My 7 Streams (part 1)
Quit yer whining and just do something – Building multiple income streams
Up to now I’ve mostly just whined about my current state or spoken in broad terms about how I am going to move forward and how you can too. But words mean little, especially in a medium where anyone can share any thought they have at any time (unfortunately that means things like cat videos and posts about breakfast). So, below you will find my real or planned seven income streams in rough order of their size and maturity, their current state, my way forward AND how it applies to you. By writing these down I will provide you some substance to my claims and force action on my part.
Stream 1: Current salary, future pension
Me: This may sound like cheating but hey, an income stream is an income stream. My current salary provides all the money I use to support my family and plan for the future. While I can do little to affect the growth of that stream, it is consistent and I can predict with a fair bit of certainty what I will make in 5, 10, 15 years. By being deliberate with this income stream I can find excess on a regular basis that will allow me to build other income streams until they provide a meaningful contribution to my family’s bank account. When I retire my pension will be about 33% of whatever my total salary + benefits are at the time, but so long as the U.S. Government stays solvent my years of military service will provide a life-long income stream.
You: Your salary may not have the same predictability but it may also not have the limitations as mine does. In either case, if you know your current income, can cause it to grow either by sticking it out or by putting in more hours AND are deliberate about your money (you control it, not the other way around), you can begin working on the foundation for future growth. I will discuss personal finance (including the dreaded B-word) more later on but in short creating multiple income streams doesn’t mean starting from scratch: build on what you have now.
Stream 2: Income from stock investments
Me: Ever heard the phrase “that will pay dividends”? After investing (somewhat blindly) for many years in traditional mutual funds such as international growth, emerging markets, S&P 500 Index, etc. I learned about a financial phenomenon that was news to me but a long-standing method for income upon which investing great such as Warren Buffet and Benjamin Graham rely- dividend-paying stocks. I’ll cover investing in more depth later but I am now nearly 100% invested in dividend-paying, dividend-growing single stocks in my and my wife’s Roth IRAs and our taxable investment account. My goal is in 7 years to build a portfolio that combined, across all three accounts, receives in dividends and distributions an average of $2500/month. Right now I am only rarely putting new money into these accounts (allowing them to mostly grow organically) and am reinvesting all dividend and distribution proceeds back into more stocks.
You: Maybe you have a retirement account such as an IRA or a 401(k). Maybe you do not. Maybe the above paragraph is Greek to you or maybe you could teach me a thing or two about investing. In any case, income-producing stocks are one of the most passive investments one can make, a fairly safe investment and one with incredible growth potential…over time. I encourage you to 1) spend some time looking researching dividend-growth stocks at seekingalpha.com and 2) truly understand what your money is actually doing for you should you have an investment account of any sort (and not blindly rely upon your financial advisor or institution).
Stream 3: Real Estate income
Me: A few weeks ago I tried to buy the domain theaccidentallandlord.com. Unfortunately it was already taken. That describes me, an accidental landlord. But through the process of buying two houses as primary residences and then subsequently renting them out after moving I now have a “passive” income stream from them. Though not large amounts, both houses are paying for themselves and allowing me to build a reserve account and begin saving for a future, deliberate real estate purchase. In seven years I should be able to start pulling some money out of my real estate account and using it for my family expenses; while I haven’t completely run the numbers, $2000/mo (and growing) in my pocket plus some left over for further investing is doable with a few more property purchases.
You: You might be thinking to yourself that real estate is a bridge too far for you, it is too expensive and risky. I don’t disagree…that those are reasonable thoughts. However, real estate has proven to be a wealth builder for millions of people throughout the history of the world. You’ve heard the adage “they’re not building any more of it (land)”. Like starting a business or investing in the stock market, real estate is something you CAN do. Spend some time at the incredibly valuable site biggerpockets.com and learn about the many different forms of real estate investing before closing your mind to it…and of course stay tuned to 7Streamblog.com for updates on how I am doing.
In my next post I’ll cover streams 4-7. In the meantime, let me know what you think by leaving a comment below or sending me a note using the Contact Me page.