Everyone wants to make more money, but how? More money gives you the freedom to live life on your own terms. The trick is to earn more, spend less, and invest the rest.
Millionaires swear by the seven income streams to help build their net worth, diversify their income, and make more money. Applying these basic principles can seem difficult to eh average human (but we break down how these seven streams can apply to you below)
The 7 streams of income
It’s never a bad idea to have multiple sources of income. While your day job may be the primary way you earn money, having additional means provides extra financial security, extra cash in your pocket, and better mental health.
In general, there are seven broad forms of income you can use:
- Earned income – Simply put, your salary, or the money you get for doing your day job. This includes things like tips, bonuses and commissions you may receive.
- Business income – Do you have a side hustle? Do you drive for Uber or sell print-on-demand t-shirts in your Shopify store? If you run a business of any type outside of your day job and are earning extra money, this counts as business income.
- Interest income – This constitutes interest income if you receive interest on the money you have in your bank accounts, high-interest savings accounts, or other investments. Typically it’s not a lot, but it still counts as money coming in.
- Dividend income – If you share in a company’s profits, whether through payouts from stocks and shares or by how your company is organized, then you are receiving dividend income.
- Rental income – Do you own a property that you rent out to others? Any money that you collect from your rental property constitutes rental income. This can include money you earn from renting out a basement apartment, a room, or putting your home on a site like Airbnb. You can write off your mortgage interest, property taxes, and landlord insurance.
- Capital gains – this form of income includes any money you collect from the sale of assets such as stocks and businesses, as well as money collected from loans You have provided to others. This can also include income you receive from selling items online through forums like Kijiji or Facebook marketplace. If you’re selling things online for profit, you may have to pay taxes on the income you receive.
- Royalties and licensing income – if you write a book and collect money on the sales or write a song for commercials, television series or film, the money you earn falls under this category. In general, it includes income from any original work that you have created that generates revenue.
Compare High-Interest Savings Accounts in Canada
Making the streams work for you
With the seven streams in mind, let’s look at some simple ways you can increase your income.
Ask for a raise
In 2022, wages will increase by around 2.7-2.8%. However, the inflation rate is rising, so a 3% increase only keeps pace with the rising cost of living. Ask for more. If your income hasn’t seen a rise, you can find yourself shelling out more money than ever for everyday items like food and gas. Speak to your employer about increasing your salary for more than inflation.
Tip: when asking for a raise, consider what your work is worth. If you can’t quantify it, that’s the first step. Has the pandemic resulted in you working from home where you’ve been more productive? Have you been training new members of your team at work? Always be ready to highlight how you’re an asset to the company. Propose how you will continue to do so.
Get a side hustle
having any business income increases your cash flow. This can be anything from a small outside job of cutting lawns to a more serious online business selling leather goods or finished wood projects. While you’ll have to pay tax on any income you generate, and a side hustle may push you into a higher income bracket, the extra money you generate can provide you with financial stability. Be sure to look into if you need business insurance. It could save you thousands.
Tip: If you can turn a hobby into a side business, you can make money while doing something you love. Think of what it is that you’re passionate about and see if there’s a way that you can monetize the activity. This can be anything from creating videos with your friends to selling baked goods at a farmer’s market.
De-clutter and sell your stuff
We all have things lying around the house that we don’t use anymore. From old stereos and video game systems to furniture, clothes and books – one person’s trash is another’s treasure. No matter what it is, there’s a market for it. By posting your goods in an online marketplace like Kijiji or Facebook, it can attract potential buyers you might not otherwise have known existed. Think of it as a garage sale you can host without ever having to step away from your computer.
Tip: Be sure to take good quality pictures of the items you hope to sell online, and write a clear and concise description. Whatever it is you’re selling, you want it to get seen by as many potential customers as possible, so you want to ensure it stands out from other posts that may be selling the same or similar items.
While a high-interest savings account or GIC can give you a small return on your investment, you might want to consider investing in the stock market to yield a higher interest rate. While this is not without its risks, mutual funds, index funds, and exchange-traded funds (ETFs) have historically outperformed other investment forms. More than this, they have also offered a return on investment higher than the rate of inflation.
Tip: if you are an inexperienced investor or are nervous to start investing, start with a Robo-advisor. Then do the work for you. All you have to do is deposit the money into the account.
Robo-advisors can earn you 7% on your money.
From credit cards to mortgages and home and car insurance, we all have bills to pay. By comparing the rates offered by different providers, you can end up saving yourself a substantial amount of money. For instance, if you’re looking to renew a home insurance policy or are shopping for a new one, take the time to look for the best rate possible.
Tip: While it’s tempting to use the same insurance provider for both your home and car insurance, you might be able to get a better rate by using two different providers. Bundling policies might seem like a sure-fire bet, but the policy options available to you might not be the cheapest.
Better rates, better sleeps.
The bottom line
No one is going to say no to extra money. Looking for creative ways to increase your income can lead to greater financial freedom and lead to more time to do the things you love. Take a look at the various common ways people increase their income, and discover what methods best suit you and your lifestyle.