If you’re struggling with your current income, it probably has crossed your mind that you need to have other sources.
About 7 in 10 Americans live paycheck to paycheck, including 60% of people with an annual average income of $100,000.
A third of US adults struggle to afford essentials like rent, food, and car payments. Millions more are one medical bill or missed paycheck away from homelessness or bankruptcy, and nearly 70% of the US population don't have savings.
In short, even having a regular income isn't enough to guarantee financial stability. We understand how frustrating this can be, especially when you're working so hard just to make ends meet.
To help you out, we examined the mindset of wealthy people and discovered that almost all of them have multiple streams of income. This means bringing in extra money from different sources like salaries, investments, properties, businesses, and more.
If you're tired of drowning in debt and never having financial peace of mind, keep reading.
We'll dive into the nuts and bolts of how it all works, share some real-world examples, and show you how to start building your wealth and break free from the paycheck-to-paycheck cycle.
First, let's start with the different types of income available to you.
10 different streams of income: types, examples, and tips
For many people, the word “income” only means the money they earn from their job. That's actually just one of the many different types of income that exist, and it's important to be aware of all of them if you want to build wealth.
1. Primary salary
Your primary salary is what you get paid from your full-time job, usually on a monthly or biweekly basis. It's the obvious source of income for most people.
According to a 2022 report by the US Bureau of Statistics, the average monthly salary for full-time workers is more or less $4, 000.
On the other hand, the average American household spends $5,111 on basic expenses a month.
That's a huge gap and one of the main reasons why you shouldn't rely on your salary alone.
2. Secondary salary
If you live in a two-income household, a secondary salary is what your spouse or partner makes.
For over 13 million Americans, however, a secondary salary literally comes from having a second full-time or part-time job.
Side gigs can range from delivering food for DoorDash or driving for Lyft and Uber, doing freelance work, doing direct sales, and other ways to make cash.
If your company allows it, you can also apply for another full-time position alongside your first one to bring in more money. Just make sure that you're able to handle the extra work and stress!
3. Investment income
Investment income is a form of passive income, which is a type of income that you earn without actively working.
In terms of investments, this can come in the form of interest income or dividend income:
Interest income
This type of investment income comes from putting your money into savings accounts, bonds, or other fixed-income products.
How it works is that you're essentially lending your money to a financial institution, and they pay you interest on it to thank you for letting them use your cash.
For instance, if you have $1,000 in a savings account that pays 10% every year, you'll get $100 in interest income.
Dividend income
This type of investment income comes from putting your money into stocks, mutual funds, or exchange-traded funds (ETFs).
You earn money from this type of investment because you're entitled to a portion of the company's profits as a shareholder.
For example, if you buy one share of Apple stock for $100 and it pays quarterly dividends of $0.20, you'll get $8 just by holding the stock for a year. This is why dividend income is often referred to as “money for nothing.”
Investing is definitely a terrific way to multiply your income streams, but it's not a get-rich-quick scheme.
You need to do your research, invest only what you can afford to lose, and remember that investment is a long-term strategy that can take years to pay off.
4. Rental property income
Another type of passive income is rental property income. This comes from renting out a room in your house or an entire property, such as an apartment, condo, or house.
The amount of money you can make from rental income depends on a few factors, such as the location and type of property, the length of the lease, and how much you charge in rent.
For example, if you own a two-bedroom condo in New York City, you could charge around $4,000 a month in rent. But if you owned a two-bedroom house in a more rural area, you might only be able to charge around $1,000 a month.
It's important to note that you'll also have to pay property taxes, maintenance fees, insurance premiums, and other expenses related to owning a rental property.
That said, if you're able to find good tenants and carefully manage your property, rental income is a lucrative way to increase your streams of wealth.
5. Business income
For employees with full-time jobs, starting a business on the side can be a good way to increase cash flow.
