It is ideal to have multiple income streams as you manage your finances because it opens a lot of opportunities for you. However, this is easier said than done because diversifying and looking for multiple sources of income might prove to be a challenge especially when you are already having a hard time with your current day job.
Your day job could already be taking a lot of your time and you barely have any energy left at the end of the day. The last thing you want to do is go dress up for a second job because you just want to go to bed and sleep. Taking on a waiting job, being a bartender at the local bar, or even singing at the nearby lounge could be too much.
There are people whose idea of having multiple income streams is to hold various jobs throughout the week. Some even hold down two to three jobs on any given day. However, technology has made life a lot easier now giving you the chance to hold down a second job right in the comfort of your own home. You can even dictate the number of hours and the type of job you will work on.
Once you identify and start earning from several income sources, you can slowly realize some of the benefits it can give you. Here are some of them worth looking into.
Pay down debt much quicker
Having multiple income streams can help you in a number of ways and one of them is giving you the ability to pay down debt obligations. Although people should really try to live within their means, it is also a big help if you are able to earn more than what you need so you can start paying down different debt accounts.
The lower your debt is, the faster you can move forward with your goals. However, you need to have a certain level of dedication and commitment to your goal to make this happen. This is because, at times, you might be tempted to spend again as soon as you see your balance dwindling down. You might start to charge items again on your card.
As you pay down debt, remember that it would help if you do not add unnecessary charges on top of what you are already paying. Especially if you see that you have more than enough every month to cover your basic needs. Pay down debt and find other uses for all the extra money coming in every month into your budget.
Save for your goals faster
As multiple income streams give you the advantage of earning more every month, one way to help you reach your financial goals is to save for them much faster. You first need to identify the long-term goals you want to achieve and start working from there. Keep in mind that even your short-term goals should eventually bring you closer to your ultimate goals in life.
If you want to pay down the house in half the time, you need to either make extra payments on the mortgage or make principal-only payments. If early retirement is your goal, you can use the money you earn to max out retirement funds like your 401k. This is a big help especially if your employer is offering a matching program on your savings.
You can also reach your target amount for your emergency fund which will help put you at ease and lower down your financial stress. This is because you know for a fact that you have some savings in case emergencies happen. If you are saving for your children’s college fund, the extra money will also help you strengthen that fund over the years.
Diversify financial risk
If you have multiple income streams, you are also able to lower down your financial risk. This helps you continue on and stay on course with your financial plans because you get to manage risk. If your income is coming from five different sources and one of them is not performing well, you still have the other four to rely on.
This is also the idea behind diversifying your investment portfolio in the hopes of reducing risk. Apart from putting your money in safer investments, it also helps to scatter your investments into different accounts. This way, underperforming investments will not affect your bottomline so much when you have other investments performing well.
If your income is coming from several sources and one of them does not deliver the amount you expected, the other sources could cover for that loss. This is better when your only source of income is impacted and you have no other way of earning money. You could end up relying on your credit cards which can put you in deeper trouble.
Multiple income streams give you the ability to invest more aggressively
There is no denying the fact that multiple income streams give you the ability to earn a little more than what you need to cover for your basic needs. This is a good chance to be more aggressive with your investments or to simply get started with it. There are a lot of people who are afraid to invest their money scared they might lose it all.
In fact, CNBC shares that there are about 17% of Americans who started stashing cash at home. If this is just a small amount for emergencies then it might be a good move. However, if this is meant as savings for the future, that money will lose value overtime on the account of inflation. You also lose the chance to earn money from compound interest.
You can invest a little more aggressively with the extra money you get every month. The idea is to make sure you understand what you are getting yourself into and manage your risk over time. When the time comes that you find the need to protect your principal more, look for safer investments so you can enjoy your returns when you need to.
The transition from renting to owning a home
The National Multifamily Housing Council or NMHC shares that about 36% of households are renter-occupied. This is quite high considering that one of the most sought after American dream is having your own home. Having a house you can call your own gives you a certain sense of accomplishment in life and helps you create wonderful memories with your family. Having multiple income streams can help you transition from renter to homeowner.
The first challenge you need to overcome is saving up for the downpayment. The ideal percentage is putting down 20% or more in order to get around the Private Mortgage Insurance or PMI. This is an added expense on your monthly house payment ensuring the lender that they get paid in case you default on your mortgage.
Once you get to save for the house downpayment, the extra money you get can also help you pay down your mortgage a lot faster. Although some people choose not to because the interest rate is low, it usually carries the biggest payment you have to make every month. Your house can also be a source of emergency money in the future.
It is not easy to look for multiple income streams but when you are able to pinpoint earning opportunities, it can help you realize your financial goals faster.