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Alternative Income is a Form of Insurance

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My wife and I are entering into the great unknown – we will soon be first time parents. We are as excited as any other first time parents, but along with that excitement comes a little bit of worry. This is a huge lifestyle change for us and there are many unknown factors – one of which is financial.

My wife and I decided she should be a stay at home mom. We are blessed to have this opportunity, but that also means our income will decrease after she resigns from her job. Going down to a one income family increases our risks – if I get laid off or something else happens, we could be in trouble. That is why life insurance and long term disability insurance are so important. But that is also why I have worked so hard to improve my small business over the last 2 years. With my business, all my eggs are no longer in one basket.

Alternative income is a form of insurance

I’ve written about alternative income before, and why it is a large part of my long term financial plans. There are many benefits to having alternative income streams: income diversification, more financial options, accelerate debt repayment, save more money for retirement, work toward financial goals more quickly, and many more.

Alternative income can work for everyone. My friend Steve wrote about how to make money without a job and why you should. This is an excellent article that explores the merits of creating alternative income streams and why they are important. By the way, Steve was already earning six figures from his day job when he wrote this. Steve worked as a consultant, and recently, the company he was working for opted not to renew his contract. He is earning much less than he was as a consultant, but his alternative income streams helped bridge that gap.

How do you create alternative income streams? Steve lists several ideas one could use to create a source of alternative income, such as starting a blog, creating an online store, consulting, and more. But don’t limit yourself to his list, my list, or this list of more than 40 alternative income options. Use your skills and talents – whatever they may be.

It doesn’t take a lot to make a difference. Even a little extra cash flow can help you with bills, living expenses, retirement savings, or give you date money. Any extra income that helps you meet your financial goals is a good thing. And once you get the ball rolling, you may find ways to increase your alternative income streams beyond your original goal.

Hedge your bets with alternative income. I think it is important to have more than one income source. There are very few guaranteed jobs out there. I think of alternative income as another form of insurance.


Published or updated December 29, 2011.
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{ 18 comments… read them below or add one }

1 Four Pillars

I couldn’t agree more – I’m a single income household and being able to build up a small side income has really lowered my stress about being laid off. Even if the alternative income stream is a small portion of your regular paycheck – it will help a lot of the paycheck disappears.

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2 Kristen

I’ve had some sort of a second source of income for years. For awhile I worked a second job. Now I do some freelancing. Even as a working adult, there have been times where I’ve gone back to babysitting like I did when I was in high school and college. There have been times when the extra income was a necessity to live. But, even when it’s not needed, it’s still nice to know there’s a little extra coming in.

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3 SaveBuyLive

Alternative income is something that I wish I would have paid more attention to earlier in my life.

Not only is it insurance, but in the event that everything is fine and wonderful it’s extra dollars in your pocket that you can use to pay off debt, fund retirement, or even take a sweet vacation.

But the past is the past and generating alternative income is something I’m working on now. I’m pursuing several different projects and hopefully some will work out.

My goal is to eventually have enough income to cover my relatively modest monthly cost of living. Even if it only gets to 75% of my cost of living, that’s enough to cover me should my job evaporate.

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4 Blogging Banks

I also try creating alternative income streams all the time. The one that has worked best for me for now is opening bank accounts for the bonuses, which could range anywhere from $25 to $200.
Other forms of income for me include interest income, although recent declines in CD rates have decreased my interest income :-(
What are your sources of Alt Income CashMoneyLife other than this blog?

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5 Ryan

Blogging Banks: The lower interest rates are disappointing… I earn money from this website and several others that I run, signing up for bank bonuses like the $25 ING bank bonus, credit card bonuses, and other sources of free money. Here is an article I wrote about it last year: How I Earned $4,100 Without Working – The Beauty of Passive Income.

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6 Craig

Its’ true, the little extra you make could pay for that vacation, or big screen TV, or just go straight into a retirement account. Something I am slowly trying to work on, not an easy thing to do though.

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7 Ryan

Craig: It’s not always easy, but it’s almost always worth it! :-)

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8 Independent Beginnings

I absolutely agree that alternative income can be a great way to insure yourself. I have actually been quite interested in ways to make an alternative income online recently. I discovered ways to make money online such as viewing ads, reading emails, performing web searches, and more! Some are so easy and really quite fun. I am constantly on the lookout for more ways to make money online.

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9 Ryan

Independent Beginnings: It’s hard to stop looking for more ways to earn money once you get the bug! ;-)

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10 Curious Cat Investing Blog

I agree strongly with developing multiple sources of income. Rental property is another good source. Just like diversifying investment, diversifying income is good. It takes some real effort but the rewards and security are great.

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11 Ryan

Curious Cat Investing Blog: Agreed. I’d like to get a rental property, but with everything else I have going on right now, this is not the time!

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12 Enrique S

I like your analogy. I’ve started building up my alternative income streams, but still have a long way to go before i can consider them to be insurance.

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13 Ryan

Enrique: Even a little bit of additional income can help out. It helps pay bills earlier, boosts savings, or helps defray your expenses if you lose your main source of income. Good luck building your alternative income streams! :-)

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14 Kristy @ Master Your Card

This is so true! I’ve always had some sort of alternative income coming in; however, I haven’t always managed it well. Historically, I’ve increased my standard of living. But, all that did was burn me out. I was working myself ragged just to survive. It was not about getting ahead, like it should have been. Recently I’ve been trying to simplify my life to the point where I can live quite comfortably on 50% of my salary. Once I get there, it will make my alternative income “extra” and I can really get that travel fund I’ve been going after this year funded. Baby steps. Still, I think alternative streams of income are helpful no matter what stage you’re in.

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15 BM

I also took up some consulting work outside of my regular job few months ago, partly in anticipation of my wife taking a longer maternity time off and uncertainties of my own job. Although it’s great to have an additional income, there is a price to pay for this. One of the first casualty was sleep, these days I sleep 2-3 hours less than my regular sleep and there is always bags around my eyes. Second causality is relationships, Besides the obvious effect on immediate relationships, I have not made any phone calls or emails to friends and family for quite a while, then physical health takes a beating, when I am under stress of a deadline, I end up eating junk/sweets early in the morning and skipping on my morning 30 min run. Finally it feels like life around me is slowly falling apart, so much so that I am considering not doing any more freelance work after this assignment is done. One thing I realized during the last couple of months is that one has to be a very organized personality to be able to pull this off, which I am clearly not.

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16 Ryan

BM: Great comment, and you’re 100% correct. Working extra hours can certainly take a toll on your health and relationships. I struggle with this sometimes with running my websites, and it can be a difficult balancing act. I have found it helps to cut back in some areas, and if that means no more working side jobs or taking on new projects, then so be it. My family and friends are more important than the money I earn running a side business or working after hours.

I’m glad you were able to realize what was happening in your life and put an end to the additional work before it caused too many problems.

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17 DDFD at DivorcedDadFrugalDad

I call this Defensive Entrepreneurship. Defensive Entrepreneurship is starting a business or businesses as a hedge against job loss or other financial setback.

These “spare time” ventures are usually conducted at night (“moonlighting”) or on weekends. They are sideline businesses that provide extra cash in good times that supplements your full time gig. However, they can provide stop gap help in tight spots in the event of a job loss. This happened to me a few years ago– I had a sideline business that I did full time as I looked for a new job after a layoff.

Best time to start– before you “REALLY” need it.

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18 Ryan

DDFD: I’ve never heard it called “Defensive Entrepreneurship” before, but I think that is a great term! Glad to hear it worked out well for you! :)

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