I’ve gone over this time and time again – because it’s an important hack for leveling up your finances. It is definitely possible to live on just one income, even for a family of four. However, the fact of the matter is that life is much easier and more secure when you have multiple sources of income. It’s absolutely crucial to build another source of income. Whether it’s a lucrative side hustle, a full-blown business, or just another 9-5 job that your spouse or someone else in the household does, you’ll be better off with that extra income.
The more money you make, the easier it is to save and invest more. The more diversified your sources of income are, the more reliable it becomes – you’ll have to worry less and less about layoffs and the like.
The Why
The why is the most important thing to understand. If you don’t understand why it’s so important, then it’ll be hard to have the discipline needed to build new sources of income. So, let’s dive in and break down the top reasons for having another source of income.
Financial Freedom – With The Potential For Huge Income
First up, a second or third source of income can raise your total earning potential a considerable amount. This will help you reach your goals on the path to financial freedom much faster. Think about it – let’s assume you live with a strict budget. Perhaps you spend $3000 per month. Unfortunately, with your job you only make $4000 per month after taxes. If you can start a side hustle that makes $1000 per month, you can basically double the pace towards your financial goals. The only key here is to avoid lifestyle creep. Don’t let your spending habits increase with your income.
Of course, depending on your hustle or business, you could make far more (or less) than $1000 per month. Any amount helps, but imagine if you can double your income with another source!
You Set The Standard
The next perk of your secondary sources of income is that you set the standard. You determine the quality of work that you’re comfortable with, how much you’re working, and how much money you put it into it to start (if any). You get to pick these secondary sources of income – they can be whatever you want them to be. My personal recommendation is to find something that you enjoy, are at least decent at, and can work into your schedule given whatever job and obligations you already have. Obviously, if you already have a busy schedule, then you may be severely limited with what you can do.
Scalability & Outsourcing
A great thing about sources of income outside of a standard job is that you may be able to scale them or outsource them. For example, if you consult, you could always build a consulting firm with employees under you. Alternatively, if you run an ecommerce website, you can always outsource parts of the work that are time-consuming or just not up your alley.
Outsourcing can definitely eat away at your profits, but it can also help you produce far more than you could normally, which offers greater income potential. There are pros and cons, risks and rewards, no matter which way you go. The nice thing here is just that you’re calling the shots and can adjust it to suit your needs or goals as you wish.
Remote Work
Another great thing about a lot of modern side hustles and businesses is that you can do them completely remote. This cuts out a lot of hassle, and can give you more time to do the things you enjoy. Picking a remote side hustle could let you make another source of income, even with a hectic schedule. I know it can seem intimidating to start, but that’s honestly the hardest part. Once you jump in and find a rhythm, things will start going smoothly. If you’re hesitant about starting, take my 30 day challenge!
Building The “Dream”
Lastly, these can always replace your day job – if that’s what you want. For those who hate their career, this could be a blessing and the best way to break free. Be cautious when you do that though. Make sure you have an emergency fund worth at least 6 months of your expenses. On top of that, make a plan for turning this into a full-time business. It’s definitely feasible to become an entrepreneur and carve your own path, but it’ll be a huge setback if you have a failed business venture solely because you jumped in before you were ready.
The Short-Term Benefits
We’ve gone over the main positives behind building another source of income. A lot of those were general or more of a big-picture view on things. Let’s go over some of the short-term benefits another source of income can offer you – whether it’s full-time or not.
Supplemental Income
Obviously, the supplemental income is immediate and useful. I mentioned how it can help you along the way towards long-term financial goals, but it can also help in the near future. If you’re spending more than you make, are struggling to keep to your budget, or are being oppressed by debt, then you can use the supplemental income to ease those burdens. A side hustle probably won’t make you a lot of money from day one, but it can make you enough to help alleviate these issues.
Protection From Job Loss
Another thing it can do is protect you from job loss. How it does that is simple, but two-fold. First, it can give you important skills you can apply in your current job. Even if it isn’t applicable in your current role, it could make a lateral shift to something else much easier. Second, if you do lose your job, the extra income can soften the blow to your finances – including your emergency fund. It gives you more time to get back on your feet, and extra padding for when things don’t go as planned.
Examples
Now that we’ve gone over the ins and outs of how you can benefit from another source of income, let’s go over some examples. This is by no means an exhaustive list, but hopefully it gives you some idea you can apply in your household.
9-5 Job
First up is a standard job. You likely have one. Some people also pick up another job – often with flexible hours or only part time. This is one option to add another source of income. It’s not always the best, or more lucrative, but depending on your situation it may be the most straightforward.
Your Spouse
Another way this works is if you have a spouse or another adult in your household. They can also get a job to help make ends meet. In fact, this is probably the route that the average American family takes. It has its perks, particularly if both of you have high earning potential. The downside to this is if you have kids, and one of the incomes isn’t enough to recuperate the costs related to working and having kids – like childcare.
A Side Hustle Or Business
Another thing people do is start a side hustle, which they may eventually turn into a full-time business. This could be just about anything you want. You could start a blog, tutor, offer translation services, or do some consulting. I’m a fan of blogging, but it can take a while to start making money with that (6-18 months, as a ballpark).
If you don’t want to wait, consulting is a really great source of income you can start doing immediately. All it takes is some skill or niche knowledge, which you’ve probably gotten through your job and education already. Consulting will just let you do more of that, but usually with more pay per hour. In some industries, consulting gigs can pay hundreds of dollars per hour!
Investing
Last, but not least, is investing. Most people usually think about long-term investments, intended for retirement. However, you can always invest in income-producing assets. One example of this is dividend stocks. It can take a lot of money to produce a significant amount from it, but it’s also fairly immediate.
Real Estate
Another great example of this is real estate. Rental properties can net you a lot of money, especially if you know what you’re doing and get great deals. Of course, it’s a lot to take on, but you may find it’s well worth it. If you choose to go this route, just make sure you do your research first.
The Key To Starting Is Just That – Starting
Everyone likes to talk about building another source of income, or theorizing about it, but all the planning in the world won’t matter if you never start. Come up with a simple, solid plan. That’s fine, and obviously a good idea. However, don’t get so caught up in planning that you procrastinate and never actually start. Take the dive, learn while you’re doing it, and you’ll come away in a much better situation. If the risk is too high – just pick another side hustle or business to start instead.
Conclusion
Building another source of income is nothing but a huge boon. If you have any thoughts or tips of your own to share, let us know in the comments. For more content like this, and a free budgeting template and financial goals worksheet, be sure to sign up for the Bitter to Richer newsletter.
