Have you ever thought about what would happen if you lost your job? With your paycheck being the only source of income coming in?
It’s a pretty scary thought, right? All your earning power gone in one fell swoop.
When I started freelancing full-time, I realized the importance of diversifying my income.
If one of my clients didn’t pay, stopped having work for me, or fired me, I needed to have other income sources in place. It just made sense.
A lot of employees don’t think this way because they enjoy more stability than freelancers do, but losing your job could happen at any time to anyone – freelancer, employee, or business owner.
If you want to diversify your income so you have something to fall back on in case the unexpected happens, here are 5 ways you can start earning more outside your job.
1) Begin Side Hustling
Do you already have a day job? Then one of the easiest ways to diversify your income is to begin side hustling. Can you offer a service, become a consultant, turn a hobby into something that earns you money, or take on a part-time, remote job?
Figure out a way you can earn money outside your job and start there. Review your strengths, ask friends and family what they think you’re good at, and see if there’s demand for it.
If you already have a wide network in your immediate area, reach out to people and let them know about what you’re offering. Perhaps you know a ton of dog owners that need pet sitters and walkers when they go away on business trips, or several small business owners that have websites in need of improvement.
Don’t know too many people nearby? Then get online, start your own website, and begin offering your services far and wide. I know starting is hard, especially if you’re in a creative space (we all deal with fear of putting our work out there), but having your own website helps tremendously as it makes you and your side business look legitimate. Plus, it serves as a great space for a portfolio if you need to showcase one.
2) Invest in the Stock Market
Another way to diversify your income is to start investing in the stock market. It pays to have your money growing elsewhere, and sometimes in a place where you can’t access it immediately.
For example, if you open a retirement account, or contribute to the 401(k) at your workplace, then you’re ensuring you have income to live off of in retirement other than whatever cash you have saved in the bank. This is a good idea and pretty much a necessity if you hope to retire “on time.” If you have access to an HSA, you can also invest for the future there.
Some people max out their retirement accounts and open brokerage accounts to further diversify their investments. A favorite among early retirement hopefuls is dividend paying stocks, since they create a source of passive income. Brokerage accounts don’t come with the same penalties as retirement accounts (although they are taxable), so you can pull money from there if needed.
3) Invest in Real Estate
This can go a number of ways. You could buy a fixer-upper and flip it, buy an apartment unit in a college town to rent out to students, buy single-family homes or duplexes/triplexes and rent them out, or invest in a vacation property and list it on Airbnb or HomeAway.
You can also rent out a section of your home, which doesn’t exactly require an additional investment, unless you need to make adjustments to the living space.
Either way, you’re creating another income stream for yourself in the event that something happens to your primary source. If you have rentals, then hopefully you’re collecting revenue from them each month.
If you can flip houses, then at least you have the skills and connections to do that, provided there are houses for sale in the area that make sense for the work.
Creating a rental property portfolio can be great for the long-term when you’re ready to retire, too.
4) Focus on Passive Income
As you can see, many of these ideas are focused around passive income. Who doesn’t want to earn money in the background without having to actively manage the details?
There are other ways to build up to passive income beyond investing and real estate. Maybe you want to start a blog and create products to sell. If you focus on ebooks or courses, you create them once, and then continue offering them with some minor updates in the future. The point is, a sale can occur while you’re away from your computer.
Or maybe you start that blog and it gains enough traction to earn affiliate income. Or you create YouTube videos and receive pay for videos you made in the past that are still being watched.
When thinking about creating and selling online products, it also helps to focus on “evergreen” content – information that will be relevant for a long time to come. Tried and true methods that have been proven to work for others. Otherwise, your information could appear stale and outdated, turning away potential buyers.
5) Don’t Forget Your Day Job
Your day job does have a place in all of this as your primary source of income. Even though you’re trying to build additional sources to diversify, having one (mostly) steady income stream provides peace of mind and allows you to venture out.
Trust me, I say this from experience: quitting your job and then freelancing with nothing else to rely on is scary! If you have your day job, use that income as a confidence booster to get out there and offer different services and to be creative.
