A Job Isn’t Enough: Why You Should Diversify How You Make Money
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In 2014, my wife and I made money 25 different ways, and no one source made up more than 25% of our income. Of course, since I write about money, test various ways to earn it and quit jobs fairly quickly (when I occasionally have one), income diversification is normal for me.
But what about you? Do you have more than one source of income?
You probably agree there is no such thing as job security, but have you thought about what it means to lose a job when it's your only income?
There is no business security, either. My wife, Ana, and I have watched our $10,000-per-month website revenue drop by 90% over the last few years due to search engine algorithm changes.
What about investments? Stock prices can fall, and the entire annual cash flow from a rental house can be destroyed by one bad tenant.
Let's face it: It's not safe to rely on one or even two ways to make money. For greater financial security, you need to diversify your income sources.
Developing more than one source of income makes sense, but to be really safe, you should also have more than one type of income. Here are four types of earning opportunities to consider.
You can pick up a second or third job, but since you only have so much time, the money you can make working multiple jobs is limited. Also, if you get sick or break a leg, you'll likely be unable to work at any of your jobs and you'll lose all of your employment income. That's a big drawback to traditional employment.
On the other hand, a good job can be a great primary income and will pay the bills while you develop other ways to make money. You can also use your job in other ways, like to get the experience you need to start a business, or to meet people who will help with your future financial plans.
So if you have a job, why not use it for more than just a paycheck? Perhaps you can find at-work opportunities to develop other income sources. Or if you're looking for a job, you might choose one where you can learn from people and investors while performing your work duties.
A business can fail for reasons beyond your control. But if it succeeds, the sky’s the limit for earning potential, compared to jobs.
My preference is for low-risk startups; Ana and I started a six-figure Internet business with a few hundred dollars. I also like businesses that aren't too time-consuming. If you run a business part-time, you're free to start another or to spend some time investing.
As our website income continued to fall in 2014, we developed other businesses. Freelance writing became one of my primary ways to make money. Ana did some social media management and Spanish tutoring. If you look, you can probably find some way to start a small business or side hustle working a few hours weekly.
Freelance “jobs” are technically businesses, and you typically get no benefits and have to handle your own tax payments. On the other hand, you do get more flexibility than with a job. As a search engine evaluator, I made $13.50 per hour. That's not much, but I worked when I wanted to and put in as few as three hours in months when I had enough freelance writing assignments — and as many as 56 hours one month. I also freelanced as a website tester in 2014.
One problem with this kind of self-employment is that your income is limited by the hours you work — just like any job. My freelance writing income stops the moment I stop writing. Some businesses have less of a limit to their growth and produce income even when you're not working. For example, a few years back my wife and I went to Ecuador for a month and our online publishing business was making even more money when we came back. We did nothing more than check emails twice weekly from Internet cafes.
When looking for a side hustle or small business, keep in mind the advantages of online businesses. You can run them from almost anywhere. If you have a job, you can check for important business emails during breaks. You can run an online business in almost any condition, too. A flu or cold that might keep you home from a job won't stop you from checking email or pointing and clicking for a few minutes. Even a serious injury, like a broken leg, will probably leave you able to use a laptop.
For example, one online business that can grow and produce income even while you're on vacation (or asleep) is online product sales using a fulfillment service.
Offline businesses you can start part time (so you can keep your job or other business) include vending machine routes, headstone cleaning and pet sitting. I like the idea of starting something offline just as a break from all the hours I spend on my computer.
Investment income often requires little time or effort after you do the initial research and work to set it up. For example, we earn rental income from a condo we own, and we've never met the tenant or fixed a toilet because a management company handles everything.
Investments that provide more-or-less automatic income like this are my favorites. The 9% to 10% interest my wife and I make lending to real estate investors is another example.
Investing in land, growth stocks and other things that you hope will increase in value can be lucrative, but it's also riskier. The ups and downs in value matter less when you receive regular income. Here are some of the ways you can invest for regular income:
- Loan money on platforms like Lending Club (and start with just $25)
- Make loans to family and friends
- Invest in certificates of deposit
- Build a portfolio of dividend-paying stocks
Perhaps the simplest ways to invest is to put your money in a savings account or interest-paying checking account. The problem with this strategy is that many savings accounts pay less than 1% interest. If you do choose this route, look around for the best interest options; here’s one we found:
4. Money-Making Projects
I previously covered six quick ways to make money without committing to a business, which I refer to as money-making projects. They're not quite businesses, investments or jobs, although they may have elements of each of these earning opportunities. What they have in common is they all have a clear beginning and end, and you can do them once or repeat as needed. Here are some examples:
Last year, I was paid to take an aspirin product for 10 days and report any side effects. I had none, which made it an easy money-making project.
Take advantage of sign-up bonuses for new credit cards and bank accounts. I made over $1,000 from these promotions in 2014.
You could enter contests for the ugliest dog, the best video about a product, the best inventions and more. You may not win, but if you stick to the ones that don't require an entry fee, you can't lose. Some writing contests pay up to $10,000 for first place.
My wife and I made a small profit flipping a condo two years ago. We originally bought it as a rental, but decided to sell it after fixing it up. The “work” part took six weeks, and the rest of the four-month process was spent simply waiting for the place to sell.
You don't necessarily have to spend much to invent a new product, and you can license the idea so you don't have the risk of producing and selling it. It's a one-time effort that could pay royalties for years to come.
It costs nothing to publish an ebook on Amazon's Kindle platform. Regular marketing helps, but on the other hand, I wrote books (sometimes in a few days) and put them on Kindle without further efforts, and still made thousands of dollars in royalties. Sometimes you get lucky!
I spent six weeks writing 101 Weird Ways to Make Money, and earned a $10,000 advance on royalties. I've since collected another $9,000 or so in royalties and, after doing a few interviews, all I've done is occasionally mention the book in articles like this one. Lucky? You bet, but all I invested was time.
I grabbed a table from the garbage when we lived in a condo last year, and sold it for $50 using a free Craigslist ad. It was one of several such finds on which I’ve cashed in.
Our rummage sale last year made only $156. It wasn't much, but we otherwise had to haul the stuff down to Goodwill or somewhere to dispose of it, and we met a lot of neighbors during the sale.
Here are a few of the other ways to make money that we've previously covered on The Penny Hoarder, and which you can do as a one-time project:
- Sell old magazine ads
- Hunt for lost treasures
- Bet on elections
- Flip a used car
- Hunt for silver coins
- Find lost accounts
- Sell a Craigslist freebie
- Be a mock juror
Putting It All Together
Of the ways my wife and I made money last year, a dozen produced over $1,000, four over $400, and nine between $30 and $400. You don't need that much diversification, but it makes sense to develop at least two extra income sources of different types. That way, if one falters or fails entirely, you'll still have the others to rely on.
Your Turn: How many different ways did you make money last year? Are you going to work on further diversifying your income?
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Steve Gillman is the author of 101 Weird Ways to Make Money and creator of EveryWayToMakeMoney.com. Of the more than 100 ways he has personally made money, writing is his favorite (so far).