Unlike before, when entrepreneurs had to rely solely on their own savings to finance a startup, there are more ways than ever to build a business without a lot of capital or a physical store. Here are some examples:
- Open an e-commerce store or launch a dropshipping business to sell products online without having to carry any inventory.
- Run a home-based business selling handmade crafts, baking, homemade soaps, or any other type of product.
- Start a blog and generate revenue through advertising, affiliate marketing, or selling digital products like e-books and online courses.
- If you have a money-making idea you passionately believe in, you can even start an actual company.
Unlike passive forms of income, however, running a business requires more time and effort.
You'll need to market your products or services, deal with customer inquiries and complaints, and constantly strive to improve your business.
But if you're willing to put in the work, owning a business can seriously multiply how much you're bringing in each month.
6. Capital gains income
This type of investment income is earned when you sell an asset, such as a stock, for more than you paid for it.
For example, let's say you buy a stock for $100 and it goes up to $120 over the course of a year. If you sell the stock at $120, you'll earn a capital gain of $20.
That's money you've made simply by owning the asset and waiting for it to increase in value.
To make this an income source, you don't need to do anything special – just buy assets you believe will go up in value over time and hold onto them until you're ready to sell.
Of course, there's always the risk that the asset will decrease in value, so it's important to choose your investments carefully.
But if you pick wisely, capital gains can be a great way to increase your income year after year.
7. Royalties or licensing income
Another potential source of passive income is royalties and licensing fees from creative work, such as music, writing, or art.
This is a wonderful way to share your talent with the world and get paid for it at the same time.
For example, if you're a musician, you could license your music to be used in commercials or TV shows. Or, if you're a writer, you could sell the rights to your book to be made into a movie.
Some tips for generating royalties:
- Find a niche market for your creative work. Don't try to appeal to everyone – focus on a specific group of people who would be interested in what you have to say or create.
- Sell your work directly to buyers, rather than going through a middleman like a record label or publishing house. For example, you can sell your music through streaming platforms like Spotify or iTunes.
- Build a strong social media presence and develop relationships with fans directly so that you always have an audience for your work.
With some creativity, hard work, and luck, royalties and licensing fees can be a great way to supplement your income – even if you aren't a full-time creative professional.
8. Subscriptions
If you have a product or service that people need on an ongoing basis, setting up a subscription model for your business can be smart.
Examples of subscription services include:
- Online courses
- Gym memberships
- Tutoring services
- Food delivery services such as weekly meal plans
- Recurring cleaning services
- Monthly treat boxes
With a subscription service, customers pay you a set amount each month (or week, or year) for access to your product or service.
You don't even need massive capital investment to get started – in many cases, all you need is a website and an idea. You can also start small by offering it to your family and friends before scaling up to a larger customer base.
As for what product or service you should offer, the sky's the limit!
9. Brokerage fees
Brokerage fees are earned when you perform a transaction on behalf of someone else, such as buying or selling stocks.
You can turn this into an extra stream of income by:
- Working as a financial advisor or stockbroker
- Trading stocks online
- Managing other people's investment portfolios
- Becoming a real estate broker
- etc.
Of course, you'll need to have some expertise in the financial industry to get started. But once you do, brokerage fees can be a great way to earn money without having to put in long hours at a traditional job.
10. Services and consulting
Last but not least, you can also generate income by providing professional services to other people or businesses.
If you have skills in a particular area – such as marketing, graphic design, web development, or business strategy – you can offer your services on a freelance basis and earn money as needed.
Some of the best platforms for finding freelance work are:
- Upwork
- Fiverr
- PeoplePerHour
You can also start your own consulting business and offer your services to clients directly. Try networking in Facebook groups and forums, asking for referrals, or cold pitching businesses in your area.
With a little effort, you can turn your skills into a profitable side hustle – or even a full-time business.
3 big benefits of having multiple income streams
Now that we've gone over some of the most popular types of passive income, let's take a look at some of the top benefits of having multiple streams of income:
1. You're not dependent on one source of money.
If you lose your job today, how would you pay your bills? Would you be able to cover rent, groceries, and other essential expenses?
As we mentioned earlier, millions of Americans are one missed paycheck away from a financial crisis.
This is why it's so important to have multiple sources of income – you never know when one source may run dry, but you can always rely on the others to help keep you afloat.
2. You give yourself more freedom and flexibility.
Another major advantage of having multiple income streams is that it gives you more freedom and flexibility in your life.
For instance, you won't need to choose between attending your child's soccer game or putting in overtime at work. You can also take more vacations to destress and care for yourself without having to worry about paying your bills.
3. You can chase your dreams.
What's your ultimate dream in life? Is it to travel the world, start your own business, or spend more time with family and friends?
Whatever it is, you need money to make those dreams a reality.
Having multiple streams of passive income allows you to do just that – pursue your passions and live life on your own terms.
How to choose and create multiple income streams
As someone still living paycheck to paycheck, it's best to start slow when generating additional streams of income.
Trying to do too many things at once can be overwhelming or worse, cause you to lose money.
If you're new to the world of passive income, here are a few tips for choosing a revenue stream:
1. Choose something that matches your skills and interests.
This reduces the chances that you'll get bored or burnt out, and it will make it easier to stick with it in the long run.
2. Start small and manage your expectations.
Self-made millionaires did not make their money overnight – it took years of work, patience, and dedication.
In addition, simply attempting to multiply your income streams does not guarantee that you'll actually make more money.
Instead, focus on generating one additional income stream first and then gradually add more over time. Don't forget that wealth is a long game.
3. Consider your resources and time commitments.
In addition to your skills, you also need to take into account the amount of time and resources you have available.
For example, if you're short on time but have some money to invest, investing in a rental property might be a better option than starting a blog.
On the other hand, if you have plenty of time but not much money, something like blogging or freelancing might be a better fit.
4. Consider the amount of risk you're comfortable with.
The level of risk you're willing to take will impact your choice of revenue streams.
If you're comfortable with a high level of risk, then things like day trading or real estate investing might be good options.
However, if you want to play it safe with your money, then a low-risk revenue stream like a dividend-paying stock might be a better choice.
There's nothing wrong with either approach – it's just a matter of choosing something that works with your financial goals and comfort level.
5. Keep your expenses low.
The more money you can dedicate to your revenue streams, the faster they will grow.
To do this, make sure to keep your living expenses as low as possible so you can maximize your income. This might mean moving to a cheaper area, downsizing to a smaller home or apartment, and even taking on roommates.
This is also an excellent way to get better at controlling your spending and managing your finances, both of which are important skills for building wealth.
6. Cultivate a healthy financial mindset.
At the end of the day, your biggest enemy will be your mindset. Avoid self-defeating thoughts like:
- I'll never get rich because I wasn't born rich.
- Working for other people is the only way to make money.
- I don't have the time or resources to start a side hustle.
- No one would ever pay me for my advice.
- It's too late for me to start saving now.
All of these thoughts are not only untrue, but they're also harmful.
If you want to succeed at generating additional streams of income, you need to cultivate a healthy financial mindset first.
For instance, instead of thinking “I'll never get rich because I wasn't born rich,” try reframing it to, “I can become wealthy by making smart decisions and working hard.”
Or, instead of thinking “It's too late for me to start saving now,” try telling yourself, “It's never too late to start saving, and the sooner I start, the better off I'll be.”
With the right mindset, you can achieve anything – including building wealth, escaping the cycle of debt, and creating multiple income streams to support yourself and the people you love.
Final thoughts: how many streams of income should you have?
The answer is, as many as you can!
There's no such thing as “too many” streams of income. In fact, the more streams you have, the better diversified your income will be – and the less risk you will face.
We hope you found this helpful and most importantly, made you feel more confident about your financial future!
Aidan has been writing about personal finance for over 6 years. Prior to this, he worked as a Corporate Finance Analyst where he specialized in Due Diligence, Company Valuations and more. He is a CFA charterholder.
