Monday, December 30, 2013

The Value of Having Multiple Sources of Income

In the 1950s and 60s the average household could live and even prosper on one income.  Compare that to today, and very few families can survive on fewer than two incomes (which explains why both spouses normally work outside the home). Even with two incomes, the average family finds themselves stretched to the limit, It's an uncertain future and even two incomes might not be enough.  That's why it is wise to have multiple streams of income.

Prosperous people have always known this.  If one source of income dries up, the others keep you going.  Other people with one or two incomes are more vulnerable.  If they lose one source of income, it can wipe them out.  And it takes years to recover.

Having multiple streams of income - even if it is a second part-time job - provides a lot of safety and security because if yo lose one, you'll barely notice.  You'll be stable.  You'll have time to adjust.  You're safe.

Here’s why:

It's a good alternative to the traditional retirement account.  If you were able to generate an additional $1,500 per month with a second job (or income), that amounts to $18,000 per year.  And yet.....
  • To earn $18,000 a year in a savings account that earned 4% interest, you would need to save $450,000!
  • To earn $18,000 from investment accounts at 10%, you would need to invest $180,000!
It's a hedge of protection.
  • For most people, to get $18,000 in raises from your employer could take decades.  (And it may never happen because the system is designed to keep you down).
  • An extra income of just $1,500 per month could cover things like car payments, help to pay down credit cards, or pay off your mortgage.
The secret to security is having as many sources of income as possible.

Here’s why:

Stuff happens.  Things like car accidents and astronomical medical bills require large amounts of money, and one salary (or two) won’t be enough.

Job insecurity.  No one is secure in their job, career, vocational ministry, or company any more.  No one.  And we all know it.

Employer Domination.  Because your employer pays your salary and knows you have no other source of income, they tend to dictate your life.  They can demand you work on your day off, on Saturday or Sunday, or the day of your child’s birthday party.  And what choice do you have?

What if You (or your spouse) Lost Your Job?  Household expenses always expand to available income, so that probably means that a job loss would represent a significant (or catastrophic) hardship.  There wouldn't be enough money to make ends meet. 

Vacation Costs.  The main reason the average person does not take a real vacation is the cost.  It’s too expensive for a one (or two) income family to really travel to ideal destinations.

You can Never Become Wealthier than the Person You Work For.  No employer can afford to pay more than he pays himself.   Therefore, you will always be lower on the financial totem pole.  It’s called the “pecking order” and it’s how things work in the working world.  The only way to assure yourself of a constant promotion or better pay is to work for yourself.

Because You Really Need the Money.  Seriously, you need to have another stream of income so that you can have the money to spend the way you want to!

Because God says so!  If you believe in the Bible, then read Ecclesiastes 11:1-2. “Cast your bread upon the waters, for after many days you will find it again.  Give portions to seven, yes to eight, for you do not know what disaster may come upon the land.”  In this passage, God doesn’t suggest just one or two investments (that will generate a return) but seven or eight!

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