The Importance Of Having Multiple Sources Of Income

Many of us know the concept of not putting all the eggs in one basket, for that is risking it. If that particular basket collapsed, all our eggs are gone. This applies to investments where we buy a variety of stocks to form the basket, or split our savings into a few different banks. This concept is called diversification. We split our assets into different portions and put them into different places so that if each one gets hit, we still have the rest. Yet despite knowing this concept, few apply it to one very important aspect of our lives – our income source.

For many of us, our sole income source comes from our job. Every month when that salary comes in, we are able to use it to pay for our bills and groceries, to pay for daily expenses and to set aside for some savings. How much we save from that income source depends on how frugal we are and each of our individual situation. In a more extreme situation which many of the people are in, the whole family depends on one income – the sole breadwinner’s income. We also have a term for this concept, where we bet everything on one outcome – all in.

In gambling, when we all-in, we pump all our money into that one single gamble. In stock markets, that is also the case. But in jobs, we all-in our energy and time, as well as potential futures on it, all for that one income. We pump in the hours in the hopes of getting promoted, we spend all our energy doing work to get that bonus, we sacrifice work-life balance so that we have a future in the company.

Under normal circumstances when all is going well, everything can function. Whether that particular individual is single or has a family to support, everything hinges on that only income source to sustain everything. But things happen. During time of economic crisis, people get retrenched. Accidents happen. Sickness befalls even the good and hardworking people. Death comes to all, regardless of age. Bad managers may fire off good workers. Workplace politics may make people disheartened and leave the job.

Let us take a very common example of real people from society. John earns $120,000 a year at the age of 40. This is quite impressive, and he has worked hard for it. He put in the hours, did great projects and fulfilled all the tasks his boss gave him. He also frequently upgrades himself to ensure he stays relevant. His job is his only source of income. John does not do investment nor side business, because he does not know how to do it nor has the time and energy for it. John has a nice house in a good location for $500,000, something befitting of his status and a reward for himself.

Tom earns $60,000 a year from his job, also at the age of 40. He starts work on time and knock off on time. He does not do overtime unless absolutely necessary. He did his fair share of work and nothing more. Definitely a decent worker but not someone the leadership would consider promoting fast. Tom does not know about the stock market well so he does not play it, afterall not all types of investment suits everyone. However, Tom had set aside 1 hour a day on average to promote his blog or Youtube channel. The blog or Youtube channel does not have much viewers for the first 6 months, but after that he earns a small income of $300 a month. Nothing too big, just enough for the monthly transport fare and utility bills. Tom also has a small online business selling handphone covers, which he listed on eBay and Amazon. Nothing too fanciful or niche, just something any other commoner could do. The money is better for this one. He makes about $500 a month.

Tom had also paid for a deposit and bought a smaller house at a not-so-good location for $200,000. The process was longer for this one, in that he had scrimped and saved to afford the deposit. He then stayed in one of the rooms and rented out the other 2 unused rooms. Sure he had to stay with strangers, reducing his comfort for some time. But he had extra money and 10 years later he paid off the first house and got money to buy a second one. This time he rented out the second house fully for $2000 a month. By this time Tom was 40 years old.

We have this situation now.
John at age 40: $120,000 a year from day job. His only source of income.
Tom at age 40: $60,000 from day job + $3600 from Youtube channel + $6000 from online business + $24,000 from rental = $96,600 per year.
We will both take away the factor of mortgage payment since they are both paying for it. We will purely look at income source.

Definitely when looking at the overall picture, we can see that John is still earning more. But John has a higher risk. Assuming that due to an economic crisis, both John and Tom are retrenched, we will see that John has 0 income, while Tom still have $33,600 per year from other sources of income to get by. $33,600 is not much but still better than $0. With more sources of income, we are able to withstand any hits taken on any particular source of income. If I have 5 sources of income, when 1 of them is taken out I still can depend on the other 4. Granted we usually have one main income, but the side income serve as additional money on normal days and a safety net on rainy days.

Furthermore, with the examples I gave above, we can see that developing additional sources of income need not be something very big. It can just be a small endeavour which any of us could do. All we need to do is to put in some efforts in the beginning and allocate a little time and energy each day. Using me as an example, I am doing a hard labour job, one which I will be gradually rendered worthless as I grow older. I know that, my colleagues know that, my superiors and my subordinates know that. It is simply the job’s nature, which is why we are paid slightly higher than our peers. But only at this moment, things go well for us. If we sit back and do nothing, we will have nothing to rely on when we lose our job.

Hence I go into expanding my sources of income. From renting out my house to doing side business, from putting my money into safer crypto savings and even getting ready for a longer term part time job, I am preparing for the day when my main source of income gets taken away from me. But even if my next main job could not earn me as much as what I am earning now, the more sources of income I expand (passive income, preferably), the safer I get.

So look at your own situation too. Do you have any side income, even though they are little as of now? If you are depending everything on that one single income, know that you are at risk. Plan and work for bad times, so that when times are bad you will not end up dead.

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  1. With the costs rising on everything these days, yes, extra money is a plus. I work from home and don’t bring in much, but at least it’s something small to go with my husband’s income.

  2. Yes I believe that it’s good these days to have multiple sources of income. There’s not a lot of job security these days so you need another way to take care of yourself.

  3. I think it’s great if both can bring in income. Both my husband and I bring in an income. It’s easier if both do, but understandable if only one income is coming in too.

  4. Your insight on diversifying income is valuable. It highlights financial stability, security, and growth potential. Expanding revenue streams is a smart move!

  5. Your piece highlights a critical concept of not putting all your eggs in one basket. It’s like having a Plan B for life’s uncertainties. The examples you provided really drive home the point that having additional income streams, no matter how small, can be a game-changer.

  6. Great post! I’m all for multiple income sources, everything is so darn high now you have to have that extra income.

  7. I wish we didn’t live in a society and culture where it was necessary that we had multiple income sources to be able to make it or be okay if something unexpected happens but you’re absolutely right.

  8. During the pandemic, it was easy to save 5 figures, now that’s all gone…everything got inflated. 🙁 Where we are though means paying so many taxes for all the different side hustles. It isn’t fair at times…

  9. I have a full-time job and I do gig work on the side. I’ve got my blog, DoorDash, Amazon Flex and more. I do these if I don’t get enough hours at work or overtime.

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