Dubai: Global surveys show self-made millionaires have multiple sources of income, but how do they go about it and how does it work if you already have a full-time job?
There is a renowned global study of over 6,000 wealthy people that was conducted over a six-year period, as well as another five-year survey that studied the habits of millionaires.
Based on this, we look at possible steps one can take to create income streams like a millionaire to combat the misconceptions about millionaire wealth and the myths that keep your money from growing.
What research reveals about millionaires and their sources of income
The above research into the Daily Habits of the Rich has shown that self-made millionaires have had multiple sources of income over the years:
• 65 percent of self-made millionaires had three sources of income.
• 45 percent of self-made millionaires had four sources of income.
• 30 percent of self-made millionaires had five or more sources of income
Plus, each additional flow they added gave them wealth that they could then tap into and invest in another.
What are the types of income of millionaires?
Here are the types of income they had, which can be broken down into seven categories.
1. Investment income: This is the money earned in the form of dividends on stocks held. Dividends are regular payments of profits made to investors who own shares of a company.
2. Earned income: This is the common wage income from contract employment.
3. Rental income: As the name suggests, these are the rents for the properties they own.
4. Royalty income: These are royalty payments from the sale of rights to use something they wrote or invented.
5. Capital gains: It is the money you get by selling assets that have appreciated in value.
6. Benefits: This is the money earned after deducting the expenses of the businesses they own.
seven. Interest income: This is mostly money from savings, deposits, bonds or other lending activities.
Investment diversification (the practice of spreading your investments so that your exposure to one type of asset is limited) has been around for ages, but these results show that this idea can be applied to income streams.
Moreover, these results also show that diversifying or creating multiple streams of income is not just a survival technique for those looking to minimize losses when putting all their money into one asset, but it is is also a wealth creation strategy.
What should I learn from these surveys to become a millionaire? Here are 5 key points to remember!
• # 1 – Having a full-time job is a plus, as is investing in stocks and real estate.
Your employment income will be used to fund your other sources of income. Nevertheless, it will give you stability to diversify your income and experiment with your passionate projects and investments.
Investments in stocks and real estate are considered by experts to be the most consistent and long-term passive source of income.
Here’s why. Allowing your income to be consistent is letting the profits pile up without spending it or reducing the amount you have invested.
Ideally, you will only increase the amount, but if you allow yourself to be patient for the long haul and put your earnings back to market, you will earn compound interest – a profit on your profit.
However, seasoned investors believe that this will only work if your investment strategy is low risk, long term, and passive, working in the background while you do something else.
• # 2 – Start a business in parallel, let the business generate more income stream
An interesting trend among millionaires is that most of them have their own businesses, which they have either started as entrepreneurs or have partly invested in another start-up.
According to a study by The Economist, about half of the world’s millionaires own their own businesses. Another key element is finding multiple sources of income to incorporate into your existing business.
For example, let’s say you’re a professional blogger and writer who gets paid to create content. However, you can also sell digital courses where you can teach others how to become well paid writers.
Or, you can self-publish and sell books on the subject on Amazon. You can also earn money by selling affiliates by recommending the products that you use to run your business.
It just means growing your business in your spare time. While it seems almost impossible to most people, this is obviously the way to do it, as the above millionaire surveys indicate.
Because it seems common for every book millionaire to aim to diversify their “primary” source of income and generate multiple streams of income, each with equal merit.
• # 3 – Create passive income streams, rental income being a popular option
Passive income refers to the money you earn without having to trade time for money. While it’s hard to save money to buy your first home, if you start small you can grow faster. However, it can mean a lot of things. Let’s simplify with a few examples.
For beginner to intermediate level investors, investment advisers suggest seeking approval from your landlord to sublet a room or bed in your room, if possible, if you don’t own a property.
Or buy a share of a rental property. You can buy 10 to 50 percent of real estate in the rental market and collect the corresponding proportion of the rent. There are many programs in which you can own just a share of the property with 2,000 to 5,000 Dh.
As your income from property increases, you can find properties that you can buy with the income you have and put them on the market. You can also find larger properties that you can buy for less than market value and increase their value with quick renovations.
• # 4 – What about royalty income? Create a product and allow others to use it at a cost
Royalty income is royalty payments from the sale of rights to use something you have created. The YouTube video made by someone is used by the platform for ad placement, for which you receive a royalty.
If you’re an academic, writing journal articles will earn you monthly royalties based on readership and the impact of your research. If you are a music artist or a photographer, your work can be monetized in the same way.
Digital products can be created around your areas of expertise. They must demonstrate your abilities. In recent years, online tutorials and courses have also grown in popularity, creating a platform for many niche topics to consider in this format.
The logic that the experts explain is simple when it comes to earning royalty income, there are no limits to what you offer as long as there is a demand for it and there is value.
• # 5 – Have a high yield savings account, sell valued assets
Use an account that gives you a higher interest rate if your savings are consistently (each month) greater than a certain amount.
Experts assess how you should always choose a savings account that earns you more than 0.75% on your money and set up an instruction from your checking account to a savings account for a fixed amount each month. Increase the amount according to your income and treat it like a retirement fund.
Selling valued assets seems to be another common habit among millionaires. A valued asset is an asset whose market value is greater than its book value or its assessed value and which, when sold, will generate a capital gain. Examples include works of art, rare books, and antiques.
For example, you could visit second-hand stores, which sell items by weight and find luxury items, often never used. The purchase of such items and their sale, at an appropriate price, will generate added value.
The same can be applied to antique furniture or your family’s belongings, which are not in use or have no emotional value to your family members. You can also create such assets yourself.
At the end of the line ?
Research shows that there are seven income streams that research finds consistent among millionaire tax returns, with the majority of millionaires having more than three income streams.
Put simply, saving money is essential and experts recommend saving at least 10-20% of your net income each year. Then, to become a millionaire, you need to increase your means, that is, start a business or a parallel career that generates additional income.
Invest your savings and additional income in investments that generate passive income such as rentals. If you can’t do it on your own, team up with others and continue to build your portfolio of assets that generate passive income.
According to surveys, while three streams of income seem like the magic number for self-made millionaires, the more income streams you can create in life, the more secure your financial home will be.
And surveys have also proven that contrary to popular myth, you don’t have to quit your job to start a business and become a millionaire.