If you’re like most small business owners, you’re always looking for ways to increase your wealth. The best way to do this is with multiple sources of income.
There are two types of income: active and passive. Active income requires you to work, whereas passive income is made with minimal effort on your part. Let’s explore how having multiple sources of active and passive income can make you wealthier.
Most people have a job that pays a salary or hourly wage. In addition to a regular paycheck, many employers offer retirement packages, such as a 401(k) or Roth IRA. Roth accounts put stricter limitations on how much you can invest, but they’re useful for early-stage investors because they’re funded by after-tax dollars. Wealth generated from a Roth account won’t be taxed as it accrues.
Many employers will match retirement savings up to a certain percentage of an employee’s income. If your employer offers this benefit, take advantage of this “free money.” From your paycheck, you should set aside the maximum amount your employer will match for your retirement.
Even if you do not share accounts or finances, your significant other’s income likely contributes to your overall quality of life. A two-income household earns more and provides wiggle room for investments. Discuss financial plans and objectives with your significant other and work as a team to find multiple sources of income and build your wealth together.
The Stock Market
If you’re a day trader, the stock market is a source of active income. For most business owners and employees, however, the stock market is a source of passive income. If you want to learn how to make money from trading stocks, hire a reputable broker.
Do your research before choosing someone to handle your money. Brokers study market trends, so they’re in a good position to determine which stocks to buy, when to sell, and how to diversify your portfolio. A good broker will also help you set goals and limits on investments, so you don’t take unnecessary risks with your earnings.
Have a spare room or an empty guest house? These could be potential sources of passive income. Before accepting any one applicant, be sure to conduct credit checks and ask for a security deposit or the first month’s rent up front, and interview multiple prospective tenants: a disrespectful renter who causes property damage is a financial liability.
Do you possess a skill that someone else will pay for? If so, freelancing is a fast and relatively easy way to earn some quick cash. There are plenty of freelance sites out there. However, they don’t always recruit or post on job boards, so it takes a little active research to find a job.
There are plenty of active and passive ways to create wealth. Use what you have: a spouse, retirement package, stock broker, spare room, or unique skill. Are you ready to create multiple sources of income and increase your wealth? Share with us how you plan to do it!