How to Diversify Your Income – 7 Practical Tips You Should Know
If you’re looking for tips on how to diversify your income, you’re in luck – this post will serve as your ultimate guide to income diversification.
Having multiple streams of income is essential – if 2020 taught us anything, it was that having multiple income streams is the only way to weather a financial storm.
That year in particular dealt a heavy blow to many people who realized they relied solely on the income of their day job to both earn and save money. When they lost their jobs due to cutbacks or quarantines, they realized that there was no way to keep the money coming in.
Enter- income diversification.
Although this sounds like a complex term, income diversification refers simply to having multiple income streams – whether those are active or passive income streams matters less than that there are multiple avenues for making extra income.
In this guide, we’ve gathered up a few top ways you can get started on the path toward financial freedom by diversifying your income. Let’s get started!
How to Diversify Your Income
Want to diversify your income? Consider pursuing several of these opportunities (we recommend more than one!) to help boost your monthly income and make your earnings totally recession-proof.
1. Own a Small Business
Owning a business is a form of active income that can be time-consuming – but if you start the right kind of business and structure it appropriately, you’ll be able to rake in a significant amount of money even by working just part-time.
You can start a business in anything that interests you (and in which you are skilled and that the market demands). You could start a consulting business or a business that specializes in selling digital products. Whatever you choose, running a side business is a great way to build wealth through side income streams.
2. Start a Side Hustle or Get a Part-Time Job
This is one of the simplest ways to help you meet your financial goals and start diversifying your income. Get another job!
Although this isn’t totally recession-proof, having another job or side hustle in your free time is a great way to ensure that you always have money coming in.
Consider applying for a job in the gig industry, like one you might get at Uber. When you work with Uber, you can work 100% on your own time. Just want to drive in the middle of the night, from 3 am to 6 am? You can! All you need is a car.
DoorDash is another option that is similar to this. When you deliver for DoorDash or a similar type of delivery service, you can work whenever and wherever you want to. You’ll get all the benefits of a part-time job – the extra money, namely! – but none of the hassles that have to do with scheduling shifts and arranging a work schedule around your full-time job.
Plus, you can increase your earnings and keep diversifying your income by working as much or as little as you’d like!
3. Start Freelancing
Freelancing is one of the best ways to start diversifying your income to earn more money.
There are a few ways you can start freelancing but the good news is that you can capitalize on this opportunity with whatever skills you already have.
Great writer? Awesome – you can start cold-pitching your writing services to companies or using a freelance work platform to do so. Good at graphic design? Website creation? There’s something out there for everyone.
Consider using a freelance website like Upwork or Fiverr to make your life a little easier. Upwork is considered the global marketplace for freelance work – if you’re new to freelancing, you’ll find thousands of job opportunities here for which you can pitch your services. It can help you build a solid portfolio of work (and eventually start charging higher rates).
Another option is Fiverr. Although Fiverr, like Upwork, does take a chunk of your earnings, there are plenty of ways to turn your freelancing into a more stable, full-time position that lets you earn as much or as little as you’d like.
The best part about freelancing is that you can do it on your own terms. Since you won’t have to report to the shift hours of a regular part-time job or side hustle, you’ll have the freedom to grow this second income stream as much as you’d like.
4. Generate Passive Income from Dividend Stocks
Investing is a great way to build passive income – if you want to diversify your income without having to take on a second job, investments like dividend stocks are the way to go.
While investing in the stock market won’t put cash in your pocket as quickly as a gig job like driving for DoorDash will, it has the potential to put far more money in your wallet over the long term.
You can invest in the stock market, in real estate (more on this below), or even in a high-interest savings account. Whatever you choose, it’s smart to diversify your income with these sorts of investments.
Just make sure you meet with a certified financial planner first if you’re new at investing – they will be able to give you a better idea of the best ways to diversify your income with the stock market.
5. Real Estate Investment Income
There are countless ways you can invest in real estate.
Many people do this without realizing it, actually. They purchase homes in appreciating real estate markets and live in the home for seven years – they sell the home, pay off the remaining mortgage, and then either enjoy the earnings or invest it in a new home.
You can also flip a house – this involves buying a home below market value, upgrading it, and then reselling it for more than what you paid.
Rental income is another popular way that people choose to supplement their day job income. By becoming a landlord, you can use the monthly rent payments to pay off the mortgage (and have the extra leftover for you to spend or re-invest).
In some cases, you won’t even have to deal with the day-to-day hassles that a landlord experiences, either – you can hire a property management service to do this for you.
6. Make Online Courses or Other Digital Products
To truly be in charge of what you earn – and when! – you might want to consider creating and selling your own products.
You can go about this in the traditional sense of course. If you like to knit, you can sell your wares at local farmer’s markets and specialty shops.
However, something that more and more people are turning to as they look for ways to add extra income streams is in selling online courses or other digital products.
You can promote and sell these products via websites like Etsy or Shopify or you can sell on platforms like Udemy. It doesn’t matter what you have expertise in or what you are trying to sell – there is something out there for everyone. When someone enrolls in a course or buys a product, you’ll get a nice royalty.
The options are endless, but the beauty of selling an online course or digital product is that they offer a way to make more money without doing more work. In fact, the money you earn from these sorts of income streams will be entirely passive after you’ve created the content!
7. Sell Physical Items
As we hinted toward in the last point, selling physical items is another option to help you diversify your income. You don’t have to create your own products, either – you can sell someone else’s.
You can find luxury, vintage, or name-brand items on sites like eBay (or even at local businesses nearby, like flea markets) and resell them online.
You can even give things like drop shipping or affiliate marketing a try – with these sorts of jobs, all you have to do is take orders and/or promote a product. You can even make passive income by selling advertising space – depending on where you live, you might get paid to advertise for a product via a billboard in your yard, an advertisement on your vehicle, or a sponsored post on your YouTube channel.
What are the “7 Sources of Income”?
When considering which of these options you’d like to pursue in order to diversify your income, it’s important to recognize that there are seven main sources of income that are widely recognized.
- Earned income (from your salary earned at your primary job)
- Business income (money you earn from your own business or side hustle)
- Interest income (from bank account savings)
- Dividend income (from stocks and shares)
- Rental income (or other real estate income)
- Capital gains (money earned from the sale of assets like art, loans, businesses, and stocks)
- Royalties and licensing income
Obviously, investing in all of these income sources isn’t realistic or possible for most people.
However, most self-made millionaires have one thing in common – they generate their income from multiple sources, with the majority having three or more streams of income!
The best tip for diversifying your wealth? It might sound obvious, but don’t put all your eggs in one basket at the same time. Instead, pursue multiple ways to save, invest, and earn money – this will reduce your financial risk and make your income recession-proof.
So get creative and stay flexible – you’re guaranteed to love the results!