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Why Alternative Income Streams Are Part of My Long Term Plans

by Ryan Guina

I have always had an entrepreneurial spirit. When I was young, I worked the playground economy and traded baseball cards and other trinkets, wrote papers and book reports, and found other creative ways to make a few bucks here and there to supplement my allowance. It was primarily fun for me then, and my money was just as quickly spent on baseball cards or something else I probably didn’t need.

As I’ve grown older, the desire to create things and earn more than my allowance (now a salary) never left. In fact, it has grown stronger. Most people in today’s workforce cannot rely on receiving a pension at age 55. If I am going to be able to retire at a young age I will need to contribute a lot of money to my retirement accounts and I believe that the more I contribute now, the less I need to contribute later.

One strategy I am using to contribute more money toward my retirement accounts is to create alternative income streams. My current goal is to become a millionaire, followed by my ultimate goal, which is to be able to retire with enough money to last the remaining years of my life.

Defining alternative income streams

When I talk about alternative income, I am talking about anything that I don’t earn through my day job. This could be money I earn from my home business, earned interest and dividends, monetary gifts, or money I get from bank bonuses, credit card bonuses, or other sources of free money. Other examples could include working a part time job, receiving rent from a property, royalties, etc. These are all forms of income I don’t rely on for my day to day living expenses, which gives me additional money every month to reach my financial goals.

Why alternative income streams are important

In many ways, alternative income is just as important as your regular paycheck, and potentially even more important if it is passive and requires no additional work to continue creating income. Here are a few more reasons why alternative income is important:

Don’t put all your eggs in one basket. I am a firm believer that your ability to generate income is your greatest asset. You career is probably the largest contributor to your basket, should only be part of that equation. The economy is bad right now and we are in the middle of a financial crisis. Unemployment is increasing and many people are having to deal with sudden decreases in income. Alternative income streams help ease the loss of a job or your main source of income.

Options. Like investing a lot of money early in life, alternative streams of income give you options. Last year, my wife left a higher paying job so we could enjoy a better quality of life. At the time she was working long and irregular hours and it was difficult for us to spend time with each other. So we decided to cut back on our budget and begin saving money while working toward a transition when we would become a one household income. As part of that transition, I began a home business to increase our income. The additional income is irregular and may not replace 100% of her income when she stops working, but it will certainly make the transition easier.

Non-existent pensions. Pensions have all but disappeared in the US. Gone are the days you could join a company after high school or college, work there for 30 years and get a gold watch, a pat on the back, and a paycheck for the rest of your life when you retire. Social Security is also in a perilous situation. Most people don’t have the comfort of knowing someone else will take care of them in retirement age. Alternative income streams help me contribute more money to my retirement accounts now so my retirement years will be easier.

Help reach your financial goals. Using alternative income is a great way to reach your financial goals – whether your goal is debt reduction, retirement, saving for a big ticket item, putting your children through college, or something else. An additional income stream means you can put your financial goal(s) into hyperdrive.

Alternative income equals freedom

I think everyone should strive for some form of alternative income stream – even if it is just earning interest from a CD Ladder or a high yield savings account. The key is to have your money working for you until you can reach the point when you are less reliant on a single source of income.


Published or updated May 21, 2013.
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{ 10 comments… read them below or add one }

1 BloggingBanks

I can’t agree more with you. I am creating CD ladders that would be good for up to 5 years which would still give me flexibility to adjust to changing interest rates and inflation.

As for online income, i would say it will be volatile since advertising is affected by the overall economy.

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2 Monevator

I’m definitely with you on alternate income streams my friend. Can I make one suggestion though? You say further on in your post that you plan to become a millionaire. While I understand goals are helpful, unless all your investments are in cash (and thus won’t fluctuate) the problem with a net worth goal is it depends on the whims of the market from day to day.

Imagine if you had been fully invested in the S&P this time last year. You might have been a millionaire then, but not now. Better to target something more stable, such as your total passive income, than capital values, I feel.

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3 Donny Gamble

Alternative streams of income should be apart of everyone retirement savings. Being diverse as possible will decrease the amount of money lost and also help you gain more money from your investments in the long term.

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4 Jarhead

Right now my “alternative income stream goal” is to become debt free with the exception of a mortgage. Once i am no longer paying CC interest that will be like getting a $500 a month raise. That is some decent alternative income.

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5 Craig

Allocating resources is a great idea and allocating income streams is just as smart. The problem is that is very difficult for most people especially since their main job takes up so much time. Any recommendations?

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6 Curious Cat Investing Blog

Multiple streams of income are a great goal. I have been making progress in that direction for years (increasing my additional income).

Social security is actually in pretty decent shape. My guess is it will have to be adjusted but by and large should remain. My picks for adjustments are delaying the retirement age (at least 5 more years by 2050) and increasing the amount of income subject to the tax as well as reducing benefits for those with over $1 million in assets and $100,000 in income.

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7 Ryan

Monevator: I don’t think a net worth goal is the way to go either, but a lot of people put stock in a number (it’s an easy concept for a lot of people who are new to personal finance). Personally I’m going for exactly what you mentioned – the crossover point where my investments are earning me more money in passive income than my day job. That is when I will feel financially free.

Craig: Your question could easily be a series of articles by itself. In addition to the previously mention money making methods, working a part time job, receiving rent from a property, and royalties, one could start a business, do contract or consulting work, and many other side jobs. Creativity is the key.

Curious Cat: I’m working on alternative income streams as well. The more, the better as far as I’m concerned!

I think your ideas for Social Security are good, and we will probably see some of them in the near future. At this point I don’t plan on including SS income for retirement because I don’t know for certain it will be around. Hopefully I will be pleasantly surprised and it will be a nice bonus. :)

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8 Jules @ Money Feuds

Great, motivating article! My main job feels a little intense at times, so creating a second income source (other than interest on my investments) sometimes feels overwhelming in my “downtime”. But it is definitely something I need to work on. Or at least come up with a first step of developing an idea!

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9 Ryan

Jules: Trying to create new income streams can seem daunting at times, but there are many ways to do it. It can be as simple as consulting or working a part time gig, or earning money through your website. The best sources of side income come from things you enjoy – such as a hobby like the photos on your site.

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10 Regis

Can’t stress enough how important it is to retain an alternate source of income. Now, more than ever, with the current financial crisis being experienced by thousands, and potential thousands from graduation from universities, one must consider the fact that our economic stability will never be the same. One must take steps to insure that they are able to maintain the quality of life they are used to and are not forced to live in financial distress.

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