Multiple Streams of Income
You may be perfectly happy in your profession as a physician and with your level of income. Yet, unless you come from a wealthy family, you probably started your life as a practicing doctor with a large student debt burden. Is your plan to buckle down and work hard to pay off your debt and hopefully make a decent living? Think again. Very few people become financially independent by working hard at one job. For real financial independence through retirement, you need to devise a plan to create multiple steams of income.
Learn from the wealthy
According to Tom Corley, who has made a study of wealthy people and their habits, most self-made millionaires created their wealth through multiple income sources. Three income sources seem to be the magic number: 65 percent of them had three income streams, 45 percent had four, and 29 had five or more.
It’s common sense to have multiple income streams – at the very least, it protects you against the financial fallout should you lose your job or can’t work for a while. At best, it can create personal wealth.
Earning an income is an investment in your future and as with any investment, diversification is key.
In the business world, multiple income streams or diversification have been the bedrock of the most successful corporations. In the case of Virgin, unrelated diversification has led to success in diverse sectors like music, transportation, financial services, media, mobile telephony, soft drinks, and space travel. Another example is Disney, which started life in animation and children’s cartoons, and moved on to movies, cruises, theme parks, and media.
Diversification will allow you to create multiple sources of income and maximize your profitability. Let’s look at some examples in detail.
Branching Out in Your Given Profession
There are many ways for physicians to find other streams of income related to their profession. Many earn an extra income through telemedicine, offering EHR support to overworked colleagues, doing chart reviewing, medical writing, and more.
Anybody with skills and expertise can find a way to diversify in their field, from electricians, florists, and cooks to software developers and lawyers.
Taking on a Second Job
Your additional stream of income need not be from your field of experience or expertise. Earning extra income has become a common aspect of American life. Millions of Americans take on second or third jobs, some to make ends meet, others because they can’t find a permanent job, and some because they are working towards financial independence.
According to the latest census figures, 7.8% of U.S. workers have more than one job. Interestingly, people working in healthcare and food services were likely to have a second job. The reason for a second job is often to augment income, but not always. The census found that multiple jobs were true for all levels of income.
When considering ways to earn an extra stream of income, taking a second job may be an obvious first choice. However, employment is not the only way to earn additional income.
You can earn money by starting your own business selling products and services to customers. Technology has made it possible for anyone to start a business online. E-commerce platforms like Spotify, WooCommerce, Magento, and Squarespace automate all aspects of what it takes to run a store. It takes time to set up, but eventually you will be selling in your sleep.
You don’t even need a super unique product or service. You can always start by looking at things that are already in high demand then branch out from there. Entrepreneurs who make the most money online are those who spot a demand and go out to fulfill it. Teenager Max Hayden from Hopewell, New Jersey, made $100,000 by selling Walmart products on Amazon. He focused on products he knew would be in high demand and short supply during the pandemic, for instance, above-ground swimming pools in the summer and patio heaters in fall and winter.
There are hundreds of ways to create an income stream online. All it requires is research and persistence. In addition, if you are a physician looking to start your own business, check our my book, Entrepreneur Rx. In Entrepreneur Rx, I share time tested insights and knowledge for building a thriving startup while maintaining your practice. From identifying winning business ideas to raising necessary capital, I offer a comprehensive insider’s view into strategies that have helped me develop and nurture a number of successful businesses.
Investment income can come from interest payments, dividends, and capital gains. Building an investment portfolio has been the traditional way to create a second stream of income. It is important to understand the basics of investing if you want to start to build an investment portfolio.
Since the income from investments is planned for the future, only use money that you will not need now. Work out your budget, and only invest money that’s left over after you have paid any outstanding debt and have set aside a couple of month’s income in case of an emergency.
Do your own research and don’t be tempted to put your money into something just because everyone is raving about it, especially if you don’t understand it. Only invest in opportunities you understand.
Diversification also comes into play here. As far as possible, spread your investment across stocks, bonds, and commodities. The options are solid and endless.
Carefully managed, and with a view toward the future, this can be a great way to supplement your financial goals.
As an investor, you can generate interest income by loaning money on peer-to-peer websites. Peer-to-peer lending brings together individuals and businesses that need money and investors that provide the money to later earn interest on it. The practice has skyrocketed in recent years.
Some sites automatically distribute investor funds among a group of borrowers, while other sites allow you to choose who you want to lend money to.
Choose a marketplace that has funds put aside in case borrowers default on their repayments. This protects your investment.
Real Estate Income
This is another traditional way to create an extra income and can be a very lucrative secondary income stream. In fact, real estate ownership has generated the most wealth for people for generations.
With the right property in the right location, you can make thousands of dollars on a monthly basis. And it’s not a problem if your time is limited – many property management companies will take care of finding tenants for you and dealing with any issues that come up with the property.
There are a number of ways to make money off a property. You can put down a deposit, buy a place, and lease it out. Over time, the mortgage will be fully paid and you’ll have a sellable asset. You could Airbnb a room or an apartment, but that can be a lot of extra work if you have new people in the place every week or two.
A vacation rental could be very lucrative. If your property is in a popular tourist destination, you can make a good income from vacation rentals, building a profitable passive income stream.
The options for investing in property vary widely as well. At the lowest level, many people make money renting an apartment with an extra bedroom that they earmark for Airbnb (a word of caution: this can often be against apartment leases and may backfire, some HOAs have restrictions on short term leases as well). Others buy vacation homes, intending to rent the property for much of the year, while the particularly ambitious may buy apartments or even small apartment buildings.
Invest in Real Estate Investment Trusts (REITs)
If you want to invest in real estate, but don’t want to be actively involved in any aspect of property ownership and are just interested in earning a passive income, REITs could be a good option for you. A real estate investment trust owns or finances various real estate projects.
REITs offer a mutual fund-type investment opportunity that allows people to benefit from valuable real estate. You can buy individual company stock or become a stockholder through a mutual fund or exchange-traded fund. Stockholders can earn a share of the income produced while professionals buy, manage, or finance the property.
One of the reasons REITs have become so popular is their return on investment – investors earn higher dividends than they would from stocks, bonds, or bank investments. Another benefit is that you can sell your interest in a REIT anytime you need to, making this a conveniently liquid investment.
Earn or Buy Royalties
This is a passive income stream that can last your whole lifetime. The most famous examples are musicians and writers who earn royalties on their original work every time it is used. Successful musicians and writers can earn such huge sums that they never have to work again. You may not fall in that category, but it’s worth considering, especially if you have an original idea or talent.
If you know that you don’t have a book or a million-dollar painting in you, you can consider buying royalties. This is an alternative investment option that produces a reliable passive income. People who own royalties sometimes need a big sum of money and instead of waiting for their royalties to pay out to make up the sum, they sell some of their royalties to interested investors. This can be done through online portals like Royalty Exchange. Royalties go on sale for all sorts of reasons and smart investors can capitalize.
An investment in royalties gives you a steady income that lasts for the duration of the copyright or patent and royalties are not linked to the stock market, so they are risk-free.
If you want to build a financially secure future, you cannot depend on just working hard at your job. You have to find a way to create additional income streams. The wealthiest people in our society have always done this and continue to turn to multiple income streams. It can definitely work for you too.