Learning how to diversify your income is a big topic in the personal finance niche. Maybe it’s because our generation came into the lackluster job market in the midst of a recession, or maybe it’s simply because we are a group of some serious hustlers with a knack for creating lucrative side hustles. Either way, a great way to increase your own financial security to is to have multiple streams of income.
Here are four reasons you need to diversify your income.
Job Loss or Other Emergency
Probably the most obvious reason to diversify your income is due to the possibility of a future job loss. If the last decade has taught us anything, it’s that no job or career path is secure 100 percent of the time.
Losing a job or being unable to work for health reasons is much easier to handle financially if you have other streams of income to help support you during unemployment. With other income streams available, you don’t have to panic, and hopefully the extra money has allowed you to build up a healthy emergency fund just for situations like this.
Create Passive Income to Retire Early
I’m sure you’ve read about many people who have been able to retire in their 30s, 40s, and 50s, but how do they do it? Many early retirees have diversified their income enough that they were able to retire from their traditional jobs and live off of their other income streams such as investments, rental properties, and online businesses.
Isn’t it everyone’s dream to be able to create enough passive income to be able to retire early or simply do the work you actually want to be doing? Nothing sounds better to me than building an income source (such as investing extra money) that allows me to sit back and watch it grow. That’s where diversifying your income can help you be able to do what you actually want to be doing with your life.
Diversify to Create a “Quit My Job” Fund
Many people today don’t find fulfillment in their careers, and if your goal is to get out of an unsatisfying career, creating another stream of income can help you jump start a “Quit My Job” fund. If you can manage to turn one of your hobbies into an income stream, you may even find something that you love doing that can also make you an income.
If quitting your job isn’t possible, income diversification could help you go down to part-time work instead, so it’s definitely something to consider if you are unhappy with your career.
So You Never Have to Wonder “What If”
After working in corporate finance for 7 years, I grew tired of working in a career that gave me nothing in the way of creativity or fulfillment. I was good at what I did, but I didn’t feel good going to work. I felt like I was squandering my life away on a job I didn’t feel connected to, and I wanted out. Leaving my job would mean that my husband would be the sole breadwinner of our house, and I didn’t want him to have that pressure.
I started a blog and jumped into a freelancing career just so I could have another option. I knew that if I didn’t make some sort of real change in my life, I’d sit in that job forever, at the same desk, and always wonder “what if.” I decided I didn’t want to be one of those people who wondered “what if,” so I did something about it, and I haven’t looked back.
How to Start
If you want to have a little more financial freedom in your life, explore the possibilities of diversifying your own income. Perhaps you could do some online work as a virtual assistant, which is something you can even do without a lot of skill. You can even start freelance writing to make money on the side. You don’t have to be a trained writer necessarily, as having expertise in a certain area is more than enough to start freelance writing. There are even courses available to help get you make money from freelance writing.
Maybe you have some money sitting in a savings account that could better serve you in a taxable investment account, like Motif Investing, or a hobby that you could monetize. Whether you are looking to retire early or simply preparing for your financial future, learning to diversify your income is absolutely the way to go.
Have you ever thought about diversifying your income? What ways have you tried? What hasn’t worked? What goals do you have for your income diversification?