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Income Diversity

One of our first articles was about diversified income streams.  If you’re not sure what that means, then here’s a quick run down.  Have you ever heard the phrase “don’t place all of your eggs in one basket?”  People try to avoid this all the time, except with their income.  Too many people depend on one stream of income!

There are many ways to diversify your income!  Much of it involves investing your actively earned income (such as salary from a job) into stocks, bonds, savings, CDs, or any number of investment options.  You can also have a side business or venture. Rental income, online properties, affiliate and advertising revenues are other streams of income that you can use.

Our Diversified Income

It’s more of a lack of diversification in all honesty, but these are the things we need to take notice of.  Now, for the sake of having some semblance of anonymity, I’m only going to share percentages.  Below is the break down of our income for 2010.  As you can see, we have a lot of “eggs” in my salary “basket.”

Our Income Percentages For 2010

Salary:  96.75%
Business Ventures: 2.25%
Bank Interest: 0.4%
Dividends:  0.06%

As you can see, if I lost my job, we would have a lot of issues trying to just live off of our income.  This means that we would need to start eating into our savings to float ourselves until I found new employment.

The point of income diversification is to cushion the blow of a lost job, or any other reason for an income stream running dry.  There are a lot of different ways that people make money, and there should always be a hedge if a stream runs dry.

No income stream should be considered impervious!  If you run an income generating web site, then what are some things that can go wrong? Here are some things that can happen:

  • Web host going down
  • Hackers attack
  • Google bans your site accidentally
  • Amazon gets rid of its affiliate program

What if you have a rental property, what are some things that can go wrong? Here are some:

  • Tenant abandons it
  • Tenant won’t pay rent
  • It accidentally burns down

All of the above options can happen and have your income stream run dry, but if you diversify your income, then one stream going down won’t hurt you as badly!

The Pot Calling The Kettle…

Now, I know it’s ironic for me to be preaching this even though I’m in the situation that most are, but I’m also going to be transparent and honest with you.  Even though I’m not where I want to be, the message doesn’t change, you need income diversification. In my New Years Resolutions post, I said that I would provide more personal examples and this is one of them.

Here is the important part though: will I allow things to remain like this?  No. There is no way on Earth that I would allow this diversification to remain in its current state.  I’ve already set a target goal for my income to only be 90% of my income share by the end of this year, and I’m working diligently to make that happen.

So, there you have it.  That is just one of the pieces of analysis that I’ve pulled against my income for the year of 2010.  Does it make me a huge geek for being excited about a year ending so I can get the annual statements?  Let me know in the comments!

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