Why You Should Have Multiple Streams of Income


I’ve pretty much always had multiple streams of income ever since I started working my first job at McDonald’s at age 15. I worked there over the summer between my freshman and sophomore years of high school in addition to working on my parent’s farm and mowing lawns for my grandmas.

I was pretty lucky because my dad did pay me a little bit to help him on the farm when I was a kid. Farm work, along with household chores, was how I earned my “allowance” each week. There were no free money handouts from my parents. (I’m thankful for that now as it helped me develop a good work ethic from a young age.)

My grandmas also paid me to mow their yards during the summer. The funny thing is that one of my grandmas had almost 2 acres and she paid me $20 even though she was pretty well-off, while my other grandma has a much smaller yard and has less money in the bank and she paid me $30.

For years I had multiple streams of income without even thinking about it. It wasn’t until I discovered personal finance blogs in 2013 that I started to learn more about the benefits of having multiple streams of income and that most people outside of the personal finance community don’t have multiple streams of income. I was a rarity!

Now that I know more about why you should have multiple streams of income, I don’t think I will ever go back to having only one. Here’s why:

Job Security

Job security isn’t what it used to be. In the past, it wasn’t uncommon for people to work at the same place of business for 25-30 years, or more, until they retired. They almost never had to worry about getting laid off due to company financial constraints. Therefore, most of these people also didn’t worry about building multiple streams of income. Times have changed since then and layoffs are more common than they used to be. If you only have one source of income and you lose your job you better have an emergency fund in place to help tide you over until you can find a new job as you won’t have any cash flowing in until then.

By building up multiple streams of income you’ll be able to continue to earn some income and supplement your emergency fund while you look for a new job. This also means you may be able to be more picky about what your next job is instead of having to take the first one you find to get money flowing in again.

Building Wealth

Having multiple streams of income is also a great way to reach your financial goals faster. No matter if you are trying to get out of debt, save for retirement, buying a house, or something else entirely, having multiple streams of income will help you reach your goals that much sooner. To get started it is a good idea to get asset based loans that will help you earn more money in the long run.

Choosing a passive income source makes it even easier to build wealth than if your multiple streams of income all take time away from other things your life. For example, owning rental properties will give you a monthly income without much time or effort, while having a part-time job requires you to put in hours each week to bring in that extra money. Therefore choosing a passive income stream is a good idea to help you build wealth.

Do you have multiple streams of income?

*Part of Financially Savvy Saturdays on brokeGIRLrich, A Disease Called Debt and Debt Free Divas*

Photo courtesy of: Thomas’s Pics

The 3 Legged Stool: A Retirement Theory


Have you ever heard of the “3 legged stool” retirement theory? With as much personal finance reading as I’ve done over the past almost 2 years, I thought I had heard it all but somehow this one escaped me until just last weekend.

I was working at my part-time job when a co-worker started asking me about investing and retirement saving options. Why these people ask me about personal finance I’ll never know because I certainly haven’t told them about my pseudo-anonymous online blogging career about personal finance, but I digress. After sharing with her my limited knowledge of investing, as my main personal finance interests are debt payoff and entrepreneurship, I was surprised when a customer chimed in from across the store and asked if I had ever heard of the 3 Legged Stool theory of retirement investing.

Since I hadn’t heard of it myself, I decided to do some research on it and share that with you today.

What is the 3 Legged Stool Theory?

According to About.com:

The 3 legged stool is a metaphor for how the post-World War II generation looked at planning for retirement. The three legs represent an employer pension, employee savings, and Social Security. You need each one to build a strong retirement foundation. Without one, the stool would not function.

This metaphor is often attributed to Franklin D. Roosevelt, who created the Social Security program.

Does the 3 Legged Stool Still Exist?

Personally, I don’t think relying on the 3 legged stool for all of your retirement savings needs is a good idea anymore. The social security leg of the stool is much shorter than what it was when this theory was first invented in the mid-1900s and in fact some people believe that Social Security will be entirely non-existent by the time that millennials begin to retire many years from now. This leaves you with, at best, a 2.5 legged stool.

Then when you look at the employer pension leg of the stool, you’ll notice that employer pensions have pretty much gone by the way-side in the past 20-25 years. These days employers choose to offer a defined contribution plan rather than a defined benefit plan, making your employer 401(k) essentially a part of the third leg that is employee savings. Sure, some employers still contribute to employee 401(k)s, but for the most part this account is employee-funded.

Now you have one long leg and 2 short legs on your stool and you’ll be lucky if you can balance on it at all when it comes time for retirement.

Today’s 4 Legged Stool Theory

In light of these changes, a new theory has emerged in the past few years: the 4 legged stool. This theory means that you will take part of the long leg of the 3 legged stool, personal savings, and invest it in a passive income producing asset, like real estate. Thus you now have a stool with 4 legs: employer pension, employee savings, Social Security, and passive income investments.

With this new theory in mind, do you have a plan in place to build your 4 legged stool?

*Part of Financially Savvy Saturdays on brokeGIRLrich, A Disease Called Debt and Shoeaholic No More*

Photo courtesy of: Crimthann Fid-Nemed