Have you ever heard this before or read it somewhere? The typical billionaire has seven different sources of income. When discussing the amassing of money and the means by which affluent people attained their position, it is one of the phrases that is heard most often.
But to what extent is this true?
The author Tom Corley conducted a research that lasted for five years and questioned rich persons about their daily routines. He then compared the results of this poll to those of those with lesser incomes. He even penned a number of pieces for prominent journals as well as a book entitled Rich Habits.
He came to the realization and conclusion that the majority of self-made billionaires derived their money from a variety of different sources. The following is how the breakdown transpired:
65 percent of people have three different sources of income.
45 percent of respondents reported four different sources of income.
29 percent of respondents reported having five or more sources of income.
What exactly are the seven most popular sources of income, and how can you start generating money from a variety of sources in this year alone?
Extra: If you are interested in learning more about this subject, you can read another detailed report that was issued by the Internal Revenue Service.
Multiple Sources Of Income, Both Passive And Active
When you start looking into the seven different sources of income, you'll discover that they may be broken down into two categories: active and passive. Although they are both significant methods to create money, each one is unique in its own way.
Active income is money that you earn by working for another person or by providing certain services to others and being rewarded for that labor. This might be your work if you operate a firm that accepts payments from consumers or if you provide consultancy services for a corporation.
Earning a passive income means that you are able to generate revenue for yourself without having to actively pursue that revenue. This kind of cash will not start bringing in money without some preliminary effort on your side, but as time goes on, you will have to put in less labor to be paid from it.
A digital book, an online e-commerce site, or any other kind of online product are all types of internet businesses that may provide passive income. After a period of time, you will eventually reach a point where you will earn money even when you are not actively working on the product.
What Are the Seven Different Sources of Income?
1. Money Obtained Through Employment
Alternately referred to as your salary, or the normal amount of monthly money you get from your principal work. A wage might be determined by an hourly rate in addition to bonuses, commissions, and other forms of compensation. This is something that does not change whether you are an employee or a business owner. Generally speaking, taxes must be paid on income generated from employment, however other thresholds may apply based on the total amount.
2. Revenue from Businesses
You may be able to acquire additional revenue from enterprises that you have established in addition to the money that you make. You may refer to them as your "side hustles," and the income from them might come from a single source or numerous sources at the same time.
In most cases, it will be included on your balance sheets and will be calculated by subtracting your profits from your losses. It should be noted that this is taxable once more.
3. Money Received from Interest
Even if the interest rate on savings accounts is likely to have dropped dramatically after 2020, you will still earn interest on any funds you have in a bank account. In a perfect world, it would be proportional to the rate of inflation; but, interest rates are now at relatively low levels.
Checking your bank statements will provide you with information on your interest rate. If you have contributed to the funding of any loans, you may also be qualified to receive interest payments when the principle amount is returned.
CIT Bank, Aspiration, and Consumers Credit Union are three examples of financial institutions that provide interest rates.
4. Profits From Dividends
The stocks and shares that you invest in could produce dividends, or you might be paid out in the form of a dividend if the structure of your firm allows for it. The term "portion of the profits" is more usually used to refer to what is known as "dividends."
For instance, if you are the Director of a limited liability company (LLC), you have the opportunity to distribute the company's income throughout a period of twelve months in the form of dividends. Alternately, several investments provide dividends on a monthly, quarterly, or yearly basis.
5. Rental Income
After you have purchased real estate, you will have the ability to start accumulating rental money as an additional source of monthly revenue. Because you might be liable to additional taxes due to the structure of your property (for instance, if it is held by a separate business), the yield of your property income should take this into consideration.
As a landlord, you will almost certainly have to take out a mortgage in order to finance the purchase of additional rental properties. This should also be included into the total revenue from your rental property.
6. Capital Gains
The selling of assets such as artwork, stocks, businesses, or loans may result in the acquisition of revenue known as capital gains. The income obtained in this manner is liable to be taxed as a kind of capital gain; nevertheless, it is more likely to be obtained in a single installment than continuously over the course of time. Visit the Internal Revenue Service website for additional information about the tax on capital gains.
7. Money Received through Royalties or Licenses
Are you a creative person who generates stuff such as music or photographs? If you provide a license for this item to be used in a certain way by the general public, you will be able to generate royalties, giving you access to an additional source of revenue.
It is not very probable that royalties will bring in a considerable amount of money on their own, but widespread creation and use of your material is likely to bring in a constant stream.
The Advantages of Having Seven Different Sources of Income
Reduced dependence on a single source of funding results from having many revenue sources.
This indicates that even if you lose access to one source of revenue, your income comes from such a wide variety of other channels that it should not have a big influence on your financial situation. Take, for instance, the scenario in which your renter is unable to pay the rent for one month.
