Editor’s note: This article was first published in October 2017; the income sources described, including personal finance websites, P2P lending, renting vehicles through apps and Airbnb rooms, are as they were then, and the remark about low savings account returns reflects 2017 interest rates.
The riskiest thing we can do these days is depend on a single source of income, because if you lose that one income (often from a job), everything starts to fall apart. Clearly, if you receive money from several sources, losing one of them shouldn’t deal a heavy blow to our peace of mind and financial stability.
And if, as in this case, we manage to have as many as 15 streams of extra income, losing one of them is barely noticeable.
Have you thought about what would happen if the company you work for laid you off tomorrow?
Have you thought about what happens to your long-term finances if you don’t manage to save more money?
Most people think they can’t create more income streams because they don’t have any more free time. And this is where the old saying applies: “He was so busy working that he forgot to make money.”
There are only 2 ways to have more money: save more or earn more (and we will always prefer the second)
(See: 9 tips to save more money and live more cheaply)
It isn’t complicated to gradually build up some assets that generate passive income for you. The younger you start, the better. In other cases, we just need to look for several ways to earn extra money, which is a good start.
To add more money to your monthly income by building assets, we could include share dividends, the interest the bank pays on our savings account (which isn’t much these days, but it should give you something; otherwise, think about switching banks), rental income from a property, renting out a room on Airbnb, renting out your car through one of the various apps that exist, giving some kind of lessons in whatever you are good at, offering your services on platforms that look for freelancers for specific tasks, and hundreds of other ways.
One thing is clear: we can’t put all our eggs in one basket, so the more baskets we have, the better for our finances.
In the case of this woman, Pauline Paquin, these are some of her 15 sources of income:
- She has 3 personal finance websites, including InvestmentZen, which bring her a steady income from advertising.
- She writes for other sites, which not only brings her some extra income but also makes her better known and sends traffic to her own websites.
- She receives share dividends.
- She rents out her car and her motorbike by the day through various apps.
- P2P loans (lending money between individuals) are part of her flow of extra income.
- She does translation work.
- She rents out rooms on Airbnb.
- In her case, she also has a house that she lets for long or short periods.
She admits that some of these income sources are recurring, while others only bring her money a few times a year, but it all adds up. What she is clear about is that it would be hard for her to lose all her clients or income streams overnight.
She knows her monthly income is unlikely to be $0, and she doesn’t have to depend on any single source, as most people do with their day job.
How can you start from scratch to reach financial freedom?
This is where we would tell you to acquire big assets such as property and shares and let the passive income cover your standard of living. The bad news is that to buy shares you have to earn money to invest in the market, and the same goes for real estate.
So first of all, you need to look for ways to make money, save more money and invest more money in those big assets.
Financial freedom is a very simple concept, but it is not easy to put into practice when you start from zero. It is precisely because it isn’t easy that so few people achieve it. The rewards lie in the hard part.
So at the start, we should focus on both systems:
- Save more money: we can always cut unnecessary spending somewhere, or get used to a more frugal lifestyle. In other words, spend less than you earn.
- Earn more money: following the 4 basic pillars of financial education, it all comes down to “earning more money, saving more money, investing more money and getting a higher return on the money we invest.” The more we have of one of these 4 pillars, the less we will need of another.
And it isn’t as complicated as we think. For example, if you know how to do something for which you could find a client who pays you 50 euros a week for a couple of hours (in this woman’s case, she says she managed it with French and piano lessons), you would already have an extra 200 euros a month. If you find a couple more clients, the figure multiplies.
Building a website if you know a subject well, or setting up a side business selling a product online, are just some of the many options that mean that, nowadays, anyone with a minimum of interest in learning how it’s done will end up doing it one way or another.
You won’t achieve any of this overnight. It will take a lot of patience, consistency, discipline and effort, but if you focus on building assets, sooner or later the results will come.
See also: Financial education in 15 very easy-to-understand points
Featured image: Katmai National Park and Preserve, Public domain, via Wikimedia Commons.
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