These days, it seems as though everyone has a side hustle. In fact, having multiple streams of revenue is a great way to pay your bills and start to build wealth. Use the following tips to determine how to grow your income in incremental ways and find out the best methods to improve your profits.
Why You Need Multiple Income Streams
Almost everyone has a day job, and pretty much everyone relies on it for the majority of their income. What would you do if your day job suddenly went away? How would you get by until you could find another position? If you depend on one source for 100% of your income, you could be at risk of financial distress if your circumstances change.
If you have more than one source of income, however, you have a bigger cushion to land on during hard times. While you may still get most of your income from a day job, you might be surprised at how many ways you can earn extra money on the side.
Active vs. Passive Income
Before you start thinking about increasing your income streams, it’s important to understand the difference between active and passive income. Active income is money you make for work you do directly. So, if you have a day job and you do gig work on the weekends, they are both active forms of income.
Passive income streams provide money based on an investment or work you’ve done in the past, but that you’re not doing now. If you have a rental property with a paying tenant, or even if you have some money in a high-yield certificate of deposit, you’re earning passive income. Varying your options allows you to manage your time. While you can have a virtually unlimited number of passive income streams, there are only so many hours in the day for active income streams.
Incremental Income Ideas
The premise behind incremental income is that you can find lots of ways to increase your wealth. Take a look at the assets you already own and turn them to your benefit. If you have an extra bedroom or a home in a major tourism region, rent it out occasionally using a third-party rental service. If you have collectibles gathering dust, consider selling them online.
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You can make your existing skills and experience do more for you. Have a lot of valuable knowledge about an in-demand industry? Write an e-book or make a video tutorial and monetize it. With some funds in hand, you could become an angel investor or invest in a business.
Starting small makes sense, but you can expand your income streams over time. Eventually, you might want to explore property investment by flipping homes or buying them to rent. You can also invest in a fund that does the work for you.
This infographic was created by Renovo Financial, a real estate lending group
How to Choose a Side Hustle
Only you can pick a side hustle that is going to meet your needs. Most people start with a hobby that they enjoy or a skill that relates to their day job. Before you choose, be sure to consider these five factors:
- Skills needed for the job
- Time you will have to invest
- Risk-reward profile
- Interval between starting and earning profits
- How much in profits you hope to earn
Some side hustles do not take much knowledge or cash to get started, but they need an asset such as a vehicle. Other income streams might require lots of prior experience. If you find that you don’t have much extra time, consider a passive income stream.
Tips for Side Hustle Success
Although almost anyone can have a side hustle, not all side jobs are practical or even profitable. Keep these tips in mind as you evaluate your options.
Keep Your Day Job
Until you can be sure of your income from new avenues, you need to keep your day job. A day job provides necessary income but also predictability and security. It can be tempting to check out mentally (or even physically) from your regular work, but you should put it at the top of your list for the week.
Be Strategic About Debt
You can often find a lot of borrowing options for small businesses. However, being able to buy on credit doesn’t always mean you should. Taking on debt for a side hustle can increase the time it takes to turn a profit. Only apply for loans you’re sure will not hurt your bottom line.
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Related: How to Side Hustle Your Way out of Debt
Focus on Revenue Generation
For each decision you make, focus on revenue generation. If you are turning a skill or hobby into an income stream, it might be easy to spend money on upgrades that do not increase your income. Avoid expanding your services or buying expensive equipment or materials until you know you can justify it with more revenue.
Building wealth does not have to be a grand action. Sometimes it is the little steps that count. By taking these incremental income ideas and incorporating them into your life, you may be able to grow your income and provide for a better future.
For more tips on building real wealth, check out the accompanying resource by Renovo Financial.
Also read:
- The Importance of Frugality in Building Wealth
- Proper Financial Planning for your Retirement
- Online Businesses You can Start with no Money
- Money spending and saving tips
- Personal Financial Strategies to Last a Life
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