- Understanding Multiple Stream of Income
In view of the above economic challenges, having a multiple streams of income provides a more secured financial platform. On the average, one should aim for at least 3 streams of income. The more, the merrier. When one stream dries up, you can live on the remaining two, while getting another stream started. According to Robert Allen, an ‘apostle’ of Multiple Streams of Income, one of your yearly goals should be to decide how many streams of income you plan to add to your life in the course of the year. It does not mean taking a second job. Having one job is stressful enough, beside ethical issues (some employers offer you employment on the basis that you do not take up another paid employment while you remain their employee). It means leveraging on other types of income.
There are three types of income:
- i) Earned income: Here, you exchange your time (your life really) for money.
- ii) Portfolio income: This income class refers to income from paper assets like stocks, fixed deposits, bonds, treasury bills etc. It also refers to income from businesses you own.
iii) Passive/Vocational Income: This income class refers to cash flow from real estate investment, private businesses, intellectual property like music, books, inventions, patents etc.
The playground of the rich is portfolio and passive income while the poor and middle class sweat it out in earned income avenue. Who you are, and where you are going determines the income class you focus on. It is obvious that if you want freedom, to exit from the rat race and live your dreams, you will focus on portfolio and passive income.
- Profession as Distinct From Business:
Having understood what multiple stream of income entails, we also need to understand the difference between “Profession” and “business”. A Profession in its simple term refers to a special type of job that requires a high level of skill acquired through a detailed education. However, a business simply connotes the activity of making, selling or supplying goods or services for money. These definitions clearly show that profession is distinct from business.
For instance, an Accountant (Profession) can be working in a firm and at the same time, also owns a Cyber-cafe or a boutique, or both. The Accountancy job is his Profession while the Cyber-café and the boutique are his businesses; the beauty of the businesses is that they can function smoothly without his daily physical presence as long as he’s able to set up a good team of employees. Such an individual can be said to have a three (3) income streams.
- Developing your Business:
One of the greatest challenges of creating multiple income streams is choosing the most appropriate business and time to diversify. It is pertinent to note that sound knowledge of rudiments and operation of the desired business is critical to the survival and growth of the business.
The followings need to be considered in developing a Business:
- Passion and Patience: This is a fundamental element in choosing a business. Personal aspirations affect how you feel about self-employment and what kind of business you want to run. The secret of building a multiple income streams is to choose a business of your innate passion, from what you know and love. It is passion that can make a man to carry-on even in the face of obvious business challenges and failure.
The place of patience is in understanding that an enviable business is built with time and that it has three (3) stages which are: the start-up (1-2yrs), take-off (2-3yrs); harvest; renewal or decline. This calls for patience.
- Environmental Influence: Another avenue is what I refer to as “street-wise strategy”. This means that you can generate a business by taking advantage of opportunities in your environment, i.e starting a business that your environment needs but lacks. In this regard, SWOT analysis can be adopted to determine the strength, weakness, opportunities and threats of your environment; this will help in choosing rightly.
- Technicalities: Passion can make you start a business, the environment can encourage you, but it is the continuous building of your knowledge capacity in the chosen business that keeps the business going. Several avenues abound, such as seeking advice from experienced people in your chosen field or consulting a Professional, going for seminars and trainings to improve your skills in that same business.
Watch out for the concluding part.