Diversifying your income is one of the secrets to getting ahead. A five year study by “Rich Habits” author Thomas Corley found that 65 percent of self-made millionaires have at least three streams of income, while 45 percent have at least four, and 29 percent have at least five. The earlier you start diversifying your income streams, the more money you can accumulate from savings, interest, and investments. Here are four strategies you can implement to start diversifying your income streams as soon as possible.
Set Financial Goals
You’ll have more luck increasing your income if you pursue a deliberate strategy geared toward specific financial goals. A good way to orient yourself toward some specific goals is to set a retirement savings target. To estimate what you’ll need to save, start by estimating how much you plan to spend each year in retirement, advises Charles Schwab. Once you know this, calculate your expected retirement income from sources such as pensions, annuities, and Social Security. You can then factor in your estimated income taxes to see how much you’ll need to save for retirement. Charles Schwab’s site provides an online calculator to help you determine this amount.
Once you have a savings goal, you can develop an income plan and budget geared toward achieving your target amount. You can automate your financial management by using an app such as Mint, which you can access from a mobile device such as a Samsung Galaxy Note8. With an infinity screen and intelligent pen, the slim and secure Note8 helps you track all of your income streams right from your smartphone.
Find New Income Sources within Your Existing Business
If you own your own business, one of the most efficient ways to start diversifying your income is to find ways to generate additional income streams within your existing business. There are three main strategies to increase the revenue of any business, says 21st Century Marketing Systems CEO Richard Johnson. The first way is to increase the number of prospects your business reaches through your marketing efforts. The second way is to increase your sales conversion rate so that more prospects becoming paying customers. The third way is to increase the average value generated per customer.
There are a number of ways to implement these strategies to generate new income sources within your business. To implement the first strategy, you might begin targeting a new demographic with your product or service, increasing your prospecting base. To implement the second strategy, you might boost your conversion rate by doing more follow-up marketing with your email database, adding more income from your subscriber list. To implement the third strategy, you might increase the lifetime value of your customers by developing additional products or services you can sell after an initial purchase. For instance, if you’re selling information in a white paper format, you could repackage it as a video or seminar, or use it as a springboard to upsell consulting services.
Create New Businesses
If your existing business allows you enough time, you may be able to diversify your income by starting a second business. Before launching into a second business, it’s important to fully develop your business plan, says Evrim Oralkan, founder and CEO of Travertine Mart and cofounder of Collecteurs. Your plan should include a time budget that designates how much time you plan to devote to your second business per week.
When it comes to choosing what type of business to launch for your second income stream, you can do anything from being a part-time Uber driver to freelancing as a graphic designer to starting up a digital company with a partner and employees. Ryan Robinson provides a list of 101 side businesses you can consider starting up while working full-time.
Generate Passive Income Sources
A less time-consuming approach to diversifying income is to generate passive income sources that don’t require an active ongoing time investment. A popular form of passive income is rent on properties you own. You don’t necessarily need to be a landlord to earn income from rent if you hire a property manager or invest in a group real estate investing opportunity such as a real estate investment trust (REIT).
Another passive income source is royalties. For instance, if you self-publish a book on Amazon, you automatically earn royalties each time a copy of the book is sold. You can also invest in royalties on other people’s intellectual property through brokers such as Royalty Exchange or by acquiring IP licenses.
Setting financial goals, leveraging your existing business, creating new businesses, and generating passive income sources are four steps you can take to diversify your income streams. Putting these strategies into effect can help you start building a nest egg today so you have more money to live on tomorrow.