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Multiple Streams of Income?





Growing up dreaming of riches, I always looked at multiple streams of income to meet my dreams. I’ve thought about having rentals, businesses, investments, stock trading and my regular 9-5 job as sources. My question is, should I be focused on smaller multiple streams of income? Or focus on larger, single projects?

So far, this is what I have:

  • Regular 9-5 job
  • 1 Rental Property
  • Investments/Stock Trading
  • Online Income

Looking at other gurus at each of these fields, it looks like becoming a master in one field will yield success.

Regular 9-5 job

  • A person who becomes the best in their field usually succeeds the most relative to their peers. I’m sure that most of you who work regular 9-5 jobs see that the ones who perform the best, get promoted the fastest.

Rental Properties/Real Estate

  • I know a few real estate investors locally who have focused on their rentals and have become very wealthy. They focused their investing efforts towards buying houses and very little of anything else. As a result, the investors that I know have quit the rat race and live off their rental income.

Stock Traders/Investors

  • There are an abundance of successful stock investors/traders out there who have put their life work towards trading/investing. Warren Buffet is a big name that comes to mind, others include Eddie Lampert, Francis Chou, Peter Lynch, George Soros…

The Downside of Focused Earnings

  • Like investing in the stock market, focusing on one source lacks diversification. For example, if the real estate markets turn sour, or when the stock markets correct your earnings/returns are looking at huge swings. I guess successful people in those fields have the stomach to tolerate such swings.

So what do you think? Perhaps I should put a focus on one field instead of being a scatter brain? Or does the diversification help protect my downside?

Perhaps I’m still trying to find the source of income that brings me the most enjoyment.

Comments?





42 Comments, Comment or Ping

  1. FT, if you can manage to have them all, you will surely make money!
    My suggestion (as you are still young) is to keep all of them for another couple of years. Then, try to establish which ones you prefer. The more you have fun doing something, the more you will make money.
    But please, don’t quit on online money and your blog ;-)!
    Cheers,
    FB.

  2. FB, LOL, no, I don’t blog solely for the purpose of making money. If I did, I would have quit a long time ago as it doesn’t pay a very good salary. :) I do it b/c I really enjoy it, it’s more of a hobby for me now.

  3. 3. glblguy

    Well, I’m no expert as I have just recently begun my multiple streams of income effort. From what I have read and heard (mostly via the 48days.com podcast from Dan Miller) multiple revenue streams mitigates risk and provides opportunity for more wealth. If you have multiple streams, when one fails you always have another.

    Dan encourages residual income, or “making money while you sleep” as he calls in. This is frequently tightly coupled with multiple revenue streams.

    Your note about finding income you enjoy is the most important aspect, as if you enjoy doing something and you are passionate about it, it will attract money like bees on honey.

  4. FT,
    Thx, not I am reassured ;-)

  5. 5. Investoid

    While diversification typically reduces risk, you are likely leaving money on the table on each stream if you don’t specialize. How many of those people getting those promotions are just 9-5 people? In my experience very few if any. You have to work harder to get ahead in the rat race, which diminishes the amount of time you have for other projects.

    Similarly, how good can you be at stock investing if only doing it part time? While you may have intrinsic skill, you simply will miss out on opportunities due to the lack of time you have to digest all the information that’s out there. The same goes for any other income stream.

    Ideally, you would devote yourself 100% to one project that had the most success, then switch out when the environment changes. Since that’s probably not very realistic (eg. your work skills /employability would be quite impaired if you take a significant amount of time off), you might as well choose a couple that best suit you and your financial situation.

    I’ve tried both sides of the equation, and I always feel more fulfilled (and get higher income) when I’m down to one or two streams.

    Just my opinion on the matter.

  6. 6. Brip Blap

    I agree with Investoid. You aren’t going to find a lot of ’9-to-5′ types crawling up the corporate ladder. I spent 15 years doing 70 hour weeks moving slowly but surely up to senior management before I gave up and went into 9-to-5 consulting. I can tell you from both perspectives that if you want to succeed at your day job, it takes lots of time at the job (staying late to impress your boss – face time is a sad but true fact) and networking time (time traveling for the company to other sites to ‘get known’, drinks with the head of XYZ division after work, attending conferences, etc.).