If you’re a freelancer, then what I recommend is having one or two “main” clients that make up a decent chunk of your income, and then having several smaller clients fill in the gaps. I know this might sound a little risky (and it totally depends on the relationship you have with your clients), but having nothing but project/deadline-based work would scare me.
I personally wouldn’t want to be in a position where I was looking for new clients/projects every three to four months. I built my business based on ongoing work, and I kept many of the same clients for a year or more as I progressed. They “grew with me,” so to speak, and I’m very grateful for that.
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The biggest thing to realize when looking to diversify your income is that you’re in control. You don’t have to rely solely on your job for income. You can branch out in many other ways, especially when you take side hustling into consideration. There are plenty of ways to make money if you’re motivated enough!
Do you think diversifying your income is important? How have you diversified yours? What other ideas do you have for diversifying?
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I am starting my online business and part of that is freelance writing. I couldn’t imaging leaving my full-time job until my online business earnings at least replaced that from my full-time job. Like you said, just too risky.
Diversifying my income through blogging has been amazing for me – it’s what helps me pay off my student loans!
Great Post! I recently started a blog and am looking to diversify my income that way. In the past, I have worked part time gigs in addition to my full time career!
I think diversifying income is especially important when you’re self-employed. That’s why I try to make sure we have multiple income streams at all time. One or two might dry up, but they shouldn’t all dry up at once!
Financegirl Exactly the same for me! I’ve been using side hustle income to pay off my wife and my student loans for over three years now. It’s nice not seeing the impact of the loans on our finances because they are offset with side hustle income.
I’ve definitely been thinking about diversifying my income to include blog income. My day job is pretty stable but you never know…plus I have this dream of reaching financial independence and retiring early. I really would love to learn more about earning passive income and to earn income from blogging.
I believe diversifying income is very important. I’m working on diversifying my online income right now since I’m freelancing part-time. If I depended on freelance writing income alone, I would either have to substantially increase my rates or take on one too many clients to reach my income goals. It just isn’t sustainable that way for me.
DC @ Young Adult Money Financegirl Ya’ll are living my dream. Those are exactly my plans. Using 95 percent of my side hustle income to put towards my student loans is exactly what my husband and I plan to do.
Great points. Having a steady income from a day job is great but it’s definitely safer to have multiple income sources. We have used some of these, and some remain as goals for the future, like owning rental properties.
Good points Erin. I think diversifying your income streams is hugely important. You never know what’s going to happen, regardless if you’re in a 9-5 job or freelance diversification can only help in the long run. I like to assign certain streams to certain goals we’re working towards as it helps motivate us to improve upon them.
Diversified income is essential during both the working and retirement years. The wife and I currently enjoy income from six sources (two jobs, one pension, a rental property, my blog and royalties from books) and are on track to have fourteen (three employer pensions, two Social Security pensions, two 401(k)s, two Roth IRAs, an annuity, a brokerage account, a rental property, my blog and royalties from books in retirement.
While some sources will generate far more than others, we aim for diversification within and between the two types of income retirees should focus on, portfolio and passive. We’ll cover portfolio income with the 401(k)s, Roth IRAs and brokerage accounts and passive income will come from the pensions, the annuity, my blog and book royalties.
lifeandabudget DC @ Young Adult Money Financegirl That’s so great to hear! It’s totally doable. The one positive to student loans is they certainly motivate you to hustle ; )
Aliyyah Yeah, I was in a situation where I had someone else’s income to rely on as well, on top of a large, large emergency fund. But it was still a lot of mental stress to deal with, and I wouldn’t advise anyone to go that route unless they absolutely couldn’t stand their job. =)
lifeandabudget DC @ Young Adult Money Financegirl Yes, having a side hustle specifically dedicated to paying off debt or saving makes managing your money so much easier, and it’s a great plan to have!
financiallyfitandfab Nice! Then you’re already used to side hustling – at least blogging is flexible!
holly@clubthrifty.com Exactly. You want to hope things are as stable as they can be, but when you’re freelancing online, or for other businesses, you never know what could happen because you’re typically not included in business decisions. Traffic can decrease and strategies can change and you need to safeguard yourself against that!
