Do you rely too much on one source of income to keep your household running? If so, it may turn out to be something of a problem. In this time of economic uncertainty, relying too much on only one source of income can lead to financial disaster. What happens if that one source of income dries up? In order to protect yourself, consider cultivating multiple income streams to help you. You should still build up an emergency fund, of course, but having alternative income streams to supplement will help your emergency fund stretch further.
Where Does Your Money Come From?
Take a few minutes to evaluate where your money comes from. Create a cash flow statement by listing your sources of household income. Even if you already own your own business, you can do this. Consider the number of clients you have, and how much of your income is attributable to to each. A few years ago, I had one client that accounted for half of my monthly income. This was a scary situation to be in, since my husband’s income was a small research assistantship as he attended school. If that client were to stop paying me, we’d be in trouble. I knew that I had to change the situation. I began looking for ways to change my client base, and make it a little more diverse. Now, my largest client accounts for 1/3 of my freelancing income. With my husband about to start teaching at university, that is something I can live with.
It’s not pleasant to think of what might happen if you lose your job. However, if you want to prepare for the future, you will need to consider the possibility. If too much of your household income comes from a single source, make a plan to cultivate other income streams so that you have somewhere to turn if you need to look for another day job.
Creating Supplemental Income Streams
You don’t have to try to replace your primary income entirely with alternative income if that’s not in your financial plan. However, you can reduce your exposure to the risk of financial devastation in the event that your primary source of income dries up. One of the ways you can do this is to look for alternative ways to make more money.
The most common way to make more money is to have someone in your household get a part-time job. In a time of job loss, your partner’s part-time job may not be a replacement income, but it can help supplement unemployment benefits, as well as prevent you from decimating your emergency fund as quickly.
Other options for creating alternative revenue sources include starting a side business, doing odd jobs, monetizing a web site, freelancing, selling stuff online, income investing, and creating something that will earn you royalties. Developing these sources of income might take time, though, so it is important that you plan for that, and realize that it’s not going to be an instant income stream. However, as you build up your revenue streams, it will become easier, and you can work up to an increase of income that can be diverted to an emergency fund, or that you can use for other purposes. The important thing is that it can be there when you need.
Photo Credit: Ryan Guina