Smart About Streams
You might think that I could do anything to provide additional income streams. When I first started adding streams I thought the same thing. But I quickly realized that this isn’t the case. Some streams aren’t worth the effort in sustaining them; they are just created quickly, like from a downpour of rain.
You need streams that are worth your effort and time. I was focusing on a new stream a few months ago that was providing me a decent amount of money. But when I took a step back I realized that if I focused more on a few of the streams I already established, I could quickly grow them to be twice their current size. That stream would be bigger than the new stream ever would be.
When you do what the majority of other people do, you are going to have roughly the same result. People who are smart with their money and rely on their job as their sole source of income tend to retire in their mid-to-late 60’s. People that are smart with their money and have additional sources of income on top of their job provides the opportunity for them to retire sooner.
To do this, taking on part-time jobs or putting up your own small business can be a good way to build and create new income streams. You can even do all of these online if you want. You can sell your products and services on websites like Amazon, eBay and Etsy. There are plenty of great ways to earn extra cash. You just have to find one that’s suited for you.
I want to retire sooner rather than later. As a result, I am focusing on creating many streams of income so if I were to quit my job, they would still be able to provide a river’s worth of income. It’s not easy and I need to be smart about what activities I choose. But if I stick with it and choose wisely, I am certain I will get to where I want to go.
Readers, do you have multiple streams of income? Why or why not? Feel free to share your insights below.
Author Bio: Jon writes for MoneySmartGuides, a personal finance blog that helps educate people on personal finance so that they can reach their financial dreams. He focuses mainly on investing and paying off debt since those are the two of the most challenging personal finance topics we face.