You've probably heard this expression before: "Don't put all of your eggs in one basket."
When most people use the phrase, they're talking about relying too heavily on one person, plan or system.
Say there's only one person in your family who knows how to deactivate your home's alarm system. That's putting all of your eggs in one basket -- what happens if you need to get in when that one person is away?
It's also used a lot when it comes to financial matters. Retirement advisors, for example, often caution investors to diversify their investments -- to not invest too heavily in a single company, stock or fund. But one recommendation I don't hear nearly often enough is to not rely on a single stream of income.
Think about it this way... If you're like most people, you've got one job -- one source of income. What happens if you lose your job? Your stream of income is shut off until you can find a new one. What happens if jobs in your industry dry up entirely? You've put all of your "eggs" (in this case, your earning potential), into the single basket of your former career.
Smart money millionaires do things differently. The last thing they want is for their income -- and the lifestyle they enjoy as a result -- to be disrupted. So rather than depending on a single stream of income, they diversify so that they can make money in several different ways.
According to Tom Corley of Rich Habits, the practice is pretty widespread among self-made millionaires:
- 65% had three streams of income
- 45% had four streams of income and
- 29% had five or more streams of income.
Imagine being in their shoes... If you had three, four or even five streams of income, what would happen if you took a major hit on one of them? Sure, you'd probably be upset about it, but the bottom line is that it wouldn't break you. You'd still have other income coming in to cover your expenses, giving you the cushion you need to make it up elsewhere.
That's what I mean by income stream diversification -- and that's the kind of setup you want to shoot for if you're serious about becoming a millionaire. In this article, I'm going to give you some examples of millionaires who have diversified their income streams in order to protect their riches. Learn from their examples, and look for ways that you can do the same for yourself:
Grant Cardone is the author of The 10X Rule, and he's gone on the record as being a millionaire who takes advantage of having multiple streams of income:
"My first business had been generating a seven-figure income for years when I started investing cash in multifamily real estate. Once my real estate and my consulting business were churning, I went into a third business developing software to help retailers improve the customer experience."
How great is that? Cardone's first business was already netting seven-figures, but he didn't get complacent. Instead, he used the extra cash his business generated to invest in two more, both of which now generate revenue of their own. Even if his first business was to fall apart tomorrow, he wouldn't be out on the street.
That's the power of income stream diversification.
Okay, so Richard Branson isn't just a millionaire anymore, but even if he qualifies for the next income bracket up, his story is such a great example of setting up multiple income streams that I'm including it here anyways.
Branson's first venture was Virgin Records, launched from the mail-order records business he founded in 1966, after leaving school at 16. In 1984, he leased a 747 to fly from New York to the UK, and the Virgin Atlantic airline was born.
Today, there are more than 400 operations existing under the Virgin investment group. Branson isn't even involved in the daily workings of all of them -- some, like Virgin Mobile USA are subsidiaries through which he's licensed the Virgin name. Basically, he lets other companies use his name and rakes in hundreds of millions of dollars in fees -- all without doing any work on his own.
Talk about a great position to be in, right??
You probably know Ashton Kutcher best from his goofball characters on projects like That 70's Show and Dude, Where's My Car? But in real life, Kutcher is much, much more than just an actor.
Back in 2009, Kutcher invested a chunk of his Hollywood change in Skype when it was trading at just $2.75 a share. In the time he held the stock, however, Microsoft purchased the communications tool for more than $8 billion, dramatically increasing the values of Kutcher's shares.
Since then, Kutcher's A-Grade Investments has taken positions in Uber, Airbnb, YPlan and others (as well as some investments that didn't pan out as well). Kutcher describes his investment philosophy like this:
"If we can create efficiencies in that which is mundane, then we accelerate our paths to happiness. The companies that will ultimately do well are the companies that chase happiness. If you find a way to help people find love, or health or friendship, the dollar will chase that."
It's a great approach to investing, and to diversifying your income streams. If you're currently stuck with all of your eggs in one basket, find ways to help people - money will follow.
Of course I'm going to add my name to this list. I'm a great example of how you can make money several different ways, as well as how you can make money by helping people as my newest venture WolfMillionaire aimed at teaching people how to monetize their Instagram following proves (the name is due to the press calling me "The Wolf Of Instagram"
As a trader, I diversify my income streams by knowing how to go both short and long on different stocks. Whether the market is up or down, I know how to make money on different stock trading patterns (and I teach my students how to do the same).
But my most recent income stream diversification doesn't even have anything to do with the stock market. I've had a tremendous amount of success growing my brand on Instagram -- more than anybody else in the financial industry -- so lately, I've been working with my mentor Grant Cardone to put together a video training course that'll help others grow (and monetize) their own followings.
It's not that I'm expecting the stock market to collapse. I know there's a lot of doom and gloom right now, but in my opinion, it's all being blown way out of proportion. But even if something did happen? I'd be covered. I'm protecting myself and my finances by having more than one stream of income coming in the door - and I suggest you do the same.
So now, I want to hear from you. Are you currently relying on a single stream of income alone? If so, what steps are you going to take to diversify your earning power? Share your thoughts by leaving a comment below: