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Alternative Streams of Income

June 5, 2017 by Ed Becker

“Don’t put all your eggs in one basket”. We have all heard this quote our whole lives, but what does it really mean? And just how do you juggle more than one basket of eggs at a time?

For small business owners or entrepreneurs who already work long hours, many trading hours for dollars, it may seem like a pipe dream to be able to have multiple income sources. Even if you do have to allocate some resources, time or money, it is necessary for your financial well-being to have at least one alternate income stream. This one thing you do today, could very well be your life boat tomorrow!

Having a single source of income creates a subjugated mindset. Not having a safety net in tough times endangers your small business. You need to fall back on something to get through a financial rough patch. Even if your alternate source of income is not generating enough to replace your main income source, it could be just enough to get you through tough times and the ability to hold onto your business.

Types of Income

Income breaks down into roughly 5 categories, most everything you can think of as a stream of income will fall into one of these. Now those streams of income may have cycles and they will change categories over time, but should still fall into one of the five.

  • Active income

This is typically your main source of income, usually trading hours for dollars. Active income can only be scaled to a certain point, because at some point you will run out of time to actively take part. The other issue with active income is that it decreases when you are not active, so if you take time to create other streams, or you want to take a vacation, anything at all that removes you from active involvement directly reduces your income.

  • Semi-active income

Semi-active income requires less of your time, better ROI because you invest a smaller amount of time for a larger return. These could include ideas that you must setup, and work for a short time for them to become passive.

  • Passive income

Passive income is an income stream that is automatic. Usually these are investment items like CDs.

  • Leveraged income

Here you use the activities of others to generate income, so that you are not fully active. This could include partnerships, group investments, etc.

  • Residual income

This is a type of income that can change categories. You could have a stream of income that you had to put in some time and effort, some investment in the beginning but you continue to receive income for years after that activity. This could include royalties or license fees.

Having alternate or multiple sources or streams of income is a wise strategy, any financial advisor or financial coach will recommend that you have a few. It is not something that you will generate large ROI or overnight millionaire status. It is a goal that you work on as you can and over time you have a solid safety net or even enough to trade out your active income for less active streams and more personal time.

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