Why and How to Build Various Income Streams to Become Wealthy

How to Build Various Income Streams to Become Wealthy | Vrid
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In this blog, we will discuss income management – the sixth step of the beginner’s personal finance checklist.

If you are new, you can look at the checklist here and read past blogs here.

If you are considering your salary alone as your income, it is a big mistake. Interest on your FDs, dividends from your investment, etc. are also your income.

Living on a single stream of income is risky. Make sure over time you invest in assets that provide you with an extra source of income. It can be your side business, real estate property, mutual fund investments, or interest income.

Estimated read time: 3 minutes and 19 seconds

Hint: If you are good at something, don’t do it for free.

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Buckle up, here we go!

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Let’s assume you are working at a great company with great pay. Have a good work-life balance and are happy with your life. Your salary covers all your expenses. You don’t feel like changing anything because everything is going great. 

Suddenly a pandemic breaks out like Covid, and your company’s business gets affected heavily. Two things can happen – you get a salary cut or lose your job.

Now tell me, will you be able to cover your expenses with the salary cut? Or with no salary?

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If you had built an emergency fund, you could survive for some months on the salary cut or until you find a new job. But is this a pleasant situation to be in? What if you have two kids, a wife and parents to care for? Think about it.

Living on a single stream of income is risky in these uncertain times. So, you reduce these risks; you need to create a few more income streams. Two ways to do it – Active Income and Passive Income.

Active Income Streams

Your salaried job comes under the active income stream, where you provide your time and knowledge in exchange for money.

Apart from your day job, based on your skills and interest, you can start some side hustles. Like starting a YouTube channel, or business, and selling digital products like courses and e-books. You can also become an influencer or freelancer.

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Remember, if you are good at something, don’t do it for free.

You don’t have to be an expert to start something, so don’t panic if you feel you are inexperienced. Be biased towards actions because –

A journey of a thousand miles begins with a single step

Lao Tzu

Now there is a limit to creating an active income stream if you can’t automate it after some time. Because you can work on 2-3 projects on evenings or weekends but can’t work more than 24 hours a day. 

So how to build more income streams? Or how to use the income from active streams to multiply your income? Here comes the wonder of the passive income stream. There is no limit to how many passive income streams you can build and how much you can earn.

Passive Income Streams

Your money works for you in the passive stream. You exchange money for more money. In the initial days, you might have to spend some time figuring out things, but slowly things get automated exponentially.

Let’s discuss some ways you can earn a passive income through investments.

Dividend Income from stocks, mutual funds, and ETFs:

When a company you invested in makes a profit, they sometimes share the profit with the shareholders as dividends. You can choose to reinvest these dividends too. 

Don’t forget the value of your investments increases over time. This is a great wealth-building tool.

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Rental Income from residential or commercial properties:

After the initial grind of managing a property and finding tenants, rental income becomes passive. All you need to do is collect the rent checks! The value of the property also increases over the years.

If you’re not comfortable managing rental houses, you can always invest in a REIT (Real Estate Investment Trust).

REITs are publicly traded companies that own and operate income-producing real estate. They own shopping malls, office buildings, and apartments. They’re a great way to get exposure to the real estate market without having to deal with the hassle of being a landlord.

Invest in Business:

You can also invest in service, product-based businesses or own franchises. These days many people have turned into angel investors – investing in startups. Be careful. Don’t fall for the FOMO. Only invest if you understand the business.

Interest Income from bonds, FD, P2P lending:

Investments in government bonds, corporate or gold bonds can earn you interest income. If you can take more risks, you can also lend your money through P2P lending platforms and earn interest.

Start building more income streams to become wealthy. In our following blog, we discuss on how to identify and plan your financial goals.

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Still Curious?

If you are like us, who likes to analyse a little more or check out content in different formats, well you are in luck. Below you can find some suitable content we found.

Finshots – Breaking the income barrier

Rachel How – I built 8 income streams in 6 months. Here’s what I learned.

Ankur Warikoo – 12 Side Income Ideas for 2022!

Note: We don’t have any affiliation with them. We are sharing links only for educational purposes. The opinions expressed by them belong solely to them and do not reflect the views of Vrid.

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DISCLAIMER: This newsletter is strictly educational and is not an investment advice or a proposal to buy or sell any assets. Please be careful and do your own research.

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