Even if you're happy and believe that your job will be around for a while, there are good reasons to have multiple income streams. Having different sources of income gives you peace of mind.
A second income stream supplements your full-time salary. It can be anything from a part-time job to a side business — and the purpose of this income stream is simple: prepare for financial roadblocks or reach financial goals sooner.
But given our already hectic schedules, looking for ways to supplement our income might be the last thing on our minds. This takes time and energy; however, if you can find ways to drum up extra income, it'll be worth the sacrifice. Here are five reasons to have multiple income streams.
1. Survive unemployment
There's no such thing as true job security. Your company may do well today, but things can change in the next month or years. And if you lose your job, money from unemployment benefits may not provide enough cash to cover your monthly expenses.
With a second income stream, you’ll be better prepared to survive a layoff or job loss. Between your severance, unemployment checks, and a secondary income stream, you might be able to keep your head above water until you find another full-time position.
2. Build your emergency fund
Financial experts recommend a 3 to 6-month emergency fund. But unfortunately, if you're living paycheck to paycheck, building your cash reserve can prove challenging. This is where a second income stream comes in handy. Income from your day job can pay everyday expenses, such as housing, transportation, and utilities, and income from your second income stream can build your savings account.
Start an emergency fund with your current financial institution. Change the title to reflect Emergency Fund and Peace of Mind. Consider opening a separate savings account with another institution if you feel tempted to dip into the funds for discretionary spending.
3. Pay off debt
Whether you have student loan debt or credit card debt, your income from work may not be enough to pay down these balances. As a result, you might get stuck in a minimum payment trap. However, if you start a side hustle or seek part-time work a few days each week, this extra money can go toward paying down your debt, which ultimately frees up your money and improves your credit score.
4. Ability to make ends meet
Even if you work hard and keep your life simple, your income may not keep up with inflation and the higher cost of living. And if you're in a financial hole each month, you probably have little cash for extras.
Having multiple income streams can stop this vicious cycle and increase your disposable income. And with more cash coming in each month, it’ll be easier to cover your monthly expenses, which might reduce some of your financial worries.
Go through the budgeting process to get a better picture of your current financial situation. A budget will help you determine your cash flow–the money in and out within a month. After completing the process, use budget apps to keep you on track and monitor your progress with less effort.
5. Fallback career
Acquiring a secondary income stream can build your savings, pay off debt or help cover your expenses — but these aren’t the only benefits. Exploring different income streams can help you discover your true passions. You may enjoy your side hustles more than your full-time job; and as you slowly increase income earned from your secondary income stream, you might be able to quit your full-time job one day and earn a living doing what you love.
In the bestselling book by Chris Guillebeau, Side Hustles, he recommends people find a skill or talent and build a business around it. You don't have to leave your primary job, but you should have a side hustle and multiple income streams.
Do you think it's time you had multiple income streams?