If you are thinking of diversifying your income, you might be wondering what is the best way to go about it. It is always advisable to create small streams of steady income from different sources rather than having one main source. If one source starts to perform poorly, you have other sources to cover your needs. Multiple streams of income also help to keep yourself busy, engaged, and productive, and that way, you can have complete control over your purpose.
Let’s have a look at some of the best ways you can diversify for multiple streams of income.
Earned income is the money you get by doing something or by spending your time on something. It can be the money you make on your job or the salary you get by working for someone else. With this type of income, your quality of life will suffer the most, depending on how much you are paid. If you are paid too little, you will be dedicating your entire time to work, to get this pay. Most people are no able to think beyond earned income and spend the whole of their time working for their employer.
Profit income is money you get by selling something for a profit, in relation to how much you acquired it at. You might be having a business that sells goods for a profit, be it in retail or wholesale. You might be a distributor or manufacturer. Any income you get from this type of business is profit income. With profit income, you may need a huge capital to start related businesses.
Interest income is the type of money you get as a result of lending money to someone. You may get this money by putting your money in the bank, buying treasury bills, etc. It can be a great source of passive income where your active involvement is not required, as you make money while sleeping. When combined with the power of compounding, interest income can be great.
This type of income may be classified as even better than interest income. It is a passive income that additionally makes you a shareholder in the company you invest in. It is the money you get as a result of the shares of a company you own. You are paid dividends from what companies announce at the end of the year.
Rental income is the money you get paid as a result of renting out an asset you own. It can be a house, space, building, or equipment. The amount of investment required to create an asset that can give you rental income is huge. This type of income normally comes after you have set other types of income.
Capital gains is the type of money you get as a result of an increase in the value of your assets. If you buy shares at $10 and sell at $12, $2 is the capital gains. You may buy an asset at a certain amount and sell at a profit, mostly because of appreciation. The profit you attract is capital gains.