    I think your best bet is to view the 9-to-5 as a ‘base’ that provides a salary and benefits, and concentrate on other income flows that can work ‘while you sleep’. If you want to succeed as a wage earner, you have to put a LOT of effort just into your job. I only started blogging when I dropped back to my 8-hour-a-day consulting. I never would have had time during my corporate days.

  7. 7. HalOtis

    For a 9-to-5, I think you have to be careful not to become irreplaceable. If you’re irreplaceable in your current position then you also can’t be easily moved up.

    It recently happened at my office. our most senior and knowledgeable developer had to fight hard to get the team lead position over much more inexperienced people.

  8. 8. Thomas

    May you like doing a little bit of everything?

  9. Great post and comments! I agree to use my ’10-to-6′ :D job as a stepping stone to earn passive income from stocks. After all, you need money to invest in stocks. This is the strategy that I’m employing, and I love it. My annual dividend increases (8-12%) are superior to what I’m getting from my current job.

    I consider income stream from stocks diversified, because all the dividends are coming from different industries and geographical regions. Dividend and income trust investors don’t rely on bull markets to succeed. In fact, the cheaper the market, the cheaper the stocks, the higher the yields on future contributions, and the shorter the road to financial freedom.

    Finally, dividend and income from stocks are genuine passive incomes. They keep coming in even when you take 1 year off. Incomes from job, rental properties and blogging are (part) salaries in my book.

  10. 10. Warren

    I agree with a lot of what is being said, particularly FJ’s last comment. I have a 9-5 job, a rental property and I recently started with some dividend/investment income (thanks to Derek Foster and his book).

    Just like job and career advice: do what you enjoy!

    Passive income is my personal goal, so far the rental thing is working out pretty well, and dividends are great.

    People are right in that rental income is not hassle-free, but the biggest hassle by far of my income streams is showing up at the office 200+ days a year. :)

  11. excellent post and comments!

    I personally try to climb the job ladder and keep having fun in the process. Then using a mostly no -effort ETF-based investment strategy, I am building my future income stream. The more money my job gives me, the bigger my future income stream will be. Real risk protection for me is having a job where I keep learning new things to remain a competitive ‘resource’. That said, doing 70 hours week seems a little bit extreme and not a very enjoyable way to spend life.

    I do blogging and individual stock investing as a hobby, not as a real income building exercise (any money from those goes to my new Santa Fe :-).

  12. 12. Gates VP

    Wow, my response to this blew into a full-blown blog post:


    http://gatesvp.blogspot.com/2007/07/multiple-streams-of-income.html

    Let’s just say that you’re actually talking about the fundamental question of what you want to with your time, which is why this is such a tough question.

    The mathematician in you probably wants to find some stable max/min point, but there really isn’t one. If you think that your time is better spent managing a rental property than trying to get a pay raise, then go for it. Same with investing and / or blogging and whatever else you like to do.

    BripBlap is obviously annoyed at his 15 years of 70 hour weeks, but you don’t need to be. Don’t spend 15 years working 12 hour days and 6 day weeks doing something you don’t really like.

  13. Great comments there guys, really got me thinking.

    Gates VP, that blog post of yours was inspiring. Perhaps I should take the happiness factor into the equation.. the problem is, making money in general makes me happy. :)

    But in terms of enjoyment, I would say that I enjoy stock invest/trading and blogging the most. Perhaps I’ll work to make those two things my full time gig! Got a long way to go!

  14. 14. glblguy

    @investoid – I don’t disagree that putting all of your effort into one job will most likely increase your returns (i.e. climb the ladder), but when I reference multiple streams of income, I think I might have been thinking of something a little different.

    Find the one thing you love doing (being in my 9-5 J.O.B. is not one of them) then figure out 6-8 revenue streams that you can surround that thing with. For example, I love blogging about personal finance and RV Camping. While this is my core focus I plan to surround that with other related revenue streams, this creating multiple streams of revenue on that one focus area.

    btw, again I credit Dan Miller (48days.com) for this and just repeating his ideas.

  15. 15. Q Cash

    I think the ideal situation is to have multiple income streams — all passive.

    Then you can spend the eight hours a day between 9 and 5 doing what you want to do. If that brings in extra money, great. If not, why worry?

