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Studying millionaires is quite fascinating, because more often than not, they are regular, ordinary people with remarkable discipline and focus. Very wealthy individuals get that way by working differently (not necessarily harder or smarter) than the rest of the world. One fascinating insight into millionaires is that they typically have multiple streams of income.
A 2018 article on CNBC highlighted the following intriguing aspect of millionaires:
65% of millionaires have three streams of income
45% of millionaires have four sources of income
29% of millionaires have five or more income streams
Most people have at least one income source: their employment. They go to work on weekdays, and after enough days of work, they receive a paycheck. However, well over half of millionaires have three total income streams. For some, that is work plus at least two others. For others, that might not even include labor at all.
Having multiple income streams is a powerful wealth-building tool, because the right streams can increase your wealth passively. If you're looking to grow your wealth like the well-off do, here are the top five streams of income that will boost your bottom line:
Related: Need More Cash? Check out These 7 Income Streams That Actually Generate Passive Income
1. Real estate syndications
Passive income streams are one of the basic wealth-building blocks. Every person on this planet only has so many hours in a day. No matter how much you can actively work, you will always hit a ceiling on how much you can earn and how much you can save. You can turbocharge your wealth generation with passive income, because you will make money even as you sleep!
Real estate syndications are one of the best passive sources of income. A syndication is a group of investors that purchase a particular multi-family or commercial property. These investments typically run for about five years and feature yearly returns of around 8%. On top of those above-average returns, syndications sell the purchased building, sometimes providing investors with a 30%-50% lump-sum return at the end of those five years.
All in all, while all investments risk losing money, it's not uncommon for real estate syndications to return an 80%-100% profit over five years. An investment that potentially doubles your money every five years passively? That's why syndications are so powerful for wealth-building!
2. Investment income
Another common type of passive income stream that will grow your wealth is to have investment income. Syndications are investments, but this category is more generic, including dividends from equities and bonds. Many millionaires have CDs, participate in P2P lending and own shares in a stock like McDonald's, which pays regular dividends.
These investments will not pay life-changing money, but as you grow your wealth, the stock market is a fantastic place to park your money safely while it grows and earns quarterly or monthly income. The key to wealth-building is diversification, and making income-generating equity or bond investments will help you achieve that goal!
Related: Escaping the Nine-To-Five Grind: How to Generate Passive Income Streams
3. Business income
Unless you have contractual obligations with your primary job not to start a side hustle, many millionaires have grown their wealth through side gigs.
Owning a business, whether making or selling something or providing services, opens up a world of limitless income possibilities. Suppose you're a developer and create a game during your off-hours. That game might develop a following and passively earn you an extra $100 per day. Just like that, your side gig is making you an additional $3,000 a month!
You can take that money and reinvest it in the business to make more, or you can leverage your side gig to save more money tax-free. Your main job might give you a 401(k), but you can open a SEP plan and contribute the lesser of 25% of the employee's (your) salary or $61,000.
Imagine being able to contribute $20,000 through your day job 401(k) and deferring up to $61,000 with your SEP plan from your side business. If you do it right, you could defer over $80,000 per year, and if you invest that wisely, the sky is the limit for wealth! When done right, business income is vital for generating wealth.
4. Royalties and licensing
This category is a little less common but essential. If you have the opportunity to create a product, idea or process, you can sometimes license it out and collect a fee every time they use it.
Royalties can be on anything — you might even start a band and manage to get your songs on one of the streaming platforms. Or you might create a YouTube channel and earn somewhat passive income from views.
Royalty and licensing streams of income are fantastic, because they typically are consistent. Suppose you invent a new waffle iron, for example, and a company buys that design. You will profit from every iron sold. In that case, you can expect a reasonably solid income stream for the foreseeable future!
5. Renting out your car
Peer-to-peer car rentals have become remarkably popular, thanks to a shortage on the market. When the pandemic hit, large companies like Hertz closed down and sold many of their cars. With the chip shortage, these same companies find it challenging to keep up with the increased demand.
Now, companies like Turo offer the ability for people to rent their cars to others. Some people have turned it into a side business of sorts, earning quite a bit of passive income. Indeed, one 22-year-old student in Toronto managed to develop a mini-fleet of four luxury cars.
It's not just property you can invest in and rent — if market trends continue, renting out cars is fast becoming a viable income stream!
Related: 7 Ways to Make Extra Income Even With a Full-Time Job
If you want to grow your net worth, you need multiple sources of income. Relying too heavily on one stream (typically a job) is risky. What happens if you lose it? Similarly, if that singular income stream requires work, you limit how much you can make, because there are only so many hours in a day that you can work.
All of the five streams of income above are fantastic ways to grow your net worth. If you haven't already, consider diversifying your portfolio by implementing the income streams suggested above!
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