Whether you just landed your first job out of college or have already been working for years, it is important to create additional, diversified income sources. After all, you never know when you’ll get laid off or need extra money for your kid’s education. Maybe you want to retire one day, perhaps sooner than later. If your salary doesn’t pay enough, you’ll need to generate additional streams of income if you want additional security and luxury. Here are several tried and true ways to develop additional income streams.
Do you have a desired skillset that you learned through work? For example, are you good with websites, search engine marketing, programming, etc? You can set aside a couple hours a week to make some money by selling your services to clients through a marketplace such as Fiverr.
Invest in dividend stocks that have a long, consistent history of growing and maintaining their dividend payouts. These stocks are relatively stable and will pay out dividends regardless of stock price fluctuations. Although the initial dividend yield might be low (1%-2%), over time, the increased dividend payouts will result in a higher effective yield. For example, the $10,000 you invested in a dividend stock may pay out at 2% right now. However, over the years, the yield on your original $10,000 investment may grow to 5% or higher. The key is to invest consistently and reinvest your earnings back into the stocks. Many people have retired on dividend stocks. Here’s a blog of someone who is detailing his journey to retirement by investing in dividend stocks. The best part about dividend stocks is that once you’ve purchased the stock, there’s very little additional work to be done.
Consider this, if you had invested money in the S&P 500 from January 1950 to April 2012, 89% of your gains would have come not from price appreciation, but from reinvested dividends. Now that is truly substantial!
Real Estate Investments
Another great way to generate additional income is through real estate investing. I like to call real estate investing “passively active” or “actively passive” since there is work involved. Although real estate as an asset class only returns about 3% a year (as opposed to 7% for stocks), you can take advantage of leverage to magnify your returns. For example, you can buy a $200,000 property as long as you have the 20% or $40,000 downpayment along with closing and transaction costs. Then you can rent out the property and take the proceeds to pay off mortgage, interest, taxes, and insurance. The net amount left over will be your additional income. Although your income may be small in the beginning, you have to keep in mind that each mortgage payment increases your ownership or equity in the building. You will also get to raise your rent over time. After 30 years, if not earlier, (assuming a 30-year mortgage), you’ll have complete ownership of the property. If you can avoid vacancy for the majority of the time, your tenants would have paid off the majority of your mortgage for you. You’ll have essentially generated $160,000 in wealth by putting down $40,000. You probably have generated even more due to the increase in real estate values over that 30 year period.
Furthermore, you can also take additional tax deductions for your interest payments to lower your tax liabilities. Many average, normal people have used real estate to generate tremendous amounts of wealth. Here’s a great property investment blog. However, you need to make sure you run the numbers beforehand to make sure that your return on investment is worthwhile. You also have to be willing to get your hands dirty. In places such as San Francisco, Los Angeles, and New York, it may be difficult to find an affordable property that will generate a strong ROI through rental income since property values have skyrocketed.
A non-traditional method of generating income, blogging has become very popular in recent years. A blog allows you to write posts online about any topic. The larger the reader base, the more potential for monetization. Bloggers generate income through either ad revenues, direct sales, or affiliate sales. The key is to produce a lot of high quality content on a regular basis in order to attract and maintain a loyal following. Here’s a finance and travel blog where the writer shows her income from the beginning. She is able to generate more than $300,000 a year in affiliate sales from her blog alone.
In order to start your own blog, you’ll need a topic that you are passionate about, a web hosting service, and some website building abilities. Services such as Weebly make it really easy for you to create your own blog with a custom web address. I highly recommend Weebly and personally used Weebly to build this blog.
If you have time, you can take on a part-time job. Perhaps you can drive for Uber, teach piano lessons, work at your local coffee shop, etc. The pay may not be as good as your full-time job, but every little bit helps.
I'm always looking for new ideas on making money. Do you have any suggestions?
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