    :-)

  16. 16. Dennis

    I think the key determinant for how you can diversify your income stream is time.

    I agree that becoming an expert for each opportunity will produce great results, however, I don’t think you would have the time to work 9-5 and manage a handful of rental properties by yourself.

  17. I love Q Cash’s suggestion!

    I think you should concentrate on the career since that probably provides the bulk of your income.

    I have a number of friends who quit jobs to start a business or new career and fell into the trap of thinking that they could make a living doing something they love.

    One thing to think about is that we always want what we don’t have. If you could earn a living by blogging and had to spend 40 hours /week doing it, would you still enjoy as much? Would it turn into a regular job after a while?

    Mike

  18. I think you should stick with a little bit of everything. The secret here is to get a team of like-minded individuals that want to share information and get rich together. This way you can still grow in your career, have assistance with stock analysis and share research and risk in real estate investing.

  19. 20. Mr. Cheap

    I agree with Q Cash. While Investoid’s comment makes sense, I think to a degree the law of diminishing returns kicks in (how much does spending an extra 5 hours / week at a salaried job increase your salary? I think if you spent 5 hours / week to investigate and manage your first rental property you’d see a MUCH larger gain).

    In terms of “switching” when their is a market down-turn in your chosen specialization (e.g. say you’re focused on real estate investing and the market turns) – part of being good at what you specialize in is to be able to survive in any environment. I do computer work, and there have been downturns (such as after the dot-com burst), but I didn’t pack it in and become a plumber (I took the opportunity to go back to school and get my Masters during the downturn).

    Which brings up another point – having a little bit of extra resources (time and money) make weathering down-turns and unexpected adversity MUCH easier.

  20. 21. Bootsie

    I thinik Four Pillars makes a great point! I used to be a huge yoga enthusiast and decided to get certified to teach. It was an expensive and long goal but I enjoyed it along the way. I always dreamed of quitting my job as an engineer and opening my own yoga studio.

    So I gave it a shot and started teaching once a week at the local gym while keeping my day job. Turns out I didn’t much like teaching yoga and soon enough, I stopped practicing yoga altogether (and got back to just being a regular gym rat).

    I think sometimes hobbies are a lot more enjoyable when they are just that – hobbies. Oddly enough, once I was getting paid to do it, I didn’t find it enjoyable anymore. :(

  21. 23. Deborah

    Interesting post and comments. Some people who have been reading my blog have suggested to me that with my analytical ability and obvious love of doing that kind of thing that I should be trying to move towards a career in that area, especially since I am wanting a career change.

    So, we have the comments about the long working hours to climb the corporate ladder. I think employers are expecting more and more for wages that decreasing relative to costs.

    When I was young I think you could have said that people would still do ok picking occupations with lower wages just because they would enjoy the job more, but I think the economy has be come so tight, that to choose them today means certain low standard of living in retirement.

    It also means that you never have the opportunity to acquire assets to have either the rental property or investment assets to supplement income.

  22. Did you crib this straight from Rich Dad / Poor Dad’s “Quadrant” system? The thing that you have to keep in mind is that not everyone’s equally good at managing all of those different streams. If you haven’t read the quadrant theory, you should probably go pick up a book…

    Also, your statement that the people who are the best in their field get promoted is fallacious — in my experience, not to be a cynic, it’s the people who are the best liked and are moderately good at what they do are promoted the fastest. They’re good, but they’re REALLY good at being likeable. -My- rich dad’s advice was that “it’s better to be liked than to be good.”

  23. 27. Gates VP

    Wow, another Blog Post response:

    http://gatesvp.blogspot.com/2007/07/multiple-streams-of-income-part-2.html

    Suffice to say there a lot of negative emotions here regarding the 9-5 work world.

  24. 28. Brip Blap

    @Gates VP: I wasn’t so much annoyed as just resigned. It did get me a lot of overseas travel and fancy business dinners while I was working the crazy hours, so it wasn’t a complete loss – and it got me where I wanted to be eventually, too.

    I also agree with Karl – in my experience having top-notch “buddy” skills is a lot more important than knowing your job. Half of my job promotions came from knowing how to talk sports and drink beer with the boss, not my technical knowhow. Sad but oh so true.

