Multiple Income Streams – Part Two

In a previous post (Multiple Income Streams Part One) we talked about the importance of multiple streams of income in retirement. This included the impact of multiple income streams for those with various levels of retirement assets. In this post we’ll expand on those ideas by broadly identifying where some of that income can come from and propose a general plan.

Income generally has a way of progressing from less passive to more passive during life. If you remember from the previous post we basically defined passive income as income that you do not have to devote a lot of time to keep it coming. No income is completely passive but at one side of the spectrum you might have a job that requires lots of time and effort (not passive at all.) On the other side of the spectrum you might have dividend income where the checks just keep coming (unless the company stops paying.)

In between a job and dividend you might have various business such as service businesses, where you trade your time and talent for income.

With this in mind let’s consider a mix of five income sources to look at how you might achieve multiple stream of income:

Job

Jobs are the least passive but they might have the advantage of being the most reliable and sometimes even provide benefits like health insurance. For a retiree this might mean a part time job that assures at least some fairly reliable income.

Part Time Service Business

Also not very passive might be a service business. Examples might include consulting or even babysitting. Here you are trading your time for income but you have more flexibility in when and how much you work. And as long as you do the work you usually get paid! So it is fairly reliable.

Selling things

Selling things is probably somewhere in the middle when it comes to passivity. Easiest example is selling things from around the house that you no longer need. For a little effort on EBay or Craigslist you might collect a considerable sum. Of course you eventually run out of things to sell, but it is a good way to initially establish an additional stream of income.

Recurring income product

This is a product you create that requires a lot of time up front but can provide a lasting income stream. For example suppose you write a book that you self publish on Amazon. There is a lot of work initially but you can potentially receive an income forever from sales of the book, and that income is fairly passive.

Stock Dividends, Annuities, and Social Security

Stock Dividends are probably one of the most passive forms of income. A similar example might be an annuity. The basic principal is that you invest money and receive a stream of income from that investment. Social Security is similar in that you paid in a long time in order to receive a series of payments.

Putting it all together

After thinking about the above income sources it isn’t hard to see where multiple income stream might come from. For example:

1. You start with a part time job.
2. You do a little pet sitting and begin establish a list of repeat customers.
3. You start selling things around the house on Ebay and Craiglist. Maybe you start small and generate about $50 a month.
4. You write a little book called “How to start a pet sitting business.” You sell it on Amazon and it generates some money every month.
5. You save your money from the above and buy some dividend paying stocks and a small annuity. This gives you another income stream on top of your Social Security.

As you can see it isn’t too hard to envision multiple streams of income. The idea is to actually take action and start with the more non-passive income types and then maybe as you get older to build up more of the passive sources. Good Luck!

Until next time…