How to Diversify Your Income

Tips for Diversifying (and Increasing) Your Income

photo @seabob

One income stream is great. Two are better. And if you could generate three or four streams of income on a monthly basis . . . why wouldn’t you?

Traditionally, people have gotten by with a single income source. You hired on to a 9-to-5 job, collected a salary, and enjoyed a few days off for the weekend before going in and doing it all over again.

But in today’s economy – in which gig services, remote work, and the Internet make it possible to launch additional businesses and side hustles – there’s a wider variety of opportunities. If you want to build wealth, you should think about diversifying your income by adding further streams.

In this article, we’ll discuss some ideas about how to do that.

photo @Hublot

Why Should You Diversify Your Income?

Diversifying your income means attracting money from multiple sources, rather than a single one like the traditional full-time job. You could diversify via any number of methods, some of which we’ll discuss below.

But you might want to explore the question: Why? As certified financial planner Angela Moore explains it, “Diversifying your income can help provide stability. It can hedge against income loss due to layoffs, illness, disability, discrimination, and more. Having multiple streams of income can have an incredible impact on your ability to build wealth and/or fund retirement.”

When you talk about diversification, not all income is the same. Not only is it wiser to diversify where your income originates, but it’s helpful if you can diversify the types of income you receive. 

Income may be divided into one of two general categories: active and passive. Active income refers to money you generate as a result of work performed (i.e., your day job).

Passive income is funds that accumulate without requiring your direct involvement and oversight (that is, investment income). When you receive both types, you typically enjoy much greater flexibility.

photo @montegrappa

How to Diversify Your Income

Now that we understand a little of the “why” of diversification, let’s explore some of the options that will help you move closer toward the end goal.

  • Find an Online Side Hustle

Make a list of your top skills (personal as well as professional). Then go online and look for ways to monetize those skills. You might be surprised by how many options there are.

For example, let’s say you’re handy with writing poetry. You could make simple prints of your poems and sell them via an online shop like Etsy. You might also design an online course where you could teach others to write poetry.

What about your full-time job? If you’ve learned how to develop websites, why not start creating online content that shows other people how to do the same? If you take into account the entire range of your talents and experience, the options could be endless.

  • Invest in Rental Properties

There are few better ways to generate passive income than by investing in rental properties. Thanks to the power of leverage and the ability to use other people’s money through financing, you can get started with very little money down.

Once you own a rental property, you may hire a property manager to oversee everything from finding renters to collecting rent checks and accounting. Yes, there are some challenges to finding the appropriate properties, but the benefits will far outweigh the costs. In addition to monthly income, rental properties can provide tax breaks.

photo @Porsche Design

You can monetize almost anything you own. You might not get rich right away, adding $100 of passive income here and another $200 there will add up over time.

The most obvious example is your house. If you live in a desirable area or your home is located near a major attraction (such as a sports stadium, concert venue, theme park, national park, and similar amenities), you could list your home on Airbnb and earn a few hundred bucks per month from that.

Another option is to lease your car using a service like Turo. This is basically the Airbnb equivalent for vehicles.

You can share your car, set your rates, and generate money when you aren’t using your vehicle. (This is especially worthwhile if you’re a two-car household during the week, but require only one of them on the weekends.)

There are even online platforms to rent your backyard pool, baseball batting cages, and parking spots in a garage. Don’t underestimate the value of what you already own!

Set Yourself Up for Success

As you should be able to see from the handful of suggestions above, there are plenty of opportunities to diversify your income. Whether you start a side hustle, invest in real estate, or monetize some asset that’s already yours, there are plenty of ways to do this.

Now it’s up to you to go put this knowledge to work!

photo @Riva Yachts