How Many Streams of Income Should You Have?

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I talk a lot about having multiple streams of income. I believe it’s the most efficient way to build wealth–but I’m not the only one. Researchers have even pinpointed a statistic: millionaires, on average, have not just one, but seven streams of income.

Now, when I read that, being the critical thinker I am, a few questions came to mind.

First, is seven the magical number of income streams that turns you into a millionaire, or is it that the millionaire knows how important multiple streams of income are, and so begins to “collect” them?

Second, are those seven types of streams, or could those seven streams be in the same category (for example, real estate)?

Finally, do highly-paid professionals really need this many streams of income or should they just keep working hard in their given profession?

Unfortunately, I couldn’t find too much additional information online (trust me, I looked all over). However, from my own research, I’ve landed on a few ideas that certainly make the most sense. So let’s go back to my original questions:

Do the income streams make the millionaire, or is it the other way around?

Well, the number seven may not be magical, but it does seem these concepts are two sides of the same coin. Yes, the streams may eventually make the millionaire, but it’s also true that the millionaire understands the importance of multiple income streams–without them, after all, he or she may never have broken the million dollar mark. So, he or she continues to increase their streams of income.

Are these seven individual categories of streams, or are they all from the same category?

As with investments, I believe that it makes the most sense to diversify your streams of income. That is, up to a point. If you’re finding a category that works for you, then go for it. Still, don’t put all of your eggs in one basket.

Yes, diversification is key. I’m talking about the whole picture here- not only the way you gain income and net worth, but also what you do with it. Smart people have learned that the best way to build wealth is to turn your active income into multiple passive income machines.

Should you focus on building more streams of income, or is your profession the top priority?

Highly-paid professionals (like doctors) should definitely be looking into multiple streams of income. In fact, more than anyone, we are in the best position to accelerate our growth towards financial freedom. We’re able to earn the necessary capital and immediately throw that money into creating additional streams very quickly. We just have to be strategic about it. Keep your expenses in check, and be disciplined about moving your earned income from your day jobs and straight into the money-making machines. There is a balance to be had here. You just have to figure out exactly where it is for you.

If you’ve made it this far, hopefully we’re (at least somewhat) on the same page. And if so, you may be wondering about what these seven streams might actually consist of. Well, while there’s no perfect blueprint for what these income streams should be, here are some of the most common types of streams:

  • Earned Income – This is your day job, and most people’s primary source of income. this one’s easy to understand and most people’s primary source of income. You trade your time for money.
  • Business Income  You own a business. You either make and sell something, or you provide a service.
  • Interest Income – This is income you make from lending your money out. This might mean a CD, P2P lending, real estate crowdfunding, funding fix-and-flip debt deals, or simply money in a savings account.
  • Dividend Income – This is money that’s distributed as a result of owning shares of a company.
  • Rental Income – You own something and you rent it out. Probably the most common is owning a rental property, such as a multifamily apartment building (renting apartments in exchange for monthly payments).
  • Capital Gains – This is money earned when you sell an investment, like stocks.
  • Royalties / Licensing – You create a product, idea, or process, and you let someone use it. They pay you a small fee every time they do.

If you’re curious about my own streams of income, I encourage you to check out my income report for an in-depth look. For now, though, I will tell you that I’m currently at twelve streams, beginning with my day job as an anesthesiologist, and ranging from an apartment building to this very blog. Ultimately, having these multiple streams of income has proven to be invaluable to me–not only because of monetary value, but because they allow me to live the life I want and I feel I have a hedge against whatever the future might throw at me.

For the average millionaire, seven sources of income may be the sweet spot. But given my own experience, I believe that seven may not be enough.

How about you? How many sources of income do you have? Any desire to add on more? If so, what are you doing about it?

23 COMMENTS

  1. We’re currently at four and about to add a fifth. The more diverse the less risk. The less risk the lower the risk mitigation needs (ie insurance). We are high income but historically we’ve focused on the two w2 incomes and investment returns. At some early stages in your career focusing on your W-2 might yield better returns. Once you’ve got a certain level marginal gains from raises begins to decline. We’re at that stage where alternative income importance is increasing.

  2. I love the concept of multiple streams of income.
    Hmmm let me think about mine…..
    1. Commercial real estate (medical office building)
    2. Bond income (muni, corporate, I-bond, TIPS)
    3. Surgery center
    4. Imaging center
    5. Medical director stipend
    6. Clinical revenue (office, procedures)
    7. Blog (ads, affiliates)
    8. Capital appreciation (private placement investments)
    9. Medicolegal work (IME, expert witness, depo)
    10. 3rd party consulting (healthcare analyst)
    11. REITs (Rental income)

  3. You have to have multiple streams of income, it’s a necessity to be able to control your own financial destiny.
    1. Medical Director
    2. Bonus payments from our insurance partnership
    3. Rental Real estate (our primary focus) – Hotels, Apartments, Agricultural land, single family homes
    4. Hospital investment (tax losses used against other income for now)
    5. Affiliate/referral income
    6. Educational Products (helping other physicians become financially free, need to market this more)
    7. Capitated clinical contract (monthly payment whether I see patients or not)
    8. Consulting

  4. Holy Christmas, I love this post!!! I honestly thought that the whole 7 income stream thing was an exaggeration so I never paid attention. 7 may not be enough!? T_T

    Ain’t nobody got time for that…
    *read comments above*
    Woahhhh, seriously?! Bravo everyone!!!

    We only have 5.5 out of 7 over here and there’s two of us. You know you’ve inspired a girl when it’s 3AM and all she wants to do is make flow charts now…aw I need to hustle more.

  5. Now here is a question for everyone –

    Do you own these assets in your personal name?

    If I googled you would I find the corporations and assets that you own?

    It is great to accumulate wealth, but do you have an asset protection plan in place?

    One that gives privacy as well as protection and sets the foundation of your estate plan?

      • Oh, I am not the expert, I just went out and found the expert and had them do it for me and continue to maintain the structures for me.

        I use the structure that mentioned with a possible twist.

        One big thing to make sure is that no one knows that your holding company exists. It shouldn’t show up anywhere that is traceable to you.

        There are a couple of other BIG keys related to how your LLC’s are written because most LLC’s are actually defective and don’t protect you in the ways that you think.

  6. So, it’s like the 7 Deadly (S)Incomes? Ha. Bad joke. I never really thought to count them up or even name them but I’m a big fan of having multiple streams of income. Let me count. 1) Earned income (freelance pharmaceutical copywriter) 2) Royalty income (published book) 3) Interest income (savings accounts) 4) Business income (my personal finance blog) 5) Pension beneficiary (RIP daddy) Crap. Only five and only 1 that pays anything substantial. Hmmmm. Time to brainstorm. Thanks, Doc.

  7. Nice summary. I never thought of it this way, and I also need to diversify my income, especially through means that aren’t related to my profession. I know docs who own real estate in a medical practice that they work in (as well as surgical center). Sometimes things get hairy and all of their related income streams go to pot.

    Will have to come up with ways to diversify, and focus my time on the high-yield ones.

    • I don’t think you can go wrong with diversifying your income. Obviously don’t get yourself in too deep with something you don’t enjoy or can’t vet out properly. Would love to hear about it when you do.

  8. I only have a few streams but hopefully that can change in the future. I’ve got my wages, my dividends, my capital gains and also my self-publishing income. I don’t know what my next one will be but I’ll certainly be on the lookout for any opportunities that arise.

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