Let me ask you one simple question.
If you got laid off, or your company went under, or you just decided you’ve had enough with your job, how would you survive the next few weeks (or months)?
Do you have an emergency fund you can pull savings from? A “Plan B” that involves moving back in with your parents? Or do you have other sources of income you can rely on in the meantime?
Most people don’t think about the first two situations very often. No one likes to think about being unemployed. After all, our generation has been dealing with a tough job market ever since we graduated from college. We’re happy when we can get any job.
Unfortunately, if you’re relying on your day job as your only source of income, you’re leaving yourself vulnerable. Here’s why you need more than one source of income, and a few ways to create it.
What if You Lose Your Job?
Let’s start with the most obvious – a job loss.
Chances are, if you’re like most people, you rely on your day job for the bulk of your income. You get a steady paycheck throughout the month, and you use that money for everything from living expenses, to debt, to savings.
But what happens when that source of income disappears?
You might think your job is stable, but a job loss can happen to anyone at anytime for any number of reasons.
I’ll give you a personal example. My dad was 60 when he lost his job a few years ago. So close to retirement, yet his company didn’t care. They fired him right before Christmas, with no notice.
Sure, he got a severance package. But he never recovered. I’m not going to make excuses – there were plenty of mistakes he made, like not keeping his skills up-to-date, but no one was willing to hire him.
Thankfully, my parents were able to retire (well, they were kind of forced into it) years later, and are working their way out of debt. Those years of unemployment were brutal, though.
Another example? My fiance has been working in his current department for just over a year. His company isn’t really known for firing people – they tend to “demote” employees instead.
However, two people have been let go in that time frame, and there are only 5 people in their department. Each time, the employee wasn’t performing well, but who knows if they knew it was coming or not.
The point is, you need to be prepared, no matter how awesome of an employee you think you are, or how much your manager likes you. Depending on the hierarchy, your boss may not be able to save you when your employer is looking to cut costs or restructure your department.
What if You Want to Try Something New?
Whether it be a new position, a new industry, or self-employment, having savings or multiple sources of income allows you the freedom to experiment.
Think about it – if you’re solely relying on the income from your day job, you’re kind of stuck there, aren’t you?
But if you have a steady side hustle, you might just have enough money coming in to break even every month. At the very least, you’ll be able to leave more of your savings untouched.
There are so many people I know who hate the job they’re in, but can’t quit because they have no other alternative.
As someone who has quit a job with money saved, I still would have appreciated the extra layer of security that having multiple sources of income provides. I hated having money going out, and none coming in. Speaking of which…
There’s Less Pressure When You Have Multiple Income Sources
Are you already in debt? Or do you have a decent amount of savings to life off of?
The rule of thumb for emergency funds is to have 3 to 6 months of living expenses in them, just in case it takes that long to find a job. And it might, depending on the level of experience you have and what industry you work in.
It’s not fun to be under pressure when looking for a job. When I graduated college, I was in a rush to find a job because of the financial situation my parents were in.
While I was also inexperienced with full-time work in general, I didn’t take the time to really think about whether or not a company was a good fit for me.
As a result, I ended up in a horrible work environment doing a job that didn’t fit the description of what I applied for.
Taking the first thing that comes your way is a huge mistake, but when we have no other choice, it’s hard to walk away.
Plus, the last thing you want to do is go into debt because you lose your job. It’s so easy to rely on credit for your basic living expenses when you’re under pressure to pay the bills, but it’s going to cost you later on.
Yes, it’s better than starving or having your electric shut down, but it can be avoided with simple preparation.
More Income Means Achieving Financial Goals Faster
We’ve talked before about how earning more can be more beneficial than cutting back.
Even if your job situation is as stable as can be, and you don’t plan on leaving, having another source of income can help accelerate your financial goals.
Really, who can’t use more money? Just earning an extra $100 a week would be nice, wouldn’t it? That’s an extra $400 per month that could go toward your student loans, retirement savings, or that vacation you’ve been wanting to take.
Being able to achieve your financial goals quicker is pretty valuable, and there’s no denying that having more than one source of income makes financial independence more of a reality.
How to Create Multiple Sources of Income
Ever since becoming self-employed, I’ve been a huge fan of diversifying my income and the type of work I do. If I ever return to the “9 to 5,” you can bet I’ll be keeping some of my freelance gigs. I would feel way too vulnerable without them.
Need ideas on how to go about creating multiple sources of income? There are plenty, depending on how much of a commitment and how much extra income you’re looking for. Here’s a few ideas:
- Invest in real estate and become a landlord
- Rent out a room in your home/apartment
- Invest in dividend stocks
- Start a side business
- Create a niche website
- Create web-based products (ebooks, courses, etc.)
No matter what situation you find yourself in, having another source of income to rely upon is a good way to secure your finances. If something ever happens and a source of income dries up, you’ll know you have others to fall back on. Having that peace of mind is worth it.
Do you have multiple sources of income, or just one? Is creating another source of income a goal of yours? Have you found that having other income sources gives you more peace of mind? Are there any benefits I missed?