Here’s the reality: having multiple streams of income is the only way to build wealth. We’ve all heard that the average millionaire has around 7 streams of income, and unless you’re a superstar athlete or a world-renowned artist, multiple income streams is the only way to make it. And by make it, I mean stop trading your time for money and really enjoy your life. Whether you’re an entrepreneur or you work in corporate America, you should have more than one stream of income. Have you ever stopped to consider what those income streams might be? Keep reading for some knowledge on income streams and how to use them to start maximizing your wealth.
When I was younger, I thought that most wealthy people had one career or business, that amassed them a great deal of wealth. I thought they forged a career path that yielded an extremely high salary, and they saved their money until they became millionaires. I had heard a bit about investing, stocks and bonds, but that’s about as far as my knowledge about finances went.
Like many African Americans, generational wealth was not passed down to me and not much financial literacy was taught. Even with my parents having “good jobs” and providing a great life for me and my siblings, the system simply wasn’t designed for African Americans to build wealth. When I got into corporate America and saw the disadvantages that most minorities have in the finances and wealth department, I knew that I had to do my own research and take the necessary steps to set my family up for success.
Over the last few years, I have read many financial literacy books, listened to money management podcasts, hired a financial advisor, and diversified my income streams. I want to share these with you all in hopes that it will encourage you to elevate your financial state and start building towards generational wealth. Please note that, I am not a financial advisor! I am simply sharing information that I found to be helpful for me. But rest assured, I’ll be sharing my financial advisor’s contact info towards the end of this blog post.
Here are 7 streams of income that most millionaires have:
- Earned Income
- Earned Income is the most popular income stream. It is the money that you earn by doing something or by spending your time. It is the money that you earn as an entrepreneur for selling a product or a service, or the salary you earn by working for someone else. If you have three jobs, they all fall under this category, so those three jobs are still technically one income stream. Depending solely on earned income can lead to no growth or financial gain because this is where you will be trading your time for money. This is where your quality of life will suffer the most. My goal is to not spend the next 20 years sacrificing my time for money. So, while it is great to have earned income, don’t get comfortable and stop at this one source. If you want to make money in your sleep, you will not achieve that with just earned income. Even if you make $200k a year, this should not be your only source of income.
- Profit Income
- Profit income is money that you earn by selling something for more than it costs you to make. Businesses selling their goods at a profit, whether at the retail or wholesale level. For example, a hair stylist doing hair would be considered earned income. But if that hair stylist decides to start selling hair weave in addition to doing hair, that would be considered profit income. Creating my digital products and selling them to consumers is profit income. After earned income, most people move on to profit income as their next income stream. How can you do this? You will need to identify a product or a service that you can provide, market it well, sell it, and earn profit. If you manage this well, this can be a great way to earn more money.
- Interest Income
- Interest income money is the money you get as a result of lending your money to someone else to use. For example, putting your money in the bank or a savings account. You can also put money on a CD (certificate of deposit), which you are not able to access for a period of time. I did this a few years ago, and decided to leave the money on the CD even after I was able to gain access to it again. All the while, it is collecting interest. This is passive income, which means your active involvement is not needed once the investment is done. A lot of people sleep on the wealth that interest income can generate, because it seems to grow so small, but if you do your research, and choose the right people/ sources to lend your money to, the wealth will grow over time.
- Dividend Income
- This is the money that you get as a return on shares of a company you own. For example, the dividend that most companies announce at the year end. The good news is, divided income is not taxable until you see a gain from it. This income is equally passive as interest income and the bonus is that it makes you a shareholder of a company.
- Rental Income
- Rental income is the money that you get as a result of renting out an asset that you have, like a house, or a building. This is be great source of income that can yield high returns. Just note that it typically takes a sum of money to gain such an asset. The average person doesn’t have $80,000 laying around to purchase a building to rent out. If you come across a large sum of capital, investing in a rental property is one of the most popular ways to generate wealth.
- Capital Gains
- Capital gains is the money that you get as a result of increase in value of an asset that you own. Think stock market and real estate: two of the most popular ways to build wealth. For example, if you buy your house for $350,000 then sell it for $550, 000. That $200,000 difference is capital gains. If you buy 1000 shares at $8 and sell them at $16- the $8000 difference is capital gains. In 3-5 years, my husband and I will purchase our forever home, and will use our current house as a rental property or sell it to make capital gains. Either way, it’s a good investment. Check out my blog post here on buying a home in a seller’s market.
- Royalty Income
- Does anybody watch the show Shark Tank? It’s one of my favorite shows and I binge watch it all the time. Kevin O’Leary, an OG shark, is infamous for making royalty deals. Royalty income is the money you get as a result of letting someone use your products, ideas, or processes. That person is responsible for doing the footwork, they have to maintain the revenues, and you get a percentage of whatever they earn. For example, if you are a legal owner of any product, patent, or copyrighted work, the franchisee has to send you a royalty check. Sounds sweet, right? The most important thing with royalties is to make something that is unique and can be repeated. Once you tap into that kind of marketable asset, the money you can earn on royalties is endless.
To date, I have 4 streams of income under my belt. So, what are they?
Earned income is how I make the majority of my money. I have 3 sources of earned income: 1) sponsored collaborations with brands 2) influencer coaching calls and 3) my monthly masterclass membership.
Profit income is my second highest yielding stream of wealth. I earn profit income from all of my digital products: my cookbooks and influencer marketing e-books. This is where I make money in my sleep, and it is so fulfilling.
I earn interest income from my savings accounts and my Certificate of Deposit in the bank. My 401k plan also has interest bearing in the securities in which I invest funds. This is my slowest growing stream of income, but it is slow and steady and will increase over time.
My capital gains are from day trading and long term investments. I’ve recently gotten more into the stock market after seeing small investments turn into thousands of dollars. The stock market can be a gamble! So, always do your research and determine your risk level before starting to invest or trade.
I hope this post has taught you something and will motivate you to get started on your financial goals. If you’re seriously ready to start securing your financial future, I am sharing with you all my financial advisor, Adam. His website is here, and I’ve gotten his permission to post his information in this blog. He is excited that I’m starting this conversation, and he’s ready to be a resource to all of you.
I hope you all enjoyed this blog post. If you have any questions at all or have something to add, drop a comment below. Cheers to being a millionaire in this lifetime!