Updated on 05.12.15

Multiple Income Streams: How They Can Work For You

Trent Hamm

Not too long ago, the only method I had for earning money was my job. I’d get up, go into work, come home, and collect my paycheck – and I believed that was good enough for me.

When I had children, though, I began to realize that my life was not all that different than an investment portfolio where I had all my money in one particular stock. All of my income was reliant upon one job, and if that job went away, my family and I would be hurting.

But how could I solve this problem carrying a big debt load, a full time job, and the needs of a family? I realized what I needed to do was create more sources of revenue, even if they weren’t as much as my full time job, so that if something happened there it would not be nearly as disastrous. Here’s what I did.

I started a computer consulting side business. Nothing complicated, mostly just helping computer-phobic people select systems that match their needs, doing some tune-ups, and a few minor repair jobs. It doesn’t take much time at all and earns a bit of regular money.

I started a blog. You’re reading it, actually. I earn some income from the advertisements and the writing can be done pretty much whenever, filling in gaps in my time.

I built up a big emergency fund. I used the money from these sources to build up a large emergency fund. While the income stream here is rather small (5% interest on several months’ salary), the fact that the income is based on my own capital that I could use very quickly if needed makes it very nice.

Later, after I eliminate some debt, I hope to look at investments that will earn a better income for me, but for now these will suffice.

Obviously, these sources all require work, with the exception of the emergency fund. These are usually called active income streams. The emergency fund, which requires no active work, is a passive income stream. Obviously, passive income streams are better over the long haul because they provide income without additional work contribution. Active income streams generally involve a trade of work for money, which means that your time is consumed. However, passive income streams almost always require some significant money to start with, something many people don’t have.

What’s the real benefit here? Why put out a lot of effort for multiple active streams? The reason is the same one you’ll find for why you should have a diversified investment portfolio – if one of those streams dries up (I lose my job, the blog starts to dry up, people stop calling for consulting), I’m still doing all right because the other ones keep going. And when they’re all going, I make significantly more than I spend, so I can pay off debts and eventually build up more sources of passive income.

It all comes back to spending less than you earn; multiple active income streams just ensure that the earnings are pretty stable and that there’s a big gap between earnings and spending. Then, when you’re debt free, you can start taking those earnings and look for ways to build up passive income through investments.

How do I get started? The first step for the average American is to make a serious commitment to spend less than you earn. Without that commitment, none of this will work. Focus on paying down debts with the difference between your earning and your spending after you build up a small emergency fund.

The next step is to figure out something you’re good at. Perhaps you have a knack for making your grass look amazing, or maybe you know how to frame pictures so that they make exquisite wall hangings. Maybe you can write solidly very quickly. Almost any strong trait you have leads directly to some sort of profit-making venture that you can do in your spare time. Spend some time figuring out your talent, then think about how that could make money.

Once you’ve got something figured out, commit some regular time to it. Give up an hour of television each day to bake bread or matte finish photographs, then find places to sell them. Once you get the kinks of whatever your little business is worked out, it’ll become a steady small source of income for you – another income stream.

Then, use that income stream for something financially positive. Don’t spend it immediately. Instead, contribute that money to debt repayment or use it to invest in something – stocks or otherwise.

The real goal here is financial independence. By making yourself less dependent on a specific revenue stream (i.e., your primary job), you’re giving yourself independence and the flexibility to make choices that you never had before.

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  1. James says:

    First off, I would just like to say that I stumbled upon your website two days ago. I’m 20 years old and I’ve been working at my first full-time job for over a month and a half. I remember when I first got the job thinking of all the amazing things I could buy with 27 grand a year. But then I realized I still had $2,000 in credit card debt and I had already grown sick of the 9-5 grind. I can now happily say, next week, I will be completely, 100% debt free. I have absolutely become addicted to this website and am trying to catch up by perusing the hundreds of articles published the last few years. I have a goal to retire at the age of 40 and I truly believe I can do it with some very good self-discipline. I’m two years away from obtaining my bachelor’s degree and I absolutely abhorr debt. Right now I’m trying to figure out what my next step in the investment process is. Should I build up a large emergency fund in a 5% APY savings account? Should I start investing in a mutual fund? Perhaps opening a Roth IRA?

    Anyways, my point is, I’ve fallen in love with your website and think it is an amazing tool. The article above about multiple income streams has made me realize I CAN make more money outside of this job. Just today I signed up to be a math tutor for high school students and winter is not too far off, so maybe snow shoveling could be a side job as well. Who knows?


