Income diversity is important. If you don’t diversify your income, it could lead to financial devastation.
I know this from personal experience. In 2008 when the market crashed, not only did my clients get hurt, but as a business person, my income went way down while my expenses stayed the same. Painful and frightening.
Thankfully, my clients and I weathered that hurricane but some people didn’t.
Think about what could happen if you lose your job or your income is drastically reduced. And think about now – not once it happens (like me).
Yes, emergency funds can help protect you in those circumstances. But your emergency fund will go further and you will have more financial security if you build income diversification into your finances.
How To Diversify Income
You don’t have to replace your primary income source completely, all at once or from any one source.
The idea is to create a number of alternative sources and build on them – just in case – and in a way that fits your family and lifestyle.
Here are some ways to do just that. Not all of these will fit – but they should give you some important things to think about:
Part-time Job: Look for an additional job. This is a low-risk way to really boost your finances. It may not add a lot to the bottom line at first, but over time this can really help.
You could do some freelance work after hours or on the weekends or during vacations. Or, you can talk to your significant other about this idea as well.
In 2008 my wife went back to work part-time. As a result, she brought home some nice coinage, plus she provided health care benefits for free that I used to pay for. Score!
This was one of the key actions that helped us get through a very tough situation.
Spouse Going To Work: This is going to vary from family to family but I think it’s a topic worth discussion.
I mentioned above that my wife went back to work . She didn’t really have to I suppose, but it was a great way to reduce the pressure on me at a time when the pressure was hugenormous.
And more important, this was really empowering for her. Money aside, it was just really good for our relationship. This may not be the case for everyone but it was helpful to us.
Again, there are pros and cons to this move but I absolutely think it’s important enough to warrant a conversation.
Side Hustle: If you want a little more flexibility in your work schedule, you can start a really small business. This is great for the right person.
And if you are already self-employed, consider expanding into other areas of your industry. That’s what I did in 2008 when I created Wealth Pilgrim.
I already had the expertise, I loved writing, helping people and making a few pesos on the side. It’s turned out to be far bigger than I ever imagined but that was not the goal.
The good news is most of these cost very little (or nothing) to start. Consider pet care, tutoring, house cleaning, yard work, hauling services and other odd jobs that match with your skills and abilities.
Also, consider something completely different like proofreading. You can take a course for very little money and potentially make some serious bucks in short order. Me likey.
A side gig can be super cool. If you get something started and keep at it, the money could come in handy in a rainy day.
And, if something happens to your main source of income, you will already have a business you can rely on. To be frank, I like this idea far more than taking on a part-time job. It provides more freedom and opportunity.
Create Income from Assets: Many people are turning to Uber or Lyft to make extra money. It’s OK but I’m not a huge fan because the hourly income (after you consider all your expenses) is often extremely low and disappointing.
What I do like however is the concept of AirBNB. For the right person, this can be a game changer. Let your home or apartment work for you instead of you slaving away all the time for it. As you’ll see, AirBNB can be a great way to pull in serious dough.
Income Investing: For those who have the resources, time and patience to build up an alternative revenue stream, income investing can be a good choice.
You can create a portfolio of investments that provide regular payments to you. You can create income from a retirement asset allocation even if you’re still working.
This takes time to build up, but with enough planning you can receive a decent revenue stream that can help in times of financial difficulty.
Make Money Online: Like income investing, this can take time to get working.
However, by devoting some time to build up a website or blog (and monetize it), sell freelance services or become involved in affiliate selling (or even sell your own items online), you can create an alternative revenue stream.
If you’re serious about making money online, be sure to read “How I Make Money with My Blog.”
I don’t like this idea as much as the other alternatives because it requires lots of work and patience without a promised outcome. But it is an option.
Think Through Your Spending With A New Filter
Sometimes the easiest way to make more money is to just spend less.
Go through your check book and credit card statements. Look for the ways you spend money that you can live without. You need to be ruthless and honest. And while you are at it, be brutal. Let nothing escape your sharp yellow highlighter.
It doesn’t make any difference if you work part-time to earn $500 a month or cut spending by $500 month. The result is the same except that it doesn’t take any time to cut spending.
Your spending cuts might not be enough to carry the day. But in concert with some of the steps I’ve suggested above, those spending cuts will really help.
Diversifying your income can catapult you forward in achieving your financial goals. It can provide more freedom, excitement and empowerment.
When you diversify your income you also gain a much greater sense of security at the same time. No matter how secure you feel at the moment, I suggest you consider how to diversify your income now before problems come up.
How are you diversifying your income? What impact is it having?