Have you heard or read that an average millionaire earns seven streams of income? This is one of the most common statements about how rich people accumulate wealth.
How true is that?
Tom Corley, an author, conducted a five-year study in which he surveyed wealthy people about their daily habits and compared the results with those of lower-earning people. He has written numerous articles and a book entitled Rich Habits for major publications.
He discovered that the majority of self-made millionaires earned their money from multiple sources. The breakdown was:
Three-fifths of the respondents had multiple streams of income
Four-fifths of the respondents had multiple streams of income
29% of respondents had more than five sources of income
What are the 7 most common sources of income? How can you create multiple streams this year?
Additional: For more information on this topic, you can also check out a study by the IRS.
Table of Contents
Active And Passive Income Streams
What are the 7 streams of income?
Seven Income Streams: Benefits
How to build a millionaire income stream
Are 7 Income Streams Required to Become A Millionaire?
Income Streams: Active And Passive
You’ll discover that the seven income streams can be divided into active and passive. They are both valuable ways to earn money, but they’re different.
You can earn active income by working for someone else or providing specific services. You could earn this income through your job or consulting services for a company.
You can generate passive income by not working. It is still necessary to do some work upfront to generate revenue. However, over time you will need to put in less effort to receive your income.
Passive income can be generated by an online store, digital book or other online products. You can start making money on your product even if you don’t work on it.
What are the 7 streams of income?
- Earned Income
Also known as salary or the typical monthly income of your primary job. The earned income can be calculated on the basis of an hourly rate, bonuses, commissions or more. The same applies whether you’re employed or self-employed. The tax rate on this income will vary depending on how much you earn. - Business Income
You can also earn extra money from the businesses you set up. They are also known as side hustles and can be made from multiple sources or just one.
This is usually found in your balance sheet, where you take the difference between profits and losses. This is also subject to tax.
- Interest Income
Your savings will earn interest, but this rate is likely to have dropped significantly since 2020. It would be ideal if it matched the inflation rate, but interest rates today are extremely low.
Check your bank statement to find out what your interest rate is. You may also be entitled to interest if you have funded loans.
CIT Bank, Aspiration and Consumers Credit Union are some banks that offer interest rates.
- Dividend Income
Dividends can be earned from the stocks and shares that you own, or you may receive a dividend payment if your company’s structure allows it. Dividends, or a portion of profits, are what is commonly called.
As a director of an LLC you can split your profit into 12 monthly dividends. Some investments also pay quarterly or annual dividends.
- Rental Income
Rent income can be collected as a monthly source of income once you own a property. You may have to pay extra taxes if you own your property under a different company. The yield of the property income will need to account for that.
You’ll probably have to pay a mortgage as a landlord when you buy new properties. You should include this in your rental income.
- Capital Gains
Capital Gains Income is earned through the sale or transfer of assets, such as stocks, art, businesses, and loans. This income is subject to capital gain tax, but it will be earned in a lump-sum rather than over time. Visit the IRS website to learn more about capital gain tax. - Royalties and Licensing Income
Do you produce music or photography? You can earn royalties by licensing this content for public use.
The royalties you receive are unlikely to be large, but if your content is used in mass quantities and produced regularly, they will likely bring a steady flow of income.
Seven Income Streams: Benefits
Reduce reliance on a single source of income by generating multiple streams
It means that if you lose one source of income, the impact should be minimal. If your tenant cannot afford to pay the rent for a month, you can use this example.
Stop living paycheck to paycheck
Having multiple sources of income means that you will always have money. You can reach financial independence by accelerating your budgeting and saving plans instead of depending on your income month-to-month.
Your working hours can be reduced by passive income
You can now spend your time on things you enjoy, without worrying about whether you will earn more money by working more hours. It means you can spend more time with your family, friends and hobbies while maintaining your earning potential.
You can turn your side hustle in to a business.
Have you noticed that many entrepreneurs have had experience in more than one type of business? They have financial stability, which allows them to take the time to investigate other options. Many of them are able to pursue their passions to solve real world problems.
How to build a millionaire income stream
Maximize your salary potential and career
When you are able to, ask for a promotion and take it seriously. You can move up the ladder by looking for lateral jobs if you have hit a glass ceiling in your current job.
Keep your expenses low
Many people are looking for a balance between low costs and a luxurious lifestyle. Try to limit your impulse purchases and buy only the things you need within your budget.
You’ll be able to save money and invest it in the future.
Investing in stocks
Stock market returns are higher than interest-bearing savings accounts. You can select an investment style that best suits your needs.
Investing in index funds is a lazy way to invest.
Investing in single stocks. Stock picking services can help with research and your portfolio.
Managed portfolios are managed by robo-advisors to automate investing. Ally Invest, for example, offers diversified funds with less work.
Invest in real estate
This is a good way to diversify if you can afford to pay a large downpayment for multiple homes. Renters occupying over 43 million U.S. units means that there is high demand for real estate.
This residual income will continue to flow into your account each month as long as you own the property. You’ll also have to pay for maintenance and other expenses, but these should be low in comparison.
You can also invest in real-estate through platforms such as Fundrise, DiversyFund or Groundfloor. You can earn interest and dividends without having to manage a single investment.
Create passive income
At first, creating digital products such as ebooks and guides may take a lot of time. Once created, digital products can last for many years without needing any further work.
You can earn money even while you are sleeping with these income-producing assets. They can generate thousands of dollars in extra revenue as long as the assets remain available.
Start a small business to grow
It could start as passive income and become your new job. Or, it may even be acquired by another company.
If you are able to start and scale a blog online, you will start earning money through ad networks. If you decide to sell your blog with recurring income and over 100k visitors per month, you will likely get a good price.
Try some gig economy jobs to see if you like them or find out how you can earn extra money. Even simple things like flipping thrift store items or books can become passive.
Start slowly
It is exciting to think of multiple income streams, especially when considering the timelines and possibilities of increasing your wealth.
You want to be patient and methodical when you approach your sources of income. You might get overwhelmed and frustrated if things don’t work out as you planned.
It is not always easy to achieve success. You may need a lot of hard work and education. It’s okay if some of your income streams fail. Some ideas for income will work from the start, while others may not. Just keep your emotions under control and keep moving!
Are 7 Income Streams Required to Become A Millionaire?
Do all millionaires have seven streams of income? No! Some will have much less, while others will have a lot more. You should never rely on one source of income. Instead, you should find ways to diversify your current sources of income.
You can become independent wealthy, and if you want to diversify your income streams in case one becomes volatile or crashes you will have other sources to cover the gap. You are the only one who can decide what types of income streams to create and how far to take your wealth.
