What People Get Wrong When Creating Multiple Income Streams
I promise, it's not what it looks like on social media.
The average millionaire is said to have seven streams of income.
By diversifying income sources, millionaires reduce risk and create more stability, even during economic downturns.
We know that building multiple income streams is a good idea. However, when you conceptualize this concept, you probably think that this means creating and building seven different businesses. That is not how it works.
Today, I will explain to you what the structure of building multiple income streams looks like.
LFG. 🔥
Multiple Income Streams Does Not Mean Multiple Businesses
I’ve seen a lot of people (especially young people) make the mistake of trying to build more than one company at the same time. I know of a two people that have done this successfully, but in general it’s a bad idea.
Building a business is hard. It’s a difficult endeavor that requires sacrifice, discipline, and a capacity to handle stress and anxiety. With that said, building two companies at the same time is almost impossible.
Just because Elon is doing it doesn’t mean you should.
When you’re starting out, you need to go all in on one business.
Yes it’s scary and risky, but it’s worth it. In order to build a successful company, you need to eat, breathe, and sleep your business. It’s all you think about. You will have time to exercise and hopefully you will have some time to maintain 3 or 4 good relationships. But if you want to succeed in building your business, you need to be obsessed. It’s all you think about. It’s all you do, and it’s all you care about.
Yes, I am being serious.
Now, if you’re willing to sacrifice your entire life for financial stability, than hopefully in a few years you will have a business that generates healthy cash AND healthy profits.
Generating profits should be your only focus. You want to build a business that generates cash and profits. This profit is where your other income streams are born.
Profits Lead To Investments, Investments Lead To Multiple Streams Of Income
Having multiple income streams means making investments. Money is a tool and money loves to grow. You build a business and you use the profits to make investments into other companies or other investment categories. This is not the same thing as building multiple businesses.
The reason why I have always advocated that people build a service business as their first business is because service work (meaning anything where you trade your time for money) is a reliable form of income.
Everything starts with income. If you don’t have income then you don’t have any options to create multiple income streams. Every empire starts with it’s first dollar, and your cashflows and profits are the lifeblood of your soon to be empire.
So the next question is, once you start to generate income, what are the different investments you can make that will eventually create the faucet of additional revenues and income streams?
The Seven Different Types Of Investments
The term “multiple income streams” can be misleading, because it suggests that your different income streams all come from different private businesses. Although owning equity in different companies is an option, I would encourage you to think of income streams itself as different categories.
Ownership in a business is only one category of income streams. The seven different types of income streams are …
Earned Income (salary or wages from a job)
Business Income (profits from a business they own)
Interest Income (from savings, lending, or bonds)
Dividend Income (from stocks or mutual funds)
Rental Income (from real estate investments)
Capital Gains (from buying and selling assets like stocks or properties)
Royalties or Licensing (from intellectual property like books, music, patents, or other creations)
These seven categories provide you with many different options.
As I said, you could take all your profits from your income and then use that money to start or buy a new company. This is exactly what I did with Copyblogger. Four years later, Copyblogger is now generating an extra $60,000 a month.
However, it’s more likely that you will use your profits to invest in different types of categories. For instance …
I invest $750 a week into the stock market. Mostly the S&P500, and the Real Estate Index.
I buy $1000 a month of Bitcoin.
I own a rental property in Nashville and we are converting our house in Denver into another rental property in the future.
I own equity in many different private companies.
I make a 4% return on my savings account at PNC bank.
I don’t have any royalties, although I dream of writing a book one day and I don’t own any bonds.
To Summarize
There is a lot more to say about this subject matter, but I want to make sure people understand the technicalities behind how this works.
Step 1: Generate income by building a business or even through your job.
Step 2: Invest in different categories of investments, this is not the same thing as “build more than one business.”
Step 3: Continue to rachet up your main income stream to give you more cash and more options to invest.
Step 4: Repeat.
This is how you build wealth. You can’t work your way to wealth, you must generate leverage. However, you also can’t confuse the concept of leverage with distraction. You need to have your one focal point of income. This income is what makes the rest possible.
Don’t make the mistake of spreading yourself too thin in the quest of chasing multiple income streams. Let the cash do the hard work for you.
Love you guys. Talk to you on Monday.
Tim
Want To Work With Me? Here Are 3 Ways I Can Help You
1. Learn how to create multiple streams of income: You’ll get V.I.P. access to my business, research, and analysis. My membership will teach you how to create multiple streams of income. (Price goes up on 12/1)
2. Join my coaching program: I’ll help you grow your business by helping you define your target customer, create compelling products and services, generate more sales, and create systems that do the hard work for you. For serious entrepreneurs only.
3. Want me to do your marketing for you? Fill out this form to see if you’re a good fit for my high level SEO / advertising service. Minimum cost is $5000 a month.
Your content is getting better and better 👌
Thank you Tim. So much value here.