  25. 29. Gates VP

    OK Brip Blap and Karl, please help me out here:

    Half of my job promotions came from knowing how to talk sports and drink beer with the boss, not my technical knowhow. Sad but oh so true.

    I’m 26 and working in the IT world. I’ve never had anyone promoted “ahead of me”, in fact I’ve never seen anyone pushed ahead due to the “buddy system”. So maybe I’m just living in a dream world here, but here’s my perspective.

    For a time I was a “full-time” consultant for people that were making more than me (which meant that I was training people making 40-50% more pay than I was). That lasted a few months and I left when the company failed to raise my rate of pay. They weren’t making the billable rates necessary to put me anywhere near that. In fact, nobody in the company was making those numbers. The guys with 10 years experience to my 5 were making 10% more.

    So obviously I left. They had a full project cycle to make it worth my time, instead they did a poor job of defending me when the client’s internal staff started smearing me (union business) and they gave all of the workers a low-end X-mas bonus in the company’s best year to date. (the smearing moved to one of the partners after I left, go figure).

    I took a 25% pay increase and moved elsewhere. Now people just ask me for direction and I give them direction. I do the things that other people aren’t good at and I make an extra cut for my time. When I move to the next pay grade it will be a direct result of my output for the company. If the people asking for direction start making more than me, then I will either start asking them for direction or I will receive a raise to maintain the balance.

    Maybe I’m just dreaming, but this is kind of the way the world works for me.

    OK, you know what, I lied, one of my first bosses actually questionably brought in someone of similar experience at a significantly higher number than me. Of course, this boss actually wanted to lay me off, but couldn’t (of course, I was already looking for a job by then). He also couldn’t turn a profit with his company, so there wasn’t much point in being there long-term anyways. The guy he hired “ahead of me” ended up joining me a my next company. The boss burnt through 6 other guys trying to fill the positions and 15 months later he was back at my door offering me double my previous salary to come back. Of course, it turned him down b/c he still couldn’t manage a business :)

    Either way, my point is that “the old boys club” seems like a poor way to get pay increases. Promoting friends ahead of quality just sows massive discontent amongst workers, which then leads to income generators leaving, which then lead to loss of income and eventually no need for the new-found manager. People (and Wall Street) have little patience left for money suckers like “the old boys club” (and I’d like to think they’re a dying breed).

    Of course, I could be very wrong :(

  26. 30. Brip Blap

    I like to think that I’m pretty good at what I do, that’s just human nature – but objectively I worked my way up the ladder quicker than my peers. All that having been said, a large part of why I was able to was not that I am the smartest guy out there, or the best technically, etc. Part of it was my ability to play corporate politics, to be a guy that my boss liked to take on business trips, to be popular with my subordinates.

    It’s not quite the same as a “good old boys” club. It wasn’t because we all went to Harvard together, or all were members of the Exchange Club. But being technically tip-top in your field won’t get you far if you don’t know how to play the corporate game.

    And seriously, I’m not defending it one tiny bit!! I got sick of it and ducked out into consulting world, too, where I can do the work, move on, and avoid all of this for the most part. But I will tell you, working on Wall Street as I do, the old boys club is alive and well. Not as strong as it was, but it’s there. I think the IT world may be a little bit better – I work in finance, myself – but in investment banking, private equity, brokerages, who you know is still very, very important. That’s just the nature of the beast.

    Good discussion, btw, interesting to see the different viewpoints.

  27. 32. Arcarus88

    I’ve just started on this response and find all the interactions fascinating. This is my first entry, particularly since I am in a very similar situation, asking myself the same. 60 hours a week, but loving my job, Rental, Other. Won’t repeat all the great comments but keep in mind the following:

    As an employee in the top tax bracket, your payout, post CPP etc can be less than 50%. It is likely that corporate longevity and pensions have as much of an impact, as they once did. Hence you have to consider After tax type returns per hour spent, of sorts.

    If structured well, write offs including wages, renos can bring down your taxes. Capital gains, of course at 50%. Your overall tax rates drop of course, if you decide to leave the employment world. There’s a lot to be said for Consulting / Small Business, particularly if you love and can get client work easily.

    In deciding to leave the corporate world, financial planning, structure and timing are key.

