Last Updated on August 1, 2024 by Izza of SavingsPinayPH

I’ve always emphasized the significance of establishing multiple sources of income. In today’s world, relying on just one source of income isn’t sufficient. The more income sources you have, the better prepared you are for financial stability.

So how do you create multiple sources of income? This article will show you exactly how. 

Let’s begin.

Why Create Multiple Sources of Income

Creating multiple sources of income is essential for two key reasons: diversification and risk management. 

Firstly, it allows for diversification, spreading out your income across different channels or investments. This can help protect you from relying too heavily on one source of income, reducing the impact if one of them suddenly shuts down. Secondly, it aids in risk management by providing a safety net in case one source of income is disrupted.

Opening more than one income stream is important because:

• It provides financial security by not relying on a single source of income.
• It gives you the opportunity to explore different passions and interests.
• It can lead to greater financial stability and opportunities for growth.
• It allows for a more flexible and varied work life, reducing the risk of burnout in a single job or career path.

How to Create Multiple Sources of Income for Yourself

Here’s a step-by-step guide to help you get started:

1. Assess your financial situation

The first step is to assess your current income sources. How secure is your main source of income? If you were to lose your job suddenly, do you have an emergency fund to fall back on? If not, what is your backup plan?

2. Identify your potential income sources

Now that you have a full picture of your financial situation, it’s time to take a look at the different potential income sources available to you. 

• • Do you have any skills or passions that you can sell as a service?

We all possess unique talents that have the potential to translate into financial opportunities. It’s crucial to recognize and nurture these skills, whether they stem from hobbies, natural abilities, or any valuable attributes. By expanding your knowledge and honing your skills, you can broaden the scope of offerings that you provide to others.

• • Do you have the right network?

Building a strong network of people who can support your career and personal growth is crucial. A solid network can play a key role in increasing your financial prospects. When you have a product or service to offer, your network will be the first source of customers and referrals. Additionally, a strong network can provide job leads and industry-specific information that can help advance your career.

• • Can you solve other people’s problems?

The key to creating multiple sources of income lies in solving problems and providing value to people. For example, if there’s a demand for a printing shop in your neighborhood and you have a PC and printer ready to be used, consider opening a part-time printing shop to meet that need and generate extra income. Use the additional earnings to invest in a mutual fund or the stock market, allowing your money to grow through compound interest.

• • Don’t hesitate to try and try again

Don’t allow failure to hinder you from pursuing your life goals. Achieving and maintaining wealth demands substantial effort. For instance, I used to dedicate approximately 35 hours per week to managing my two blogs – savingspinay.ph and izzaglinofull.com. I remember sacrificing a lot of sleep and social life to put the blog to where it is today. Embrace failure as an opportunity to learn from mistakes, as it is an inevitable part of life.

3. Start small and build gradually

Again, multiple income streams don’t happen overnight. Start small and build gradually. Choose one or two income sources to focus on. For example, you can start with dividend income from stocks or selling your stuff with market value. 

Once you have the income streams chosen, outline the steps required to start and grow each income stream. Research everything you need to know about dividend stocks in the Philippines. What are the high-dividend paying stocks that are within the amount you can capitalize? For example, you can start with Php 10,000 and buy a minimum lot of the dividend stocks within that amount. 

Always remember to remain patient and realistic when it comes to generating income. It takes time and effort to build sustainable wealth. Avoid letting greed cloud your judgment, as it may make you more susceptible to scams.

7 Different Income Streams and How Each Work

Even the millionaires do diversify their income. According to the United States’ Internal Revenue Service (IRS), an average millionaire has seven income sources. 

The seven income streams are as follows:

1. Dividend income from stocks
2. Earned income from a paycheck
3. Rental income from real estate
4. Royalty income, intellectual property, inventions, etc.
5. Capital gains from selling assets that have appreciated in value
6. Profits from a business
7. Interest from savings, bonds, or lending activities

Now let’s discuss each of the income sources and how you can get started. 

Dividend income from stocks

Dividend income is one of the best and easiest income streams from the list above. It can be scary at first, but starting stock investing has come a long way. You only need to choose your online stock broker, fund your account and apply your investment strategy.

When you own stock in a company, you own a share of that company. Companies often need funds to support their operations, so they may choose to go public by offering shares of ownership to the public. As an individual, you can invest in a company by purchasing its available stocks.

By owning stock, you become a part owner of a publicly-listed company. For instance, you can own shares of Jollibee (JFC).

How do you make dividend income from stocks?

There are two ways you can actually earn in the stock market:

Capital appreciation 

An increase in the value of your investments due to increase in the potential value and demand of shares in the company you invested.

Example :

Let’s say in 2013 you bought 100 shares of Jollibee (JFC) at Php 107/share. The total value of your investment is Php 10,700.

At present 2024 Jollibee stock is at a whooping Php 232.80/share. Meaning you make Php 23,280 out of the 100 shares you own.

You can earn Php 12,580 through passive investing over 11 years without having to actively participate or work for it.

Dividends 

A dividend is a sum of money that a profitable company pays to its shareholders as a reflection of the company’s earnings. This can be distributed as additional cash to the shareholders’ accounts.

Example:

Given the example above, let’s say Jollibee also gave a Php 1/share dividend to its shareholders every three months from 2013 to 2024.

So, on top of the Php 12,580 you earned from the capital appreciation of your investment, you also received a dividend of Php 4,400. Keep in mind that this doesn’t even account for any compound interest you could potentially earn with your investment.

Investing in stocks can be scary, confusing and complicated especially if you are just starting to learn it. With the investment tips in the blog posts below, you’ll realize that it’s actually easy to invest in the stock market. From step-by-step procedure on how to open your brokerage account to my own experience investing in the Philippine stock market, you’ll learn something new from the posts below.

