Find out why you need to earn an extra income and the pitfalls of not diversifying revenue streams so you can avoid future financial hardship and be prepared for the unexpected curve ball life will throw you. I have shown below some of the reasons why you should consider further options as well as providing some solutions and ideas for you.
Let’s start with a question. Have you ever suffered the sinking heart feeling of an emergency repair needed to a vehicle? A property repair, A washing machine failure, or had the boiler and hot water system break down? None of these come cheap. I know and can easily tick all three of those off the list (plus many more other unexpected items). For example, Did you know that the average washing machine repair in the UK is £175, and according to Fleet News: Motoring repair costs have risen over 40% in the past 5 years.
Add to this that in the US, Research by CBS indicates that 40% of adults would struggle to cover an unexpected expense and that 1 in 4 are a pay-check away from being Poverty Poor. Reference: CBS News Moneywatch. However, more worryingly, analysis carried out by Property118, shows 51% of private renters are one missed salary payment away from being made homeless. Source Property118 News, August 2023.
Now a tough question to ask yourself. Based on the above, are you in a financial position that could cope with the unexpected?
For us all the importance of securing some form of financial stability should be a number one priority. My article on How to get out of Debt, shows that too many people are either burying their heads in the sand, or racing blindly towards the edge of a cliff where their finances are concerned, and they are usually on the way down before they realise it’s too late.
The above really enforces the fact that having some form of supplementary or second income can be a real safety net in times of unexpected financial stress as well as going some way to making you feel that you are in control of your future.
Investing in your future: Why extra income matters for adults 25-60.
Single Income Source Setbacks
Are You relying on a single Income Source? If so, this will leave you vulnerable to financial setbacks, most of which are beyond or out of your control. such as:
Job Loss and Redundancy
Illness
Being unable to work in your current sphere. Or, perhaps a family member becomes ill and needs your time to care for them.
Age:
Ask yourself the question. Are you physically able to do the job you currently do when you are in your 50’s and 60’s?
Economic Downturns: Recessions, Pandemics.
Did You, or do you know of someone who worked in hospitality? How was the Pandemic for you. Did you feel in control of your future? See my About me Page for my experience during that time.
Technology.
Advances in tech can leave workers vulnerable. For example, look at car manufacturing, robots have replaced workers on the assembly line.
Environmental Impacts.
By this I mean the requirements for companies and countries to meet global targets on emissions and climate change. As an example, at time of writing, in Wales, an announcement has been made that the TATA owned Port Talbot Steelworks Blast Furnaces, are to be shut down and replaced with more environmentally acceptable solutions, resulting in the nett loss of 2,800 jobs.
Any of the above, you will experience at some point in your working life. (Substitute Port Talbot for economic changes and cost cutting where you are currently employed.) Sometimes, just like buses, two of the issues will probably turn up at the same time! You have no control in the timing of these events.
Where do You Start Finding Ways to Diversify Your Income?
How do you go about earning money from different streams? The first thing to do is to understand what income streams are out there and depending on your current situation what suits you in the short, medium, and long term.
Basically, we look at 3 types of earning revenue.
- Active Income
- Passive Income
- Portfolio Income
1. Active Income:
An Income earned from your job or business. You are trading your time for money. Usually, you turn up to a place of employment and at the end of the week, or month, you are paid a sum of money in return for your time carrying out the duties set.
Short term, if you need an extra income then looking at what part time roles are available that can fit in around your current situation and commitments could be the way to go. There are many opportunities out there, particularly if you have skills that can be utilised in ways that can help others. I point to the opportunities for skilled accountants or bookkeepers in my post on How to get out of debt, further, the article concerning Work from Home Jobs gives a background and pointer on the rise in home based opportunities by global corporations (and others) seeking Part and Full time at home workers.
2. Passive Income:
This income is particularly interesting. The target for you here is to potentially be unlocking financial freedom through multiple income streams. This Income type requires an upfront investment, most usually of time but once in place there is minimal effort going forward to maintain or perhaps grow that income.
An easy-to-understand example here is that of an author or pop star. Take Neil Diamond, and his song Sweet Caroline, which he released in May 1969 and enjoyed the success with it at the time. Now fast forward to 1997. The song was played at a Boston Baseball game and from there it (the song) has become a massive stadium hit with Fans, even adopted by the England Football Team supporters.
In my head I have a wonderful image of Neil Diamond, sitting at home, with the postman shovelling daily royalty payment cheques through his door, as an income for the work he did once, in recording the song. The same is true for authors of books, songs, articles. Could you turn your hand at writing a few posts online?
Medium to Long term. Opportunities abound here, but in my experience, and by the very nature of a passive income the results will take time to come to fruition. However, there are plenty of people, just like you, creating financial security through diversified income sources. I would say if you are going to do something then just get on with it. Time moves on, and to state the cliché, you don’t want to be in the same place next year, looking back wishing you had started something a year ago.
Small Steady Steps build up in an enterprise, and it is possible to start today and see the results of your labours within 3 months.
The real advantage of these types of opportunity are that you can build something in your spare time, alongside your Active Income. Here you will find every and anything from Individuals who have found a way to earn extra money working from home by home baking and selling their wares through local Markets in their spare time, through to individuals running large E-Commerce Stores and Online marketing businesses, again in their spare time using a kitchen or dining table as their office.
3. Portfolio Income:
Income from investments, dividends, and capital gains.
Long term. By their very nature building any form of income that falls into this category is going to be a long-term vision. As an example, if you are buying shares and want dividend income you will have to wait until the corporation you bought shares in, pays its yearly or half yearly dividend. Capital Gains on property? you won’t realise that until a sales and legal timeline has elapsed (plus you need the property in the first place). However, A simple savings plan that you start today, where you invest the same amount each month, can soon begin to build a balance for you.
That then gives you options, where once you have built a balance, move the accrued sum into better interest paying accounts etc. and the real benefit of this one is it gives you, at the very least, that Financial Safety Buffer for any of the unforeseen scenario’s that are waiting around the corner to smack you in the face.
Hopefully the points above are an opportunity not just for you to look at your current (and potentially future) situation but also a bit of a framework with pointers as to where you might want to explore in a little more depth.
It doesn’t matter what stage of life you are at, you may just be starting out in your career, or perhaps in your mid-fifties with the stark realisation that you may need more income as retirement starts to loom over the horizon.
Remember we are all different and what is right for one person may not suit the next. Even something as a simple saving plan can make a difference and make you feel that you are taking control of your future. For more complex financial strategies then it is worth speaking with a regulated financial advisor. As ever, I am always keen for your feedback and thoughts. How are you putting together a plan to ensure you don’t fall victim to having all your ‘eggs in one basket’? where your income is concerned. Let me know.
Best Regards
Del