One thing I have learned from this recession is you cannot underestimate the importance of diversification, and I am not only talking about investment diversification. I am talking about diversifying your income. We always hear investment professionals and media talk about diversifying your investments and not to have all your eggs in one basket, but we rarely hear anyone speak of diversifying your income.
What is Diversifying your income?
It’s just having different sources of revenue, alternative income; this can be passive or active income. With the massive layoffs we have seen in the last 8 months your primary source of income is never as stable as you think it is. It’s a good idea to start diversifying your revenue and adding alternative streams of income, just in case your primary income is cut off you still have some cashflow. The alternative sources are not supposed to replace your main income, but only supplement it.
Benefits of Diversifying your Income:
I think this is obvious. First of all, you increase your disposable income even if it’s a small amount. If you have an extra income of $200/month would that pay a bill or two? When I discuss this idea with others, among other objections a common one is how much can I possibly make? My reply is does it really matter? If you make an extra $100/month it may not sound like a lot but if you add that t your RRSP, you will have added $1200 extra that year then take into account the tax refund and compounding……..well you can do the math. Don’t be too concerned with how much you will make, if you keep on doing it consistently it will add up over time.
Second it can provide a cushion against layoffs and job losses. We have unemployment numbers reaching 8-9% I can only imagine the financial hardship people are going through. Having an extra source of income would elevated some of the financial stress.
Ideas for alternative income:
Well there are many things one can do to increase your cash flow and diversify your income, but I’ll list some of the things here.
Start a small business- This can be anything and can be done on the weekends.
Turn your hobby into income
If you like writing, start a Blog or freelance
Get a part time Job
Build an income portfolio
I know many people are not a big fan of multi-level marketing, mainly due to the bad reputation these companies have. If you do your homework you can find a good one, one that has very useful products or services and does not cost an arm and a leg. I studied MLM’s for couple years and currently am involved with one, and am very happy with the service, company and income. Here is a post about MLM.
I strongly recommend everyone to start at least thinking about diversifying their income and research an alternative income stream, the income will be low at first but with consistency and patience you will be able to enjoy a healthy positive cash flow.
Have you diversified your income? Any alternative income suggestions?