You may not realize it, but most of us have multiple sources of income. For example, the contributions you’re making to your retirement are earning interest will become a new income stream. These additional income sources will be in addition to your salary — and they will make all the difference in your standard-of-living — especially in retirement.
But, why not go a step further and generate even more income streams? It’s a surefire way to help you reach financial goals like paying off debt or purchasing a home.
More importantly, it helps build your wealth so that you don’t have financial stress. If you lose one source, you have another to fall back on. And, thanks to diversification, this mitigates potential financial losses, like if the stock market crashes.
But, what makes for a good new income stream? Well, it should flexible, scalable, and sustainable. And, if you really want to sweeten the pot, it should be something that you don’t mind doing.
Ways to Generate a New Income Stream
How many income streams should you have? That’s your decision. However, millionaires have the following seven income streams. So, that’s probably a good starting point.
1. Earned Income
For most of us, this is our primary source of income, aka your “day job. However, if you’re a college student working part-time, this is also applicable. Why? Because you’re exchanging your time for money.
Because this is your most important, and time-consuming, income source I would first look for ways to optimize it. For example, working an additional shift or overtime. But, a better idea would become more valuable so that you’ll receive a raise or promotion.
There are a couple of ways to do this. Obviously, you need to be reliable and good at what you do. But, you should also constantly be sharpening or learning new skills so that you become indispensable.
There are, however, other ways to cash-in on your 9-to-5. If you’re a teacher, you could tutor — either in-person after school or virtually through Tutor.com. VIPKid, or Skooli. Are you a graphic designer? Then freelance on the side by listing your services/searching for gigs on websites like Fiverr, Toptal, or Freelancer.
Do you own a business? If so, find ways to bring in additional revenue. For example, a music shop around the corner for me opened-up a year ago. About six months later, the owner started offering lessons and even recording sessions.
If any of the above isn’t an option? Then you might want to find a side gig while keeping your full-time job. Some options are driving for Uber or Lyft, delivering food, bartending, virtual customer service. These qualify because, again, you’re trading your time for money.
2. Business Income
With this type of income, you’re making money from the sale of a product or service. In most cases, that means that you’re a business owner. But, you could still generate a business income as a side hustle. It can be one of the greatest new income streams you’ve tried.
Let’s go back to an educator. You could create an online course and sell it on a platform like Skillshare, Udemy, LearnWorlds, or Thinkfic.
You could also make money through your hobbies or passions, like baking, photography, or making furniture. One way would be to launch a blog, podcast, or YouTube channel. Or, you could sell your homemade products on Etsy or in-person at a local flea market.
Best of all? You can do this from the comfort of your home. If you don’t believe me, then here are 101 home-based businesses that you can start today.
And, the best part of this type of income? It has the ability to become passive. That simply means that you’re earning money without sacrificing your time because you already that upfront. Or, you’re earning enough to have people work for you.
In either case, if you need inspiration, here 101 passive business and income ideas for you to explore.
3. Interest Income
Interest income is when you lend money out. In return, you’ll make money by through, well, interest. While this can vary, it’s usually on a monthly or annual basis.
Some of the most well-known examples include:
- A savings account — preferably a high-interest savings account.
- Certificates of Deposits — building a CD ladder will spread your money evenly across short- and long-term CDs.
- Introductory bank bonuses where in exchange for opening new checking or savings account you’ll get a monetary bonus.
- Rewards checking accounts that offer cash-back or help you earn interest on your balance.
- Bonds where you lend money to a government, municipality, or corporation.
- Money markets — which are nothing more than trading in very short-term debt investments.
- Retirement vehicles like a 401 (k) or IRA.
- Peer-to-peer lending.
- Real estate crowdfunding.
4. Dividend Income
“If you’ve spent any time investing in stocks, you know the power of quarterly dividends,” Peter Daisyme writes in a previous Due article. “Many major companies distribute profits to shareholders regularly in dividends, typically paid quarterly, and often amount to a total payment of 2 to 4 percent per year.”
“In other words, for every $100,000 of stock you hold, you could be generating $2,000-$4,000,” Peter explains. “You can also enjoy the benefits of capital gains if the stock prices increase while you’re holding them.”
“If you’re interested in hedging your bets, you can buy multiple dividend-paying stocks simultaneously with the help of an ETF or a mutual fund.”
5. Capital Gains
Did you sell your stocks or shares of a company? If so, this is known as a capital gain. However, these are profits you’ve made from the sale of any asset, including;
- An existing business
- Real estate properties
- Fine art
- Precious metals
Capital gains are considered taxable income and can either be short-term (assets held under a year) or long-term (assets you hold onto for a year a more). Holding on to these usually means that you’ll have a lower capital gains tax.
The idea is to purchase these assets at a low price and sell them at a higher price. When it comes to stocks, this can get tricky. Because of this, you should work with a broker or use a robo-advisor.
6. Rental Income
In most cases, this is when you purchase real estate and rent it out. Examples would be:
- A home or apartment complex that you rent out to long-term tenants.
- Commercial property that’s rented out to a business.
- A vacation home, like a beach house, that you rent on a weekly or monthly basis.
- A second home or empty bedroom that’s listed on Airbnb.
- Farmland that’s leased by someone else.
However, this really applies to anything that you rent out. It could be a parking space, vehicle, or photo booth, or yard tools. It’s a simple way to make money off the things that you already own.
Rental income can be a great investment as you’re in charge and these investments are considered to be “highly leveraged.” There are also some tax write-offs like interest on your mortgage, property taxes, insurance, and maintenance repairs.
Are you the creator of a piece of art, product, idea, or process? If so, you can charge others a small fee to others to buy or lease your private or intellectual property. That means you’ll receive a small fee whenever someone plays a song you wrote or licenses a product or service that you came up with.
If you’re interested in following this new income stream, Entrepreneur has a handy guide to licensing that you should use as a reference.