Stock Investing 101 | The Frequently Asked Questions About Stocks

Why You Should Invest in the Stock Market Even If…

I’m Finally Investing in Stocks 

How To Open a First Metro Sec Online Stock Trading Account 

FAMI or COL Financial – Which Broker Should You Choose?

How This 24-Year Old Marino Started Investing in Stocks 

My First Six Months Investing in Philippine Stock Market

Earned income from a paycheck

Earned income from a paycheck is the money you receive from your employer in exchange for the work you have performed. This type of income includes wages, salary, bonuses, tips, and other forms of compensation for the work you have done.

Now, if you have the luxury of time to do so, the best way to diversify your earned income is to look for side hustles. 

Spending an hour or two of your day after or before work can make a huge difference. You can also use your weekend for it. 

Related reads:

41 Ways To Make Extra Money While Working a Full Time

7 Side Hustles I Did to Earn Extra Php 5000 a month

If You Are Living on One Source of Income, You’re Doing it Wrong

My First Year as a Freelancer in the Philippines

Rental income from real estate

Rental income is often regarded as a reliable source of ongoing revenue. While it may be challenging to get started and typically requires a significant initial investment, when managed effectively, it has the potential to generate profitable returns.

Here’s a breakdown of how you can start your rental income stream:

• Direct real estate investment, meaning purchasing a residential or commercial property to rent out to others. 
• Pursuing a career as a property manager or a licensed real estate sales associate. You may need to obtain a license for these positions, or you can explore earning commissions by collaborating with a licensed friend or relative and connecting them with potential buyers.
• Investing in Real Estate Investment Trusts (REITs).  REITs is a new addition to the product offerings of Philippine Stock Exchange or PSE which makes it possible for individual investors to earn dividends from real estate investment without having to buy, manage, or finance any properties themselves. To understand simply, a REIT is like a mutual fund but instead of stocks, bonds or other securities, your money will be invested in properties.

These properties that a real estate investment trust owns can be residential or commercial like hotels, buildings, malls or commercial spaces. Even mortgage loans can be considered as REITs.

Through REITs, you can earn from the real estate market without spending a ton of money that is usually needed when directly purchasing a property.

Learn more here – Real Estate Investment Trusts (REITs) for Beginners

Royalty income, intellectual property, inventions, etc.

Royalty income can be challenging and carry significant risks. It is widely regarded as one of the most difficult income streams to establish, especially when starting with limited resources.

So what are royalties?

Royalties are the payments that creators receive for each sale of their book, music, or public performance. This means that you need to put in a lot of work upfront before you can start earning. Additionally, you need to be skilled at what you do so that others will be willing to buy it.

But is there an easier way to earn royalty income?

One great option is to create an ebook, which is a digital version of a book that can also be printed if needed. Publishing an ebook is cost-effective as it is in digital format, saving you the expenses associated with traditional publishing.

Earnings from ebooks can come from various sources, such as direct sales on platforms like Amazon Kindle, Apple Books, or through sales generated by other distributors or retailers. The royalty income can be calculated based on a percentage of the ebook’s retail price and may vary depending on the distribution channels and agreements with publishers or self-publishing platforms.

Capital gains from selling assets that have appreciated in value

When you sell an asset for more than you paid for it, you earn capital gains. While this can be a significant income source, it’s crucial to comprehend the process and the associated tax implications.

You can earn capital gains from appreciated assets like real estate, stocks and bonds, and collectibles. 

Here’s an example for a house:

• You purchased a house for PHP 2 million five years ago.
• Its current market value is PHP 3 million.
• If you sell the house for PHP 3 million, your capital gain is PHP 1 million.
• After paying capital gains tax, you can reinvest the remaining amount to generate additional income or wealth.

Profits from a business

Most earn their first million by starting a profitable business. But owning a business may not be for everyone. Here’s why:

• Risk tolerance: Running a business involves a significant amount of risk, and not everyone is comfortable with that level of uncertainty.
• Self-discipline: Being your own boss requires a high level of self-discipline and motivation, which may not come naturally to everyone.
• Financial responsibility: Managing the finances of a business can be daunting, and not everyone is equipped to handle that level of fiscal responsibility.
• Stress management: Running a business can be incredibly stressful, and some individuals may struggle to cope with the pressure that comes with entrepreneurship.
• Long hours and hard work: Building a successful business often requires long hours and hard work, which may not be feasible or appealing to everyone.

But if you want to start a business here are possible ways you can do so:

1. Small business around your neighborhood like samalamig, bbq, or a sari-sari store
2. Franchise another business
3. Start a money making blog 
4. Service-based business like freelance writing, editing, or design.

Interest from savings, bonds, or lending activities

Lastly, you can earn portfolio income by the interest you make in your savings, bonds you own, or lending activities you do. 

Banks pay interest on the money you deposit. This is typically lower than other investment options, but offers both safety and liquidity for your money. You can also look at high-yield savings accounts, time deposits, and money market accounts. 

Having bonds can also provide you interest income at a more regular payment, typically quarterly. You can research retail treasury bonds and corporate bonds for this. 

While I’m not a fan of peer-to-peer lending, it can potentially offer higher interest rates compared to traditional savings accounts.

Final Notes from SavingsPinay

Now building multiple sources of income is no easy task and certainly not something you can achieve overnight. This is a truth especially for those not born into wealth. However, some of the income sources listed above are now more accessible than ever before. Although it may take years to achieve, with financial discipline and persistence, it is possible to cultivate multiple streams of income.

Read next:

55 Best Money Tips in Your 20s – How To Save, Invest, Retire Early and More

8 Important Reasons to Start a Side Hustle

11 Ways to Build Emergency Fund from Scratch

How to Reach Financial Independence