The Federal Reserve just downgraded the economic outlook for the U.S., and started another round of quantitative easing, dubbed “Operation Twist.” The financial markets have been in upheaval as European stocks and U.S. stocks alike plunge, and even gold is losing ground fast (although some think it will pick right up again). If the economic outlook is really as dark as some seem to think, it means that maybe it’s time to consider your situation.
Yes, you can prepare for the future by reducing your spending and paying down debt. In fact, these are wise ideas if you want to whip your finances into shape and avoid obligations that can make an already difficult personal economic situation even harder. But you should also consider that earning a little income can also be a good idea.
One of the principles of financial preparation is income diversity. Income diversity requires that you cultivate different revenue streams in order to prevent you from becoming too reliant on one source of income. Consider: If you rely entirely on your employer for your income, if your hours are cut, or if you lose your job, you are in big trouble.
Income diversity allows you to have something of a safety net. In many cases, your alternate sources of income probably won’t make up for a full time day job. However, other income sources can ease the burden, and help your emergency fund stretch a little bit more.
Building Up Income Sources
For the most part, if you want instant income diversity, you will need to find another job, or find aside hustle that allows you to earn money quickly, such as a yard care business, or selling items online. It is possible, though, to build up alternative income streams with some planning and time. The time involved is one of the reasons that it is a good idea to start as soon as you can, so that you have some cash flow in the event that something happens to your main source of income.
Some ways that others start building alternative sources of income include:
- Web sites: If you have the time and patience to build up web traffic, you can monetize a web site to provide you with a little extra income. However, it can take months — or years — to build a successful web site. You need to be prepared for that.
- Investing: Others like to use investments as a way to build income. Bonds, P2P lending and dividend stocks can provide income. Interest on bonds and P2P loans are always being paid, so you can receive income that way — even when the stock market is down. Additionally, dividend stocks continue to make payouts — even if the market is in turmoil.
- Royalties: Some people generate income from their creativity, selling ebooks, or earning money on stock photography sites when others use their work. And, of course, if you have written a book or recorded music you can earn royalties.
These paths, of course, require time and patience. But, if you start building now, you can progress to a point where your diverse income might be of help to you in tough times.