On the 6th Day of Christmas (Personal Finance Style), my true love gave to me… 6 Streams of Income. According to the song lyrics, the 6th Day of Christmas is “Six Geese A-Laying.” What does this mean? To me, Six geese a-laying represents 6 different streams of income. A farmer can use the eggs for food, or to sell or barter for other goods. If something were to happen to one of his geese, he would not be ruined. He would have 5 geese a-laying, and still be able to put food on his table, or trade eggs for money or other goods.
Photo by Glenn via Flickr
I believe more people should act like this proverbial farmer. I strongly believe that diversifying your income streams can be a huge benefit for everyone. Why? Think about what would happen if you were suddenly laid off, or had a drastic drop in income? You may find it very difficult to replace your income, and may not have any options. Having alternative income sources gives you just that — options.
The blogger behind Lazy Man and Money was recently faced with this situation when he was laid off. Fortunately, Lazy Man has a goal to replace his living expenses with alternative income. Though Lazy Man’s alternative income did not replace his entire income, it was a great financial help to him and his wife.
Here are several alternative income streams that can help you diversify your income and rely less on one source of income:
Dividends are cash payments that are distributed from stock companies to their shareholders on a regular basis. Dividends can provide a nice income if you choose to have it paid to you rather than reinvesting it back into stock. Dividend investments are wonderful because your investment can appreciate through two means — dividend payments and increases in stock prices.
The only downfall to this is that it generally takes a substantial base amount to earn enough dividends to make a regular difference on your income. However, if you start building your dividend investments now, you may have enough time to turn this into a viable source of income in the future.
A side business is something you do to create income outside of your normal work hours. Genius Types runs several side businesses, one of which is a candy vending machine business that takes up very little time, but nets him hundreds of dollars per month. Other side businesses might start out as a hobby such as scrap booking, creating and selling crafts, or running a website.
In fact, some people grow so successful at their side business that it actually grows to the point it becomes a full-time business. J.D. Roth from Get Rich Slowly has set a goal to transition to full time blogging for a living. His side-business has grown into a full-time business. The best part is, J.D. has applied the principles in this article and diversified his blogging income into several income streams, decreasing his reliance on any one form of income.
Here are some more ways to make your hobby pay its way — and then some.
Some businesses rely on a business model that has a peak during a certain part of the year, and is not a viable year-round source of income. One example would be a landscaping company. During winter months, few people need lawns mowed, shrubs and trees planted, or other landscaping work. However, many people are willing to pay someone to hang Christmas tree lights, remove snow and ice, and remove downed trees or other winter storm damage.
Other sources of seasonal income include farming, running a snow cone stand, owning a pumpkin patch, selling Christmas trees, and supporting other “once a year” events.
Many people have investment properties (or rental properties) that bring them extra income every month. Being a landlord is a lot of work, and the responsibilities are numerous. However, if you can find the right property, get a good loan, find a good tenant, and the stars and moon align just right — you may find yourself with a few hundred extra dollars every month after your mortgage payment is paid. After you have retired the mortgage, you may find that the rental income is a considerable benefit. In fact, I know several people who have funded their retirements via a steady stream of rental income.
Admittedly, this is not for everyone, but a part time job can help out in many ways by providing extra money, training experiences, and an extended network you can fall back on should things get worse. Some part-time jobs even offer health or education benefits, which as we all know is valuable.
These are recurring payments you receive for a one-time effort, usually for creating something unique. The best part about patents and royalties is that the income is passive. There are several artists who have been dead for many years, but their estates continue to earn millions of dollars annually. Royalties can come from sales of works such as books, music, art, or performances on video, radio, or television. Patent income usually involves an invention or design innovation.
It may not appear to be an easy task at first, but once you get creative, you may find adding alternative income streams to be easier than you once imagined. And once you see the money coming in, I guarantee you will like it!
The 12 Days of Christmas – Personal Finance Style, is a group writing project. Several personal finance bloggers have banded together to write a series of personal finance articles based on “The 12 Days of Christmas” theme. This article is the 6th in the series. Here are links to the rest of the articles: