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Monday, November 18, 2013

Build resiliency with diverse income streams

No matter what your financial goals are, they will be served well by creating for yourself diverse sources of income. Most people in America have a normal job as their main source of income, bringing in thousands of dollars a year, even on the lower end of the scale. However these people's next highest source of income may only bring in only $25 or $50 dollars a year.

This means that they are completely dependent on their primary source of income. This is a totally rigid system that leaves no room for variance of any kind. You are basically a slave to the job since you can't continue your lifestyle without it.

Consider two individuals with identical monthly expenses:

A. Guy A makes $2000 a month working 40 hours a week in a cubicle. Other than the occasional gift and similar small windfalls, this is his only source of income.

B. Guy B makes $1000 a month working a part time job at a local business. He also makes $150 a month from online ad revenue and affiliate sales from a blog, $350 reselling on eBay and Craigslist, and $200 a month doing odd jobs.

Guy A makes slightly more money, but he is totally dependent on his single source of income, and can't do anything to jeopardize it. He is a slave to it.

Guy B has income from various sources, so a disruption in any of them is not catastrophic. Even if the biggest source of income (the job) goes away, it is much easier to find another part time job making $1k a month. And he still has some income in the meantime. He may even be able to expand his efforts in the other areas to make up the slack.

Obviously if you can combine Guy A and Guy B, then you are really going to be on the fast track to financial independence. But whatever you are doing, and whatever situation you are in, you should seek additional sources of income. It will make you much more resilient.

-The Money Monk

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