Why You Need Multiple Sources of Income

This article was originally posted on my blog: knowledgeinvestor.com

Almost every millionaire reaches a seven figure income through various income streams. It’s rare to find a multi-millionaire who makes all of his income from a single source. So I figured I would break down the reasons why you should build multiple sources of income in order to become a millionaire.

Reason 1: Financial Security

If you are reading this and currently work a typical 9–5 job, you are placing yourself and your family in financial harm’s way. Having a single source of income is like sitting in a chair with one leg, not a great idea…

By having only a single source of income you are taking unnecessary risks especially if you are employed versus self-employed. Even if you have a union at your job and if they decide to fire you, your union will step in and defend you, you are still at risk of losing that income stream. What happens if the job you work for goes out of business? Even government jobs experience government shutdowns from time to time, what are you supposed to do when events like this happen?

By having multiple streams of income you aren’t putting yourself at risk nearly as much because if you lose your job or you can’t produce income from one particular source, you can always have other income streams to cover you.

The Average Self-Made Millionaire Has…

• The average millionaire in the United States has roughly 3–7 income producing revenue streams.
• 65% of self-made millionaires have at least 3 sources of cash flow.
• 50% of self-made millionaires own their own business
• 70& of self-made millionaires earn passive income
• 89% of average U.S. citizens have only one stream of income.

Reason 2: Income for Opportunities

Opportunities come and go but most of them require you to have some money on hand to invest in them. By having only a single source of income you have expenses you have to cover. At the bear minimum you have to pay for housing, food, water and clothes. By having only one source of income you are already depleting some of that income to go towards expenses you more than likely cannot avoid. Having different cash flow pools to borrow from to invest in opportunities will help you grow even more income for yourself because you can’t take advantage of opportunities as they arise.

Grant Cardone has a great video on how to use your money to take advantage of opportunities:

“Don’t Save to Save, Save to Invest”

Not only will more income streams bring you increased revenue for new opportunities and investments, but you can even find yourself having more freedom as well. Want to quit a job you no longer are passion about? Go ahead, you’re other incomes got you covered.

Reason 3: Tax Benefits

I won’t get into the specifics because the tax breaks you can receive from income streams vary from state to state and country to country.

If you live in the United States most states allow you to make tax reductions if you are self-employed or own and operate a business such as an LLC or S-Corp.

If You Hate Taxes, Quit Your Job!

While working a job is technically an income stream, “owning a job” is a great tax haven alternative. What do I mean by that? I mean self-employment, or working for yourself or for your company.

Here are some of the benefits you can expect from being self-employed:

• Find yourself investing in new equipment for your tasks? Tax break.
• Need to have a dedicated vehicle and spend money on fuel/electricity to travel to your office? Tax break.
• Have to pay for monthly products/services (expenses) to operate your business or in order to produce work as a freelancer? Tax break.

Typical incomes such as a job are the worst for paying taxes because the government takes out a hefty portion of that income. However, if you are self-employed as a freelancer or you own your own business the government only takes what is left of your income after you write off all of your tax-break expenses.

Reason Four: Your Retirement

You may be reading this and be in the best shape of your life. Unfortunately the human anatomy won’t always be in your favor. We all age and get old and eventually working might be harder than it once was. Having multiple sources of income will allow you retire early and retire comfortably. What do I mean by that?

Average Incomes of Middle Class Americans:

• Under 35: $6,676 Median Net Worth
• 35–44: $35,000 Median Net Worth
• 45–54: $84,542 Median Net Worth
• 55–64: $143,964 Median Net Worth
• 65–69: $194,226 Median Net Worth (Age of Retirement)

Most people depend on government social security and pensions from their jobs to actually retire and afford to live after they can longer work for a living. Basically, most people put their economic futures into the hands of someone else.

By having a stream of income, preferably passive income which means income that works for instead of the other way around, is the best way to retire worry free. By having streams of income you don’t have to fear if a company goes out of business and you lose your pension. Before you begin to think the government has your back, think again, recent reports claim that social security is expected to run out of money by the early 2030s. If you unfortunate enough to still be working by then you may want to look for alternative options…

Thank you for reading…

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