You have probably heard that the average millionaire has 7 income streams. Even though that might make sense, do you know what those income streams are or how they got to have them?
7 TYPES of income streams
TO understand the concept of 7 different income streams, we should understand that there are different types of income. There may be others, but let’s just focus on these 7 for now:
Earned Income Streams
Earned income is when you sell your time in exchange for money. This could include being self-employed and range from wages to tips or bonusses.
The more value you add during that time, the more people or companies will be willing to pay you for your time. Time is a scarce resource, since everyone has the same number of hours per day. Also, you don’t know when your time in THIS life will run out.
It is also interesting to note, that many self made millionaires, and even billionaires, had a job at some point in their lives. Take a look at some of these examples according to Investopedia (7 Billionaires’ First Jobs):
- Warrent Buffet started a newspaper delivery service at the age of 13
- Oprah Winfrey’s first job was a grocery store clerk
- Michael Bloomberg started as a parking lot attendant
- Bill Gates started his career as a computer programmer
- Steve Jobs‘s first job was a summer job at HP
- Jeff Bezos started out as a grill operator at McDonald’s
- George Lucas started his filming career as a teacher’s assistant
High paying jobs
High income skills or qualifications, may give you a good start toward making a lot of money, or even becoming a millionaire. According to Job Monkey (11 Jobs That Will Make You A Millionaire), these are the 11 jobs that are most likely to make you a millionaire:
- Doctor
- Investment Banker
- Real Estate Agent
- Lawyer
- Engineer
- Day Trader
- Air Traffic Controller
- Athlete
- Insurance Agent
- Entrepreneur
- Actor/Actress
Do you realise, though, that being a millionaire doesn’t necessarily make you wealthy? All of the above mentioned jobs, are earned income examples. If you don’t show up, or you don’t perform as expected, your income will go down. This is why it is so important that you develop multiple income streams.
What you do with the money you earn is important.
Profit income Stream
Profit income is simply income you make from selling goods at a profit. This could be literally ANYTHING. If people are willing to pay for it, and you can get a good deal on something and then sell it to the people who are willing to pay for it – you can make profits. The more you can do this, the more profit you can make.
Interest Income Streams
This is income generated from lending your money at a certain interest rate or by putting it in high interest savings products. There are very few that will out-perform inflation, but you should have at least SOME savings put away for big purchases and emergencies.
Big purchases include your luxury car, or that fancy holiday or even a house.
Dividend Income Streams
This is income earned from owning a piece of a company that pays out dividends. This could be done with public equity or private equity and will depend on if the company you own shares (or equity or stocks) in actually pays out dividends. This should be determined before you decide to make an investment.
Rental Income Streams
Rental income is income generated by renting out something you have control over. Notice I didn’t say that you own it necessarily. Renting our residential or commercial real estate is a popular way of generating multiple income streams.
There are many other things besides real estate that you could rent out. This could include tools you own, a car or anything else you have control over which people are willing to rent from you instead of buying it for themselves.
Capital Gains Income
Capital gains income is similar to profit income, but this is more related to selling assets like real estate, bonds or shares in a company. This could also include crypto-currency if held for longer than a year. Short-term capital gains result from selling capital assets owned for one year or less and are taxed as regular income.
Royalty Income Streams
Royalty income is received from allowing someone else to use your property – usually intellectual property like patents or copyrighted works (eg books or songs) and so on.
How to develop 7 income streams
The short answer to the question “How do you develop 7 income streams” is quite simple – one at a time. The more important thing to realise is that you need to spend less than you earn and you need to put in the time and effort to develop the skills, knowledge and relationships in order to generate other income streams.
“Most of the wealth you see in the world, wasn’t created by hard work and saving. It was created by deal structure”
Jay Summit
Jay summit is the former Independent Vice Chairman of Deloitte and the author of books like “Disrupt You” and “Future Proofing You”. Jay Summit says that most of the wealth you see in the world wasn’t created by hard work and saving. It was created by deal structure. If you’d like to understand more of what Jay is trying to say with that statement, then check out this episode of Impact Theory (Tom Bileyu): The 2 Things You Need for Success
Try to think of ways that interest you so that you will be committed to developing the extra income you want. There are almost unlimited different ways of generating income. The internet is a great place to generate income since you are just a few clicks away from millions of potential clients.