  2. Moneymonk says:

    Great Article.

    My side business pays my debt. It feels good when someone else pays my bills. That way my hard earn money go to me.

    Side income streams are great because one will always work when another doesn’t.

    You are always covered in some way!

  3. Meg says:

    Great topic–the whole idea of multiple streams of (preferably passive) income is the whole basis of financial freedom.

    Here are my streams of income I’m developing:
    Day job (active)
    Retirement Accounts (passive)
    Other investments (passive)
    Rental Real Estate (passive/active)
    Blog (active/passive)

    For now I’m still dependent on my job. Soon I hope to have good additional streams from rental real estate and my blog. Eventually, I plan to be able to live off interest/dividends from my retirement accounts and other investments.

  4. Mrs. Micah says:

    Hmm. I suppose that I could “take in sewing,” as people used to say. I’ve made wedding dresses (for me and others), clothes for myself, clothes for other people, that kind of thing. Scares the hell out of me, though, because I don’t want to screw it up.

    I’m also good with quilting, but I donate that–it’s one of my ways of giving generously to charity and having money to pay off my debts (I use a lot of my fabric leftovers, too).

    Now that I’m settled and such, perhaps I should try advertising for sewing, hemming, mending, comissions… I wonder how one goes about such things….

  5. Easychange says:

    Mrs. Micah, Craigslist is probably a good place to start if you’re looking for a way to advertise your services on the cheap.

  6. Heidi says:

    I completed my MBA last year and am counting on a second income stream to pay off my student loans. This fall I began teaching at two different area universities.

    It’s win/win: I get the extra income and I get to practice my public speaking and presentation skills. Someday, I hope to be paid public speaker.

  7. Susy says:

    My husband started started a small “side business” 5 years ago to make enough money to buy a motorcycle. When his job got too stressful, he decided he could start doing it full-time. We now have a successful business that started as a source for extra income. We both work from home and WE LOVE IT! We have much less stress and our expenses are much lower!

    We are now trying to create multiple sources of income within our business, constantly trying to develop new ways to earn money. Then if one aspect of our business doesn’t do as well, we have other places to earn money.

    Another benefit of starting a side business is the tax benefit. You can often deduct a portion of your phone/internet if you use that for your business. You also have mileage you can deduct. We try to do our personal shopping when we’re out buying business items.

  8. rita says:

    I’ve also been busy lurking in your blog. This article reminded me that I should never be too busy to manage my finances.

    I used to tutor before, but a full time graveyard shift job, grad school, family and church committments fill up my time.

    I miss the money that came from my 2nd job, but I realized that I still had more than one income stream now:
    My fulltime job – active income
    savings – passive income
    seasonal buy and sell schemes – active income

    My friends and I also formed an investment club to explore and learn about finances. But my priority for now is grad school.

  9. You make a great point about multiple streams of income, Trent.

    But I’d like to point out one pitfall–getting too scattered and distracted.

    One of the hallmarks of a high earner is the ability to focus. Underearners tend to scatter their energies in too many directions with too many projects.

    I discovered this fact when I interviewed successful people for my books: “Secrets of Six Figure Women” and “Overcoming Underearning.”

    Just something to consider.

    Barbara Stanny

  10. JMS99 says:

    I’d really love to establish more passive income streams. Right now, the only passive income streams I have are investment income (interest, dividends, capital gains).

    I experimented with vending machines, but they don’t seem to produce much, and it’s not so passive, as they require maintenance, gaining new locations, restocking, etc. To establish enough locations to get significant income from this becomes a full-time job (which doesn’t pay that great).

    Collecting rent to me seems like another type of investment income (but one that requires work, so it isn’t really that passive). To me, dividend paying stocks give the same benefit with no work.

    Royalties are another type of passive income, but it seems to me that there is alot of work up-front to produce something that would generate royalties (like writing a book), so it seems to me more like deferred income (since you’re putting in alot of effort up-front with the hopes that it will generate revenue for you later). Same thing with patents.

    I met a guy once who had a small business that processed credit card transactions. He did a little work up front to establish the relationship with the store, setup their equipment, and that was it (according to him). He was basically retired, living off the income from the locations he had already established.

    Is there any other way to generate truly passive income?

  11. Mrs. Micah says:

    EasyChange, that’s a great idea! I’m embarrassed to say that I don’t often think of such things. It took Trent to remind me that I could do sewing for other people.