Andrew LivingRichCheaply I would like to have that stream of income someday, too. There’s just little time for me to prioritize my blog these days! But as long as you have the traffic, affiliate income and ebooks seem like a popular way to go.
lifeandabudget Juggling freelancing with working full-time is definitely difficult. But don’t sell yourself too short – once you start gaining more experience, don’t be afraid to raise your rates! If freelancing is something you want to work toward in the future, you’ll be able to grow while having that steady paycheck.
pretendtobepoor Same here! I need to pay off my student loans before looking into rental properties, but it’s definitely a path to passive income that interests me the most.
FrugalRules Yes! I love that idea, and I’ve heard several people talk about that. It just makes it easier to look at the big picture and figure out what’s going on. Plus, if you’re paying off debt or saving up for something huge, and taking on a large workload to do so, once you’ve paid everything off or saved up, you know exactly how you can scale back.
James @RetirementSavvy Wow James, you certainly have diversification on lock down! That’s impressive. Thanks for sharing those methods here, and you’re certainly right that diversifying income shouldn’t stop upon leaving the traditional workforce.
Hey YAM team, loving the new pop-up for the book & I will pop this on my list & give you an honest & I’m sure great review :)..
Yes, diversifying income is highly important for me, being able to no be single source income dependent.. The ways I’ve done this is through property investing, looking at residual or passive income & always looking at more ways to do this..
Love your work as per usual!
mycareercrusade Thanks! Investing in real estate seems to be a popular way to go, at least in the personal finance community.
mycareercrusade Thanks for the feedback on the popup! Probably a bit annoying but I think it gets the point across ; )
Passive income is my favourite :) I’d really like to invest into another rental property – I’ve had this source of income for a few years now and I’m loving it. I’d also like to start earning money blogging – this is work in progress.
Eva @ Girl Counting Pennies It’s great you already have another income source! That makes it a little easier to build off of. I know you’ve been blogging for a while, so I’m sure you’ll get there!
This is a great post. I believe in diversifying. But doing such thing, you are not only allowing yourself to earn more money, you are also protecting yourself if or when one of your ways do go down south. I would love to start earning money through blogging but I know it’ll probably be a while before I can see some dollars just because I just started blogging 2 months ago.
practicalsaver Exactly! Diversifying is beneficial in many ways. At least you’re being realistic about blogging from the start. So many people begin blogging thinking they’ll be making hundreds in a few months, when that’s very rare. It’s a lot of hard work, but there are more options to monetize than ever before, and options are always good!
Diversifying my income is one of my main goals this year. I feel so much more secure having multiple sources of income and even though I’ll be making my side hustle my full-time gig later this year, I still like the idea of having diverse streams of income so I’m not just depending on one source.
Chonce Same here! Plus, it sounds weird to say, but I think it can be easier to bounce back as a freelancer. Finding another job and going through interviews can be a process, but with freelancing, as long as you have a solid network, finding another gig can take a much shorter amount of time.
My husband has trouble with stocks – he’s fixated on the “people who lost all their retirement savings in the recession” stories. Because of his attitude, I really have no choice but diversify. I have been adding money to my 401K, but we’ve also invested in a rental property. The blog, ebook (whenever I finish it), and freelance work will also give us additional income in the future. We feel most comfortable not putting “all our eggs in one basket.”
Diversifying my income is something that I have been trying to do the last couple years. It’s finally working. So far I’m working on side hustles and working on ways to create passive income. Once that happens, I may invest in the stock market.
Harmony@CreatingMyKaleidoscope I don’t blame you, I like having all my “eggs” spread out, too! I’m sorry to hear your husband is on the conservative side when it comes to investing. It can be hard to get over that fear, even with the math. It sounds like you’ve done a good job creating other streams of income, though!
Jason @ The Butler Journal Nice! Sounds like a good plan to me.
DC @ Young Adult Money mycareercrusade Man it’s perfectly fine! Wouldn’t say it’s annoying at all, I’m more surprised when sites don’t have that these days, speaking of which I have to get onto that myself ;) haha
Cheers!