Assists you in escaping the cycle of living from paycheck to paycheck
Having consistent access to funds is much easier to achieve when you have a number of different revenue streams. You may speed up your efforts to save money and stick to a budget in order to become financially independent more quickly. This will allow you to rely less on your salary from one month to the next.
Earning money via passive means might result in less hours worked.
When you are no longer reliant on putting in more hours in order to earn more money, you will have the freedom to spend your time in an authentic manner and on activities that are important to you. This will eventually result in more time for your family, friends, and the pursuit of your favorite interests; yet, your prospective earnings will not be affected.
You now have the opportunity to transform your part-time job into a legitimate enterprise.
Have you ever observed that the majority of people who start their own businesses have experience running more than one company? The reason for this is that they have achieved a level of financial security that allows them the luxury of time to investigate several alternative possibilities. It requires a big number of individuals to pursue their interests in order to find solutions to issues that occur in the actual world.
Advice on How to Begin Constructing a Multimillion-Dollar Income Stream
Boost both your income and your professional prospects.
When you have the chance, be sure to ask for a raise, and ensure that you give every promotion possibility your full attention. If you've reached the top of the career ladder at your present company, you may want to consider searching for lateral roles at other companies so that you can progressively climb ahead.
Maintain a low cost of living
Many of us are looking for a way to live a luxurious life while yet maintaining reasonable living expenditures. But make an effort to limit your spending on impulse and restrict your purchases to those "wants" that fit inside your budget.
You may increase the amount of money you have left over after paying your bills and saving for the future by reducing the amount of money you spend each month.
Invest in the stock market.
The returns you obtain on the stock market are likely to be far larger than the returns you would get from any interest savings account. The typical return on the stock market is between 6 and 8 percent. Although every investment has some level of risk, you have the ability to choose the kind of investing strategy that best meets your requirements.
Investing in a lazy manner with index funds; maybe employ the three-fund portfolio.
Speculating on the performance of specific stocks. You may get assistance with your research and portfolio management by making use of stock selection services.
Investing strategies that are more automated and are managed by computer programs known as robo-advisors. For instance, Ally Invest gives you a variety of reliable choices for diversified funds while while reducing the amount of effort you have to do.
Invest in real estate
It is an excellent strategy to diversify your portfolio if you can afford the hefty upfront costs of making a downpayment on numerous residences at the same time. There is a significant demand for property in the United States since there are more than 43 million tenants living in rented housing.
In addition, this is the residual income that will continue to flow into your bank account each and every month for as long as the property is rented out. Even though you'll have additional charges, such as upkeep, this one ought to be quite inexpensive in contrast.
In addition, there are opportunities to invest in real estate that are presented via crowdfunding platforms such as Fundrise, DiversyFund, and Groundfloor. You don't even have to manage a single property in order to cash in on dividends and interest payments from your assets.
Develop sources of passive income.
Initially, developing digital items such as ebooks or manuals might need a significant amount of work. After they have been created, however, there may be no need for retouching or further refinement for many years to come.
These assets that generate income imply that you may make money even while you sleep and have the potential to bring in thousands of dollars in additional revenue for as long as they are accessible.
Begin a secondary company that you can eventually expand.
This may begin as a passive revenue stream, evolve into your new line of work, and even, in the long run, be purchased by another organization.
For instance, if you are successful in launching and growing an online blog, you will begin to get revenue from ad networks and sponsored articles. Additionally, if you then try to sell it with over one hundred thousand site views per month and continuous recurring income, you will certainly be able to collect a good price for it.
If you want to test the waters before diving in headfirst, try your hand at some jobs in the gig economy or find out how you can earn some additional money. Even something as easy as flicking through books or shopping at thrift stores might, over time, become a passive activity.
Take it easy on yourself as you get started.
It is thrilling to consider the prospect of having many sources of income, particularly when you consider the possibilities and the timetables for building your wealth.
However, you should approach your various sources of revenue in a scientific and patient manner. Otherwise, you run the risk of overwhelming yourself and becoming irritable when things don't go the way you want them to.
You won't accomplish everything immediately, and sometimes a lot of hard work or schooling is required before you can be successful. It is OK for some of your potential sources of income to dry up altogether. Some of your ideas for making money will be successful right away, while others won't be; the important thing is to keep your emotions in control and to keep moving forward.
To Become a Millionaire, Do You Need Seven Different Streams of Income?
Is it common for millionaires to have seven different sources of income? No! Some people will have much less, while others will have a lot more. Your objective should be to never be dependent on a single source of revenue, and you should look for methods to diversify where your money comes from at the moment.
This enables you to become financially self-sufficient and assures that even if one source of income were to become unstable or collapse, you would still have other streams to make up the difference. You are the only one who can decide how many various kinds of revenue streams you want to develop for yourself and how far you want to carry your riches.