I'm sure you have heard by now the statements and phrases that most millionaires have 7 streams of income [minimum]. I'm far from a millionaire but I have interviewed millionaires and it's pretty much true. If you want to be a wealthy person you must create multiple streams of income. But how do you do that? You just started your business or you're still contemplating when to start your business. How do you go from one or no stream of income to multiple? First lets talk about the different types of income. The most popular terms you will hear are; active, passive, & residual income. I will explain each of them briefly.
This is income you earn from the work that you physically do. So an hourly wage, salary, tips, commission are all considered active income. This is the form of income we all have whether you're an entrepreneur or work a 9-5.
This is income you earn with no real effort and while you're not physically working for the money. Essentially this is money you make while you're sleep. Stocks, bonds, dividends, books, etc are forms of passive income.
So now lets quickly break it down. Right now you're a fresh entrepreneur. Working crazy hours every week to get your business going. In these early stages you're not going to make any hourly wage or a salary and if you do whether it be small or large it is still considered active income. Now let's say you still have your day job, that's two streams of income now! You're on your way. However, your job is active income also. It's important to keep in mind that as you build more and more streams of income you have to keep them diverse. Too many active streams will stretch you too thin because remember that means you have to physically work for that money. Currently I have 3 streams of income, all of them are active. I have a 4th one in the works and that will be a passive stream.
One day in due time your business will provide both active and passive incomes. Your salary will be your active income and your dividends will be your passive income. Continue to build your business and as certain services/products become a solid money maker branch off into other streams. SMART STREAMS! Don't just do anything for the money you must only invest into areas you are knowledgable about or an expert in. The ultimate goal is to have residual income.
This isn't a stream but more so a formula. Residual income is the amount of money YOU have left over each month after all of YOUR expenses and debts are paid. In other words it's your PERSONAL profit. Another word for it is disposable income.
One of the end goals of being an entrepreneur and chasing your dream career is financial freedom. You will reach financial freedom when you create and solidify multiple streams of income. These streams will all work together to keep your debts & expenses low. This is why it's so important to live within your means EVEN when you become wealthy you should still live within your means. Money comes slow and goes fast, when you truly think about that you will spend it differently in business and your personal life. When one stream dries up you still have more to keep you afloat while you replace it. The money game isn't complicated it's very simple it's just up to us to pass the knowledge on and win the game!