Words Of Wealth

a.k.a. “The Dangers of Having Just One Stream of Income”

If all goes well in the next week or so, I’m going to accomplish a goal that I’ve had for many years: Buying land. Doing this is one of the biggest steps towards achieving a dream I’ve had most of my adult life. But it’s change, and change is sometimes scary.

I’m not paying 100% cash upfront for the land and this is an unusual thing for me. I usually buy everything–including big stuff like vehicles–outright. Having something fully paid for right from the start is a tremendous source of security for me. I don’t have to worry about whether I’ll have a short cash flow month or how I’ll keep up with payments during a lean year.

In this case though, I’ve decided to finance it for 10 years. And that’s where the topic of this post comes in: Currently my income streams are out of balance. One of my sources provides about 75% to 80% of the total at the moment, and that’s a bad thing.

When too much of your income comes from just one source, you are carrying a heck of a lot of risk. In fact, your entire life is at risk. If that one source of income goes away–like it has for so many newly unemployed people in the last couple of years–you could find yourself losing everything. That is high risk.

That’s one of the reasons I don’t like the concept of a “job.” Companies decide what’s best for them… and that’s not always in line with what’s best for the people who work there.

A company can go out of business, be restructured, put automation in place the eliminates people positions, be merged with or incorporated into another company. Any number of things can happen that leaves workers out on the street. And for most people that means their only source of income disappears overnight.

Working for yourself–whether as a freelancer, solo entrepreneur or small business owner–puts you more in control. Unfortunately I see a lot of small business owners and freelancers working themselves into a home based job instead of an actual business. They land themselves a big client who writes fat checks and they end up letting everything else fall to the wayside. They effectively turn themselves into an employee for that fat check writing client and when the contract ends or work dries up, they’re back at square one with no other income to fall back on.

In Robert Allen’s book “Multiple Streams of Income” he explains the difference between linear and residual income. I’ve been a huge fan of residual income for close to 13 years now and one of my biggest goals in the next several years is to grow those residual streams ever larger and more reliable.

In Multiple Streams of Income, Allen talks primarily about establishing three different types of residual income: Real Estate, Investing, and Marketing.

I’ve personally concentrated on marketing so far. I have about 30 websites at the moment and over the last ten years that’s been as high as 100 at any given time. I occasionally sell websites and domains and I’ll sometimes let others fall by the wayside because the project didn’t pan out as expected.

With the web sites I have income streams primarily from advertising and affiliate marketing. In a few cases I have software, books, articles and reports for sale as well. I also sell books and reports for the Amazon Kindle, and I still provide writing services on a contract basis here and there. Last but not least, I have several stock photography portfolios with more than a thousand photos available for license online.

So I have multiple streams of income that are primarily internet and marketing based. I’ve held off on the real estate and investing side of things while concentrating on those marketing pieces.

Watching the fiasco with the economy and bailouts and such over the last year has kind of soured me on the idea of stock market investing for now. A part of me knows that really great deals can be had before everything starts turning up again but I’m a bit annoyed at the entire system at the moment so the plan is to hold off on that for now.

My second “Money Mountain” as Robert Allen calls them, I plan to put into place before the end of this year. Instead of flipping houses or buying and holding strategies though, I plan to jump into tax lien investing.

Before I get there though, I need to shore up my current streams of income. Seventy-five to 80% of the income coming from one source is way to unbalanced. About the only time that might be acceptable is if your lifestyle won’t be affected by the loss of that much money. Even then though, it should be a temporary thing.

Having replacement income streams in place before disaster strikes means you don’t have to start anything from scratch if and when things fall apart. It’s the equivalent of having an emergency fund or a first aid kit. Be prepared before it’s needed.

Related:
• Multiple Streams of Income: How to Generate a Lifetime of Unlimited Wealth!