Grow Your Wealth With These 5 Different Income Streams
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Studying millionaires is quite fascinating, because more often than not they are ordinary, ordinary people with remarkable discipline and focus. Very wealthy individuals achieve this by working differently (not necessarily harder or smarter) than the rest of the world. A fascinating insight into millionaires is that they typically have multiple streams of income.
A 2018 article on CNBC highlighted the following intriguing aspect of millionaires:
65% of millionaires have three streams of income
45% of millionaires have four sources of income
29% of millionaires have five or more income streams
Most people have at least one source of income: their job. They go to work on weekdays and after enough days of work they get a paycheck. However, well over half of millionaires have three total income streams. For some, it’s work plus at least two others. For others, it might not even include labor at all.
Having multiple streams of income is a powerful wealth building tool because the right streams can passively increase your wealth. If you’re looking to grow your wealth like the rich do, here are the top five sources of income that will boost your bottom line:
Related: Need More Cash? Check Out These 7 Income Streams That Really Generate Passive Income
1. Real estate syndicates
Passive income streams are one of the building blocks of wealth building. Each person on this planet only has a certain number of hours in a day. No matter how actively you can work, you will always hit a ceiling on what you can earn and how much you can save. You can boost your wealth generation with passive income because you will earn money even while you sleep!
Real estate syndications are one of the best passive sources of income. A syndication is a group of investors who purchase a particular multifamily or commercial property. These investments typically last around five years and have annual returns of around 8%. In addition to these above-average returns, syndications sell the property purchased, sometimes offering investors a flat return of 30-50% at the end of those five years.
Overall, while all investments are at risk of losing money, it is not uncommon for real estate syndications to return an 80% to 100% profit over five years. An investment that potentially doubles your money every five years passively? This is why syndications are so powerful for wealth creation!
2. Investment income
Another common type of passive income stream that will increase your wealth is having investment income. Syndications are investments, but this category is more generic, including stock and bond dividends. Many millionaires have CDs, participate in P2P loans, and own shares in a stock like McDonald’s, which pays regular dividends.
These investments won’t bring in life-changing money, but as you grow your wealth, the stock market is a fantastic place to park your money safely while it grows and generates quarterly or monthly income. The key to wealth building is diversification, and making income-generating investments in stocks or bonds will help you achieve that goal!
Related: Escaping the Nine-to-Five Grind: How to Build Passive Income Streams
3. Business income
Unless you have contractual obligations with your main job not to start a side hustle, many millionaires have increased their wealth through side gigs.
Owning a business, whether it’s making or selling something or providing services, opens up a world of unlimited earning possibilities. Suppose you are a developer and you create a game in your off hours. This game could develop a following and passively earn you an additional $100 per day. Just like that, your side gig earns you an extra $3,000 per month!
You can take that money and reinvest it back into the business to earn more, or you can leverage your side job to save more tax-free money. Your main job may give you a 401(k), but you can open an SEP plan and contribute the lesser of 25% of (your) employee’s salary or $61,000.
Imagine being able to contribute $20,000 through your 401(k) day job and defer up to $61,000 with your SEP plan from your side business. If you do it right, you could carry over $80,000 a year, and if you invest wisely, the sky’s the limit for wealth! When done right, business income is essential to generating wealth.
4. Royalties and licenses
This category is a little less common but essential. If you have the ability to create a product, idea, or process, sometimes you can license it and collect a royalty each time they use it.
The royalties can be on anything – you can even start a band and manage to get your songs on one of the streaming platforms. Or you can create a YouTube channel and earn some passive income from views.
The revenue streams from royalties and licenses are fantastic because they’re generally consistent. Say you invent a new waffle maker, for example, and a company buys that design. You will benefit from every iron sold. In this case, you can expect a reasonably strong income stream for the foreseeable future!
5. Rent your car
Peer-to-peer car rental has become remarkably popular, thanks to a shortage in the market. When the pandemic hit, big companies like Hertz shut down and sold off many of their cars. With the shortage of chips, these same companies are struggling to keep up with growing demand.
Today, companies like Turo offer people the possibility of renting their car from others. Some people have made it kind of a side hustle, earning quite a bit of passive income. In effect, a 22-year-old student in Toronto managed to develop a mini-fleet of four luxury cars.
It’s not just property you can invest in and rent out – if market trends continue, car rental is quickly becoming a viable source of income!
Related: 7 Ways to Earn Extra Income Even With a Full-Time Job
If you want to increase your net worth, you need multiple sources of income. Relying too much on a stream (usually a job) is risky. What happens if you lose it? Likewise, if that singular stream of income requires work, you limit what you can earn, because there are only a limited number of hours in a day that you can work.
The five income streams above are fantastic ways to increase your net worth. If you haven’t already, consider diversifying your portfolio by implementing the income streams suggested above!
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