    Thanks so much!

    (feeling quite excited about this development)

    @Rita, sounds like you’ve got a lot on your plate! Quite enough to keep one person busy. :-)

  12. This is very inspiring. I’m one of those trying to establish some financial independence as well. I look upon these efforts as producing the cash flow that helps fuel asset building. Unfortunately, I’m still too heavily tied to my 9 to 5 job, which likes me more than I like it, so haven’t been as successful with developing other sources of income yet. But hopefully with time, I will…

  13. Mom says:

    This site is just darn good!! I found it while looking for info about tires!!! ( How many to replace, if you can’t get four! The answer: Two, if possible, and put them on the back!) I am trying to help my son stay encouraged, while he finds out what next to do. You have some good advice and it looks like you have figured out how to live simply and well. In the meantime, I have unplugged the toaster and got out our Smartstrips!Cheers!

  14. 2million says:

    I have been focused on the same thing. I really think this is key to financial indenpendence unless you are planning on being a CEO with a golden parachute.

    I have my job income, rental income from 2 properties, blog income, dividends, and interest from 0% balance transfers. However I am still WAY too dependent on my job income – it still makes up 91% of my total income. If my job income represents 50-75% of my total income I would feel much more comfortable.

  15. Mariette says:

    Great article Trent! Now if I can just finish my film so I can hopefully get some distribution income to help me pay off the debt I generated in the making of the film in the first place. Phew!

    Don’t ever make a documentary (or other kind of film) with your own money unless it’s really costs next to nothing to make. Seems like it should be a no-brainer but artistic passion sometimes has difficulty listening to financial reality.

  16. John says:

    Trent, thanks again for the kick in the pants (the backside kind (good), not the frontside kind (bad)).

    I’ve been thinking about the multiple income stream idea for a while, and I guess my chief concern was that raised by Barbara Stanny above. I figured I’d earn more by focusing on my highest-income pursuit – my day job – rather than diversifying my human capital, since nothing else I could do would earn me as much per hour of effort as my day job, not even close, especially with overtime factored in.

    This post got my cranial juices flowing, though. What if I break out of the time-for-money paradigm? Right now I’m working on developing an information product related to cooking that could generate a passive income that could scale WAY beyond the number of hours I put into it. That was already in the works. What THIS article got me thinking was: why don’t I start a personal chef / small-scale catering business?

    I already do the majority of my cooking 1 day a week…what if I just doubled, tripled, or quadrupled the quantity (which does not increase the level of time and effort by the same amount) packaged it into meals, and sold it to folks who want home-cooked meals without the hassle? This is turning my greatest passion – cooking good food for people who appreciate it – and turning it into an income stream. I figure at the very least, my passion for cooking will start to pay for itself, and what I learn from this business may improve the quality of my info product.

    The punchline: I posted an ad on craigslist earlier this evening. If anyone’s in the Minneapolis area, search for “personal chef”. Bon appetit.

  17. Matt says:

    My alternate streams of income are still limited but I’m setting more up and the goal is to make as many of them passive as possible. You can create a passive income stream without a huge investment of capital if you’re willing to put in a good chunk of time upfront – depends on the business.

  18. ronnie says:

    I find it very difficult to have a side job working 8-7 with no overtime on $28K/yr in a very sedentary office environment. It literally sucks the life out of me. Luckily I was able to save enough to pay off my debt. I just wanted to add that for some, a side job just isn’t an option.

  19. Jim Lippard says:

    Ronnie: Sounds like getting a different job is an option you should consider.

  20. rita says:

    Trent, your blog really makes my day. I try to check it at least 3x daily. You gave me the idea to look into starting my own income-generating blog, since i post entries almost everyday in my own blog. still thinking of what to write about aside from my daily routine. any suggestions?

    @Mrs Micah – you wouldn’t believe my schedule right now…thank goodness semester break’s just a couple of weeks away. =) i got to cut back though, i’m feeling exhausted lately.

    @Barbara Stanny – it might not be obvious with my tons of commitments, but i agree with what you said that generally,
    “Underearners tend to scatter their energies in too many directions with too many projects.”

    jack of all trades, master of none. i’m still in the process of figuring out what i’m really passionate about

  21. fiveberries says:

    Mrs. Micah —

    consider making curtains – that is my income, as I’m mostly a stay at home mom, but can do it in my spare time, and it pays far better than making/altering clothing.

    And I started so cheap that I wasn’t making much, but people were paying so little that they were very forgiving of my mistakes. Eight years later, I work only on referrals, not a bit of advertising, and I stay REALLy busy.

    Just another idea, for a fellow seamstress!

  22. Michelle says:

    I love this idea. I like to take photographs and create paintings of them, however I have a hard time getting started. The time committment to create each piece and select a photograph I like enough to paint is a lot, plus the start-up costs of buying the materials (although I tend to do anyway since it has always been a hobby for me), then I wouldnt know where to sell it. Craigslist is already so cluttered with people trying to sell their art.

    After considering all this, I get so overwhelmed that I never really start. I think it is a problem of keeping my motivation and finding the time outside a full time job and volunteer work.

    Any suggestions?

  23. Joe says:

    “I built up a big emergency fund”

    If you become completely debt free and start to build a small inventory this will not be as critical however for 95% of America it is a good recommendation.

    For example we now have more food around our place because we buy in bulk to save 10-25%, find stores that offer discounts when you buy by the case. It is nice to also know that come an emergency like income loss or natural disasters we won’t be worrying about what we’ll do in a day or two…imagine if everyone in New Orleans had a one week supply of food and water, the whole dynamic would have changed.

  24. Anwar says:


    I read your blog avidly. There is something I would like to get your thoughts on.

    What is your take on the ethical side of a part time job? Many of us work irregular hours, i.e. starting time is fixed, but ending time is….as and when we finish our jobs.

    How do we do justice to both jobs, if the timing factor is not so clear. This will also hold for starting a side business, I think

  25. You are SO right about trying to set up a secondary income stream — I decided to turn my “hobby” of designing cross-stitch and needlepoint projects into a business. Now, instead of just giving completed projects away as gifts, I’m encouraging others to stitch works of art for their own walls! The internet has made so much possible now . . . and you don’t have to invest much in building a website. Your TSD info has been invaluable to me — thanks so much, and keep it going!

  26. Suzanne Barker-Small says:

    I just read this article, and I’ve already started writing down all of the gifts/things I can do.

    So far, I have listed that I like to talk and can speak well, I am an excellent administrator-i can plan, organise aanything, I can type really fast, if you give me an idea I can blow it up 10x bigger and show new ways of making it better, I take really copious readable notes, I can sing & dance well, I love to write, I love to help to do anything.

    Right now, my husband and myself are both self-employed and own 3 small businesses between us, which are our only source of income except for some very small mutual fund shares. We have come to realise that when our streams of income aren’t doing so well that it affects us financially straight across the board, as then we have to think about not only supporting the needs of our family but our businesses as well.

    Thank God we don’t owe any bank etc. but we would love to own a home without the worry of an additional mortgage payment-we see this as a burden.

    So I am very interested in hearing how I can go about creating multiple streams of income without adding stress to a life which is just simply busy running our 3 small businesses, taking care of our 5month old and 3 year old, and volunteering in a charitable organisation and further without adding yet another “payment” to our current list. we simply cannot afford it.

    The article was great. Thanks a million

  27. Diane says:

    I love your site to read. And i’m also living from multiple streams. I love networking and do that at home with my pc.

    Thanks for your articles.
    greetings diane

  28. Buck says:

    Way to go, this is one of your best posts. I have been trying out various ideas on how to make money without going back to the 9 to 5. Once I was away from the daily grind my mind began to open up to the previously hidden possibilities that surround all of us. I hope it continues to go well for you!

  29. Agree with you on the eggs in one basket thing regarding a job. And it’s funny how most jobs just pay you enough to get by and be totally financially dependent on your job. I suppose that’s how they manage to retain employees in the work force

    Passive streams of income are a total must do. At the end of the day each individual needs to dig within themselves to find what their strengths are and then make it work for them

  30. Mona Abdulla says:

    Great article & website! I totally agree that there is an pressing need for more than one income stream. I’m trying to re-organize my life by seeking other alternatives beside my full time job. I’ve started my own Internet business and blog and on my way towards creating another income stream. I just love this idea and looking forward to finding more ways to supplement my income.

  31. teejay says:

    I find that income from my side business goes to savings and 20% of my take-home pay goes to paying debt. This works for me since I’m almost done with my credit card payments and a personal loan.

  32. Besides the income from my job, I also purchase Certificates of Deposit and Long-Term Treasury bonds. My alternative income stream is guaranteed by the US government or FDIC. I also open bank accounts for the bank bonuses ( $50-$200 per account) and also generate a little in blog income as well.

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