Two salaries? Yes please!
Ever wondered what it would be like to get paid a couple of times a month? Like two, three or four pay cheques a month? I don’t know many people who’d say no thanks!
In his study of the daily habits of the rich and poor, author of Rich Habits: The Daily Success Habits of Wealthy Individuals, Tom Corley learned that most self-made millionaires generated their income from many sources:
- 65% had three streams of income
- 45% had four streams of income and
- 29% had five or more streams of income.
Having multiple income streams makes a lot of sense. It helps you diversify your risk (in case you got retrenched, your business burned down or there is a crash on the stock market for example) and enables your wealth generating activities to develop a life of their own. It’s simple really – once your living costs are taken care of, any additional income can be invested to earn even more money in future.
Here’s how you do it:
Even if you don’t have the time, skills or appetite to work extra jobs yourself, or generate income on the side of your current day job, there are three types of income that anyone can generate, with a little bit of time invested in learning how to get yourself another monthly pay cheque:
This is the money you’d get from renting out an asset that you have, like a house, or offices. There are lots of things to consider (it takes work, tenants could default and it’s an illiquid asset) but some people really enjoy having other people pay their bond off and later, pocketing that income from their rental properties.
Interest Income is the money you get as a result of lending your money to someone else to use, e.g. putting it in the bank. It’s a great source of passive income (you don’t need to do anything to manage it) and when combined with the power of compounding, it can be a nice sum of money that gets deposited back into your bank account every month. You’ll need to make sure you’re getting a good interest rate though – it needs to beat inflation and then some – and weigh it up versus the capital growth you could achieve by investing in the stock market instead for example (see dividend income next for how that works).
Similar to interest income, dividend income is not only passive – but it also makes you a shareholder in any company you invest in and as a result, allows your capital to grow (or shrink) based on the underlying performance of the companies you choose to invest in.
As with any investment decisions you make, it’s important to consult a financial advisor who can advise you on the best ways to generate additional streams of income based on your particular circumstances.
“The ability to spend less than you earn, and save towards your investments consistently is the real secret to financial freedom,” says Warren Ingram, financial advisor and author of a new book entitled How to Make Your First Million. If you are in a relatively stable career, the benefit of a regular cash flow that can be used to build up your investments and cover all expenses is significant, he says.
“Unfortunately, most salary earners view their monthly income as a means of funding their lifestyle only, not as a way of creating wealth,” according to Instagram.
*Hayley Parry is the Co-Founder of The Money School, an independent financial education company proudly associated with the Truth About Money. Parry currently has three streams of income and is working towards building more.