Most of us are familiar with the concept of asset allocation , or diversifying our portfolio. However, just as important is your ability to diversify your income.
Diversifying your income streams reduces risk and positions you against the unknowns: job loss, a downturn in the market, business failure, and more. It also gives you the chance to take advantage of new opportunities and explore your interests.
Recently we highlighted that 65% of self made millionaires have three streams of income . How many income streams do you currently have?
Multiple Income Streams Can Change Your Life
Diversifying income reduces risk. As we’ve seen many times in previous years, sometimes one income stream will cover our entire yearly budget. In addition, since we’re making some big changes when my husband quits his job  later this year, having a diversified income also reduces our need for withdrawals from our portfolio. Even though it was a goal of mine, I don’t know if I would have ever felt completely comfortable with both of us leaving our jobs  if we didn’t have such a diversified portfolio of income. The risk reduction from diversifying our income enabled us to change our lives!
We made a goal to work on diversifying our income  years ago. Over time we’ve added multiple income streams. If you are looking for ways to diversify your income, here’s what our income distribution currently looks like for some inspiration:
Job. My husband’s job is currently listed in our income stream while he works part-time. As you know, he is quitting  this fall. Next year, I will remove this income stream.
Amazon Profits. I Made $100,000 Selling on Amazon Last Year . It was great to crack the six figure mark; however, for this income analysis I included only base profits that weren’t reinvested. I want the income to reflect only money that would be available to us for personal spending.
Real Estate & Vacation Rentals. We own a few rental properties . In addition to the real estate investing, we also still own our vacation home . The vacation rentals last year were positive, so while we don’t see much income from it, it does offset the cost for us to vacation there. However, the Vacation Home Tax Rules  are not very favorable for our situation. For those of you who also own real estate, feel free to jump in on the How to Calculate Real Estate Investment Returns  discussion!
Blogging. I still make money from advertisers on this website  and a few others we own. I’m not very popular with advertisers since I write about all the ways to maximize deals and take advantage of free money, but I still love it!
Royalties & Miscellaneous. I also earn royalties from some writing that I did years ago. Royalties are great since you keep earning money, but don’t have to do any additional work! In addition, I still have some residual income from the tax business that I started years ago.
Consulting. My husband spends most of his time on his blog consulting  business. As his job winds down, I expect he might take on some additional clients and this income stream will go up.
Investment Income & Appreciation. I track our investment income (interest, dividends and capital gains) and return on investments , since it’s our primary source of income if we decide to scale back on the other income streams. For our budget though, I ignore the income and appreciation and use only SWR.
Credit Card Deals & Free Money. This is my favorite category. It includes all of the free money  offers I sign up for, including credit card sign up bonuses and cash back. It also includes online cash back  and all the other deals I like to take advantage of. I’ve tried to make a better attempt at tracking this category of income since it’s become more lucrative over the years.
I looked back at our old income diversification plan from over seven years ago. My first step was to reduce our jobs to 50% of our overall income and create a plan to make that happen. For long time readers, did you work on diversifying your income? If so, how is your progress? If you are new to the idea of income diversification, what is your first step?
How do you diversify your income?
Ways to Make Money to Diversify Your Income
- 7 Passive Income Ideas to Make Extra Money 
- 5 More Ways to Earn Some Extra Cash 
- 12 Ways to Generate Extra Income 
- 9 Quick Ways to Make Extra Cash 
- How to Make Money on Amazon 
- How to Make Money Without a Job and Why You Should 
- How to Find Missing Money Owed to Me For Free