Rich people have multiple sources of income

The rich and wealthy normally build and rely on multiple sources of income.

However though, most people only rely on 1 source of income. Which is normally a salary paid by an employer through an occupational role.

Unfortunately they are at the mercy of that employer. 

It may be considered safe and secure for most people.

But happens if that company is struggling financially or goes through a restructuring programme.

The vast majority are considered to be living pay check to pay check. So are only 1 month away from financial distress or disaster. 

So surely it makes sense to have numerous sources of income. 

Could you manage to pay your bills such as mortgage / rent and utilities if you were to lose your main source of income ! 

Have you got any savings or capital to fall back on ?

Most people have very little money saved aside for an emergency fund. 

If you are solely relying on a income from an employer. They control the following:

• the number of hours your work
• how mcuh they pay you as a salary
• do you receive pay award to keep up with inflation
• what about bonuses to meet specific targets
• your income is limited to number of hours worked.
• You may have to factor in commuting costs and travel time outside your normal hours.

If you want to become rich or create wealth – you have to create numerous sources of income. 

Most people will never become rich or wealthy working a 9 to 5 job.

So what action steps can you take !

• interest income

This is normally the easiest form of additional for most people.

In that you set money side in a simple bank account savings account. Whereby it is topped up by annual interest paid to you by that financial institution.

This money could be for emergency fund, holidays, days out, home improvements etc  

It can be accessed at short notice, although the rates of interest received will probably be less than the rate of inflation. 

So a simple savings account is the 1st step for most people to generate some additional income.

• Dividend income

You can invest into stocks and shares listed on the stock exchange. 

In the UK we have the FTSE 100 (largest capped shares), overseas (S & P 500) as simple examples.

You can invest regular or ad-hoc sums to buy shares in listed companies. 

Which will then pay you a dividend, (either quarterly, half-yearly or annually). As a reward to its shareholders, paid out from the business profits it makes. 

At present the FTSe 100 have a payout ratio of about 3% across all companies. 

If you earn dividends from shares or funds on a regular basis. It could provide to very rewarding and lucrative. Especially if you re-invest those dividends back into the respective company.

So dividend payment will increase each year. As the company usually increases payment each year, plus you will hold more shares. So your payment will increase two-fold.

If you are going to invest into shares or shares. Make you invest within a tax-free wrapper such as stocks and shares ISA.

Whereby all dividends received are tax free and don’t have to be declared annually to HMRC through self-assessment.

 

 

• capital gains

 

• rental income

 

• royalties

 

 

• business income