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By Allison Martin, The Balance
The current economic climate is causing a lot of worry and uncertainty. Even if you have a 9-to-5 job, you may be wondering how to prepare for the future and shield yourself from financial ruin.
Diversifying your income is one way to calm your fears but it can be challenging to do when you have a full-time job. However, there are feasible ways to create multiple streams of income and protect your finances.
What Does It Mean to Diversify Your Income?
To diversify your income means adding multiple streams of revenue to supplement your current job. Career coach Margaret DeBellotte believes diversification gives you security and financial independence.“It’s important to find ways to make money to protect yourself because your boss decides everything ... They control how much you make in life,” DeBellote told The Balance in a phone interview. “But when you diversify your income, you have balance.”
Despite time constraints that come with a 9-to-5 job, it’s possible to create multiple income streams without taking on a part-time job.
Ways to Diversify Your Income While You Have a 9-to-5 Job
There are several ways to diversify your income. Some methods cater to consumers who have a strong savings account, while others are suited for those who live paycheck-to-paycheck. Here are some strategies to help you get started.Open a Side Business
DeBellotte encourages career professionals to level up their skill set to, among other things, break into entrepreneurship. She believes it’s a great way to find another income stream while doing something you absolutely love.Try putting your creative talents to good use by opening a side business. You could become a consultant or convert a hobby, like bracelet-making, into a business venture.
Already have a side business? Upsell additional products and services to your existing clients to boost your earnings.
The Small Business Association recommends calculating some of the following expenses to understand what you need to pay to get your business off the ground: licenses and permits, insurance, inventory, advertising, marketing, building a website, and purchasing equipment and supplies.
Tighten Up Your Budget
Revisit your budget to determine if there are any expenses you can reduce or eliminate. While budget cuts technically aren’t an income stream, the money you free up could help you contribute to an emergency fund, investments, or as capital to launch a side business that could produce another income funnel.Tip: The Bureau of Labor Statistics estimates the average household spends $3,526 on eating out, which is around $293 per month. Cutting your spending in this area in half can bring in an extra $146 per month, on average.
Generate Rental Income
Real estate investing can be an effective way to diversify your income. This method is best if you have a considerable amount of capital built up to cover buying a home with cash or paying an extra mortgage payment.“You may not make a large profit right away on rental properties, but you’re acquiring an asset that can yield generous returns in the long-run,” South Florida realtor Jennifer Joseph Green told The Balance in a phone interview. “Rental properties can also position you to make larger investments that require collateral in the future.”
Give Micro-Entrepreneurship a Try
Micro-entrepreneurship is ideal if you want to run a small operation that doesn’t require a hefty investment and work when you see fit. You can take this route to diversify your income and be up and running in little time.“Be sure to do the math to make sure the venture works for you, and only pursue opportunities where the costs outweigh the benefits,” DeBellotte adds. “Cash flowing in doesn’t necessarily mean you have a profitable micro-entrepreneurship operation on your hands.”
Food delivery and ridesharing services are popular micro-entrepreneurship options you can do in your downtime.
For example, Uber drivers made, on average, $19.73 an hour in 2019, a figure that does not reflect what drivers spent on gas and car-related expenses like gas.
Important: The amount you earn will depend on when and where you drive, along with the number of hours you put in and your car’s fuel efficiency. You may also experience fluctuations in your earnings due to decreased demand as a result of COVID-19.
Pay Down Debt to Free Up Income
Like cutting your budget, paying down your debt doesn’t involve creating a separate income stream. However, it frees up income that you already have coming in that’s being used elsewhere.How much you can save from debt payoff varies from person to person. Here are a couple of national averages from 2020:
- Monthly credit card payment based on a 2% minimum payment: $158.82
- New-car payment for cars bought from new-car dealerships: $568
- Used-car payment for cars bought from new-car dealerships: $397
Two popular ways of paying down debt are the snowball and avalanche methods. The snowball method encourages paying off your smallest balances first, while the avalanche method pushes you to pay off your high-interest balances first.
Create a Passive Income Stream
Does the idea of making money while you sleep sound appealing? It’s possible with a passive income stream but be mindful that you must put in work on the front end before you can turn a profit.If you’re a subject-matter expert, create a collection of printables or e-books to help everyday consumers solve common challenges related to money, parenting, careers, or life. Once the digital content is complete, you can sell them through a service like Amazon, Sendowl, and Gumroad. This means you can sell your offerings and earn money on autopilot.
Another option is to create a clothing-and-accessories line through a website like Printify or Teespring that offers print-on-demand drop shipping services. These sites allow you to operate without maintaining an inventory and pay you a portion of the proceeds each time an order is placed.
Set up a blog and embed affiliate links for products and services you like. Each time someone makes a purchase using your link, you’ll earn a commission.
Key Takeaways
- Diversifying your income can give you security and financial independence.
- There are several ways to diversify your income, even if you have a 9-to-5 job.
- You can trim your budget or pay down debt to free up cash every month.
- It may be the ideal time to open a side business, become a micro-entrepreneur, or create passive income to add revenue sources.
See more at The Balance
