Diversified income stream — what, and why?

The first time I heard the term “diversified income stream” was at a job fair, at a booth that was essentially handing out anti-jobs: a book on how to become an investor instead of getting a job.

The concept is one that I’m sure you’re familiar with, although perhaps not in the context of employment. “Diversify your income stream” means “Don’t put all your eggs in one basket.”

Example

Examine these two scenarios:

Allen has a job. It’s a pretty good job with benefits, and his employer isn’t planning on doing any downsizing soon. All of Allen’s money comes from his paycheck (not counting the money in his grandma’s birthday card.)

Betty has a website. She has to buy her own insurance and fund her own retirement plan. She makes about 20% of her income from ads on her site, 20% from affiliate links, and 60% from consulting jobs that she gets from people who have been impressed by her site.

Then suddenly, out of nowhere, the housing market drops like a rock, and the stock market goes with it. The economy is plunged into a recession, and everyone’s job is in danger. Who’s in a better situation?

If Allen loses his job, he’s lost 100% of his paycheck; he has to live on whatever savings he has, or go into debt.

Betty has more fallbacks. Even if no one calls her for consulting, she still has 40% of her income to help her through, so her savings won’t disappear nearly as quickly. She can adjust her ads to reflect more frugal options, and offer her readers affiliate links to products that will help them get through tough financial times. Depending on the theme of her site, and the effectiveness of her adjustments, she may be able to keep her income about the same or even raise it.

A diversified income stream means bringing in your money from multiple sources, so that the loss of one source isn’t as devastating. As a reader on Freelance Switch so brilliantly put it, “Always remember it only takes one person in a corporation to decide if you should be fired. As a freelancer, every single one of your customers has to fire you AND you must totally lose the ability to find any new customers before you are out of work.”>

Moving towards a diversified income stream

We’re used to thinking of having “a job”, and getting money from only that source. But that way of thinking is a leftover from back when you could expect your employer to show you loyalty. You didn’t make money from multiple sources, and your boss didn’t leave you high and dry even during tough economic times. That was a great way to be, but it just isn’t the case any more.

Now it makes a lot more sense to have a diversified income stream. Even if it’s just doing side jobs on your days off, it’s good to have something to fall back on if the primary income source dries up. So as you’re thinking of how to monetize yourself, don’t think in terms of the monetization method. Think in terms of a monetization portfolio, a set of monetization methods, each of which can bring in some fraction of the money you need.

Resources for Further Reading
Multiple Income Streams: How They Can Work For You
How to Create Multiple Income Streams
10 Reasons You Should Never Get a Job
Monetize Yourself Case Study