Warren Buffett is known as one of the best investors to ever exist. Each year, he earns just $100,000 from Berkshire Hathaway. For the last 25 years, his salary has remained the same. During the same time period, he has managed to become the fourth richest person in the world.
Buffett did not increase income and his net worth through his day job. Like many investors, he became rich through the power of his business income and investments. To increase and maintain your net worth, you need to do more than rely on your W-2 income.
The Advantage of Having Multiple Streams of Income
When you depend on a single job, you place your finances at risk. If you are laid off, you have to depend on your savings or unemployment checks until you find a new position. By using passive investing and other strategies for wealth building, you can develop multiple income streams. Even if one income stream fails, you still have other income streams available that you can rely on.
When you have multiple income sources, it helps in the following ways.
- You reduce your risk level. With multiple income streams, you are less likely to end up without any income sources.
- Having multiple income streams is often easier than creating one large income source. Diversifying your income also helps to protect you from risk.
- You can create income streams that focus on your talents or interests.
- Having multiple income streams helps you reduce boredom because you constantly get to do new things.
- You can increase your overall savings and net worth.
- Eventually, you could quit your day job.
There are potential drawbacks you should be aware of as well. While passive income can help you build wealth, it also takes work in the beginning. Whether you invest in a rental property or an online site, you will have to spend time building your income stream. In addition, you will need to do your research to make sure that your income stream is a viable one before you invest your time and money.
How to Generate Multiple Income Streams
In the beginning, you should start by creating a mind map. The center of the map is for your main product or service. Then, you should draw four spokes that lead to products, advertising, services and other sections. These are the main categories you can use for investing and creating passive income sources.
From these spokes, you can draw more lines and ideas. For example, you can create products like online courses, physical products or ebooks. Under the advertising section, you could list a website or blog. While the services section may include options like driving for Uber, the other section may include ideas like renting out an investment property.
Ideally, you should focus on passive income streams. This kind of income involves doing the work once, but you get to reap your rewards over and over again. For example, a book is a good source of passive income. Once you have written and published the book, you continue to earn royalties as long as people keep buying it. Affiliate marketing and franchising are also popular methods for generating passive income. You may also want to focus on ideas that help you grow your main business or career.
Developing multiple income streams takes time and effort. Start with just one income stream. Once you have finished planning and initiating one stream, you can begin working on the next one. If an income stream fails, you should be willing to drop it and move on.
1. Invest in a Property
Real estate is one of the oldest and best ways to develop passive income. Once you buy a property, you can rent it out to businesses or residents. If you want an easier option, you can hire a professional property manager to take care of the property. Normally, property managers charge about 10 percent of the monthly rent. While this may reduce your cash flow, it will also allow you to spend more of your time building other income sources.
When you invest in a property, you have to do your research. If the property is not in the right area, it will not attract tenants. In addition, a decrepit building may require a huge investment in renovations before it can be rented out.
If you make a wise investment, your tenants will pay your monthly loan cost for you. Over time, they will pay off the mortgage until you owe nothing. At this point, your investment turns into your retirement plan.
2. Buy Index Funds
Index funds are one of the best investment options available. Normally, you have to pay commission fees and other costs when you invest in mutual funds and stocks. An index fund charges less because it does not use brokers or stock pickers. Instead, these funds automatically invest in the overall market.
Over the last 100 years, the stock market has always increased in value. Because index funds save you so much money on commissions and fees, you end up earning more in the long run. Plus, you do not have to choose which stocks you want to purchase. Once you contribute money to an index fund in your portfolio, you can sit back and enjoy your new income stream.
3. Write a Book
If you are an expert on a specific topic, writing a book can be a viable source of income. In addition, it can help you advance your current career or business. When people see that you have published an authoritative book on the subject, they are more likely to see you as an expert.
Today, you can easily publish ebooks on your own. Once you have written your manuscript, you can hire someone to edit, format and market the finished book. You can sell the ebook on your site or through retailers like Amazon. In addition, you can give the ebook to your clients during promotions.
While writing a book involves a lot of work at first, it becomes a passive income stream once the book is published. This is especially true if you work with a publisher. Once the book has been published, the publisher will send you a percentage of the sales on a quarterly or annual basis.
4. Create YouTube Videos
By 2021, researchers estimate that people will spend 100 minutes a day watching video content. Because of this, many marketers are using online videos to advertise their products. You can capitalize on this trend by creating YouTube videos.
If you want to build your net worth, this is an easy field to get started in. You can create videos like tutorials or movie reviews. Then, you just have to put them on YouTube. If you link Google AdSense to the videos, then they will automatically include advertisements. When viewers click on these ads, you end up making money. The best thing about this plan is that you need very little capital to get started with it. Once you have your videos on YouTube, you can kick back and enjoy a new source of income.
5. Start or Buy a Blog
You can bring in advertising and affiliate revenue using a blog. If you have a limited budget, you can always create the blog yourself and wait until it has more views. To buy a blog, you will generally have to pay about 24 times the blog’s monthly income. If the blog earns $200 a month, you can expect to pay about $4,800 for it.
Investing your time and money in a blog can pay off. Top blogs earn millions of dollars a year. In addition, your blog can support your other income streams. For example, you can sell your ebook on your blog or advertise your company’s products.
6. Create and Sell a Product
If you want to focus on wealth building, creating your own product is a good place to start. You can sell your product on your website or in an online marketplace. Once your product is doing well, you can always sell your company. Depending on the kind of product or service you sell, you may be able to turn your business into a franchise as well.
7. Use Real Estate Investment Trusts (REITs)
REITs are another idea for passive investing. If you want to earn money from rental properties without having to do any work, REITs can help. Basically, you are buying a share in a portfolio of different real estate projects. Then, this portfolio is managed by a professional team. At the end of each financial quarter, the funds’ earnings are distributed to each share.
8. Try Airbnb
Do you have a vacation house that sits empty for most of the year? If you have extra space, you can convert your unused rooms into a revenue stream. Once you place your rooms on Airbnb, travelers can rent the space. Depending on how luxurious the rooms are, you can end up earning a significant amount of revenue from them.
You do not have to be limited to just the ideas on this list. If you want to increase income and build wealth, you can also try some of the following options as well.
- Freelance in your free time.
- Become an angel investor.
- Make an online course.
- Become a silent partner in a business.
- Create an app.
- Try peer-to-peer lending.
By building your wealth, you can create a legacy that you can leave to your children one day. Many of these additional income streams involve passive investing, so they require very little work once you have them up and running. Before long, these strategies for wealth building can help you multiply your net worth and create a lasting legacy.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.