Reliable and effective information on how to build multiple income streams is hard to find on the net. There’s a major problem with the financial advice given by mainstream personal finance blogs. Most of their recommendations revolve around cutting costs and they are constantly proposing new ways their readers can reduce their monthly spending. Some of their proposals border on the outrageous. I once came across a blog post telling readers to cut on how much toothpaste they used each morning, among other trivial things, as a way to save money.

I don’t know about you but I think this kind of thinking is highly limiting. The reality is, focusing so much on saving money will surely take the fun out of living. When you have to watch how much toothpaste you use, what’s the point of working hard every day to earn a decent living?

Cutting Costs Vs Earning More Money

The biggest mistake a person makes when they begin to think in terms of cost-cutting is that they shift most of their focus from earning money to cutting costs. There’s only so much cost-cutting you can do. While there’s a floor to how much money you can save through aggressive cost-cutting measures, there is no ceiling to how much money you can earn. The smartest way to pad your savings account is to focus all your energies on earning more money. You can do this by taking the time to build multiple income streams.

The more money you make, the more money you can save. If you make $70,000 a year after taxes and your living expenses take $60,000, you’ll be left with $10,000 in savings. If you want to save more money, you can take either of two paths: reduce your annual living expenses to a figure less than $60,000 or leave your living expenses at $60,000 and focus on earning more money. Both options take energy. For someone mindful of their quality of life, increasing income is the wise decision. This is such an unassailable logic that only the delusional would try to refute it.

Now, how do you go about increasing your income? The best way to earn more money is to expand your earning options by taking the time to build multiple income streams. If you’ve been reading finance blogs for some time now, you have probably come across the statistic that the average millionaire has seven sources of income.  hat’s an intimidating number if you only have one source of income right now. But do you really need seven income streams right away? No, you don’t. In the end, you might end up with seven or more income streams but you totally don’t need to start there.

All you need to start your journey to build multiple income streams is just one income stream aside from your main job. Before I go about detailing how you can build these income streams, I am going to introduce you to some of the ways people earn money:

Multiple Income Stream Ideas One Can Pursue

• A job: a job typically covers instances where someone directly exchanges their time for money. Someone with a job either earns a fixed rate per hour or is paid based on performance.
• Investing in real estate and earning rental income.
• Freelancing online. Freelancing skills on demand include graphic design, web design, writing, translation, web development, app development, and transcription, among others.
• Selling photography on sites such as iStock and Shutterstock.
• Making YouTube videos.
• Running a blog.
• Self-publishing a book and selling it on a personal site or on Amazon.
• Being an affiliate marketer and getting paid for each referral made.
• Building apps.
• Selling online courses.
• Driving for Uber or Lyft.
• Starting an e-commerce store.
• Renting guest houses on sites such as Airbnb, One Fine Stay, and Home Away.
• P2P lending
• Passive investments such as SP500, REITS, government bonds, and Certificate of Deposits.

From the examples above, it is clear that the average person has unlimited opportunities to make money. The income streams fall into three distinct categories:

1. Exchanging Time for Money

People exchanging their time for money have the least leverage when it comes to building wealth. The income multiple in this situation is the number of hours worked. Since there are only 24 hours in a day, your income is limited right off the bat.

2. Businesses

Businesses are operations with leverage. Leverage may be labor (people working for you), capital, or media. Media can be traditional media or online bots running websites. If you don’t possess labor or capital, you can take advantage of the power of the internet which is essentially free and available to anyone with a connection. With the internet, you can start a blog, offer apps on the App Store and Google Play Store, produce a podcast, sell physical products on an e-commerce website, or become a YouTuber.

The income multiple when running a business is the number of products sold or the number of customers served. With an adequate production capacity, a good distribution network, and proper marketing, there is practically no limit to the number of products you can sell or the number of customers you can serve. Leverage makes it far much easier to make a lot of money.

3. Passive Investments

As you earn more money from a business or a job than you can spend, you should put the extra money into investments. Ideally, you want to put them into passive investments that can generate regular cash flow. When a passive investment that requires almost zero time to maintain generates cash, the cash generated can be used to generate more cash and therefore give you a chance to accelerate your wealth creation process.

Multiple Income Streams: Getting Started and Making Transitions

Making the transition from having only one source of income to having multiple income streams is a journey any motivated person can make. To make the journey possible, it is important that you keep the following two points in mind:

• Cash flow is king
• Lifestyle inflation can be crippling

Lifestyle inflation is the tendency to raise one’s standard of living as income increases. If you are trying to build multiple income streams, you want as much cash as possible available to expand existing new projects or to start entirely new ones. Lifestyle inflation robs you of that cash. You will be in a position to live the good life once you actually make it. For now, resist any temptations to use the extra cash to fund a more expensive lifestyle. You should direct as much as cash as possible towards your efforts to build multiple income streams.

You probably are working a job and that is your only source of income right now. In your current position, to build a second income stream, you can start a business, get a second job, or freelance. The most productive path to take is to start a business since businesses have the most leverage and can be automated later on to free up the time needed to focus on a third income stream.

The best business to start today is an online business. Online businesses can be in the form of blogs, e-commerce stores, radio or podcast shows, apps, and YouTube shows, among others. It goes without saying that building a successful online business will require a significant time investment. The rewards, however, make the process totally worth it.

Since you are already working a job, you can build your business in the evenings, over lunch breaks, and in the mornings before you go to work. You should throw as many hours as you can at your online business. You want to make the transitions as fast as possible so you can leverage the momentum in your third income stream. Momentum is probably more useful than motivation. Once you have the ball rolling and are in motion, to paraphrase Isaac Newton, you will generally stay in motion and want to keep going.

A key feature of online businesses is that they can be automated and the routine tasks outsourced. When your first online business is making money, you should appraise what your time is worth and direct it appropriately. If you spend 40 hours a month on your online business and it generates $1,000 in monthly revenue, your time is worth $25 an hour as far as that business is concerned.

To free up time to work on a second online business and so create a third income stream, outsource the routine tasks that can be done by an online freelancer for significantly less than $25 an hour. This is how you begin automating your income. With the newfound free time, business building experience, and consistent cash flow, building a third income stream won’t be that hard.

I mentioned earlier that you should avoid lifestyle inflation for the first few years. You should use the cash generated from your businesses to buy cash flowing assets. These will form new income streams that you don’t have to put a lot of time in. These assets could be dividend-paying stock or rental houses & apartments or any other income generating passive investment opportunity.

You want to invest in cash flowing assets because cash is king. Having lots of cash on hand will make it far much easier to build multiple income streams. When you have cash flowing assets such as rental apartments, the cash generated can be used to build other businesses or used to fund other cash flowing assets and so create additional income streams. You don’t even have to fully fund an asset purchase with your own money. With regular monthly income from your cash flowing assets, you can take loans – think mortgage – to fund the purchase of properties and so put yourself in a prime position to start building wealth fast. This is how you explode your net worth.