    Do you have the experience / financials to weather Rental problems – including maintenance problems (roof) and tenants that can suck up all your time. Is there sufficient lease time, so that you can relatively assure yourself of an income stream, but also not have to deal with change in tenants that can lead to incremental massive problems. Is your property in an area (e.g. Downtown) that makes getting new tenants easy.

    Consider approriate financial structuring before leaving. Getting lines of Credits from banks are a lot harder without that stable job. This and other structuring, if desired (Smith manoeuver) are key. How levered are you on the Mortgage, if any?

    If the Market takes a nose dive, can you manage. Overall, a portfolio would have to be reviewed if there is a substantial change in cash flows.

    Are your personal administrative things completed – Can you get these out of the way while still at work – you don’t want them to be diversions – Wills, Power of Attorneys, addressing family issues; health checks; use of your work benefits, etc. etc.

    Last, Can you actually do it? Sounds like a simple enough question, but hardly that easy to answer. Do you have a daily game plan and short term set of objectives that allows you to become a more strategic and versed investor.

    You will also have a much smaller network of people to interact with and in some ways, there is a kind of loneliness in INvesting vs office work. Can you stay focused on researching etc. even when things go wrong. Are there other family members etc. that will want you to do many other things, given your newly freed up time. do you have supportive family/friends

    I’m not trying to scare you, but I’m a believer in Murphy’s law. And when it rains, it pours. And while not all contingencies can/should be addressed, lots can befall and you should be prepared.

    Lots of questions, but my view is that the “war is won, before it is fought (G Gordon Gekko, Sun TSu). Know some of the implications, risks and have good plans. Once you have a certain comfort zone, you’ll know exactly what you want to do for yourself and equally important – When.

    Kind regards.

  28. Seems like we have a similar outlook.

    after losing my job in 2001 I decided I’d diversify my income sources too.

    http://moneyshaker.blogspot.com/2007/06/buying-canadian-income-funds-for.html

  29. 35. oOKitijimaOo

    FT,

    I think your doing a great job. =o) Of course it’s always going to seem greener on the other side but this is your ingredient for success and it’s working for you. Just stick with your plan.

    Kit

  30. Passive income from rental is nice but they require a lot of working, especially dealing with tenants and all. But if you have a nag for this kind of investment and is able to deal with people, then this investment can yield great return at low risk.

  31. 39. Kyle

    Do Non-registered mutual funds work the same as individual stocks? By this I mean, that with the new TFSA coming out, will the dividends paid out by the MF be a form of passive income? Will the dividends paid out be automatically re-invested or can I have it paid out as income? Thanks everyone for all your great posts all over this site!!!

  32. Kyle, mutual funds basically act as a basket of stocks. If you were to hold a mutual fund in a TFSA, it can be most likely be reinvested or taken as income depending on the mutual fund company. In addition, all distributions will be tax free.

  33. 41. Greg

    Great responses from all. I seem to also struggle with juggling multiple business’s. I do agree with working on things that you enjoy as it doesnt feel like work then! I recently found a national professional networking group that allows you to grow referral clubs (i.e BNI and LeTip) and pays you a monthly residual income. I couldnt beleive it–I started one club and now it has taken on a life of its own with other referral club members starting clubs themselves- we project 11 clubs by the end of the 1st quarter of 09′. check it out at gsclubs.com

  34. 42. Leroy

    Hey Guys, I’m 24 and I have some thoughts. (excuse my poor grammar)

    I intend on working two jobs Panago ($1,800/ft) and superstore ($500/pt). Two jobs afford me safety when I go to acquire a rental property, have a 20% cash flow surplus as liquid savings (I.e duplex rents out for $2,500 jobs make $4,800 and bills only equal $3,300).

    So that affords me two prongs in battle for financial independence, now comes the puncher. Fiancé and I will be setting aside $300 a month in investments, managed by a professional broker with minnimal guidance from me (I.e we collabrate together if I have time and if not he has instructions and investment criteria from me).

    So now I have developed a 3 prong battle plan, which is more like a 6 prong attack. Because the job has safety factor, rentals also increase in value and my investments are diversified. Now as time goes on and my tax bracket moves up I create my rentals into a corporation to reduce my taxes and get paid a salary and quit 1 job to focus on it more.

    I recently found this blog and it is very informative and suprising how usefull it is. I haven’t found to many people paddling the same boat as I so this is refreshing.

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