Is your income at risk? 3 reasons why you should diversify.

Nov 18, 2016 by

Is your income at risk? 3 reasons why you should diversify.

Is it time to start a side hustle?

 

With the recent presidential election, there is a lot of uncertainty on which direction our economy will go.  If the market takes a turn for the worse, could you survive?  How long could you make it without your primary source of income? These are important question to ask yourself, because if the answer is no, you are essentially living will all of your eggs (income) in one basket.  Every finance expert known is adamant about having a diverse set of assets when it comes to investing.  Shouldn’t we also have a diverse set of income streams?

I recently came across an article that discusses this very topic.  The article I read was written by Pauline Paquin, an expert finance blogger at Investment Zen, and posted on Business Insider. In her article, Paquin discusses the importance of having multiple streams of income.  She begins her article by posing the critical question:

“What would you do if your boss fired you overnight? With no more paychecks coming in, how would you pay the bills, put a roof over your head, and feed your family?”

For many of us, the answer may be “PANIC”! Hopefully not, but this is something we all should consider. In her case, she says that she would do nothing.  The reason being is that Paquin has 15 streams of income!  This is definitely well above average, but shows that it is reasonable for us ordinary people to have multiple streams of income.

Some ideas of ways to generate extra income are:

  1. Start a side-hustle
  2. Tutor
  3. Interest earned on an emergency fund savings account
  4. Driver for Uber
  5. Rent a spare room on AirBnB
  6. Babysit
  7. Sell old things online
  8. Work off hours at a local business
The list above is just a compilation of some examples of ways you can bring in a little extra money. No matter which option you select, an additional stream of income will help you feel more confident in the event of financial hardship.

Another added benefit of side  income is that it allows you to increase your savings rate.  For example, say your current income is $2,000 a month and your expenses are $1,5000 a month.  You could use any extra income you generate to supplement that $500 a month you are already saving, plus still live the same quality of life.  Any additionally savings you can generate gets you one stop closer to reaching financial freedom!

 

 

Financial Press: Action Items

 

This Business Insider article gives great insight into the reasons why it is beneficial to have multiple streams of income. Here are some key points that you can take from the post:
  • Diversify – The more streams of income you have, the better.  It is less likely for all your income to diminish the more it is spread out.
  • Be Proactive – Even if you do not want to start a side hustle for extra income, it is still important to have a plan for what would happen if your job were to go away.  This could be as simple as starting an emergency fund account.
  • Save, Save, Save –  Save the extra income that you earn.  Not only will the extra money give you some piece of mind, but it will also bring you closer to financial independence.
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1 Comment

  1. Diversify is the key!

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