No financial advisor in their right mind would tell you to put all your investments in a single company. When it comes to your income, you should probably take a similar approach. Photo by Alan Cleaver.
Passive income is one of the holy grails of personal finance, and one we talk about a lot. However, as business site Entrepreneur points out, it’s easy to funnel all your effort into one job or even one type of income and lose sight of the surrounding markets. While it’s fine to have one skill you rely on day-to-day, there are too many stories of a business that collapsed or an industry that moved on leaving someone without a way to pay their bills. While you’re building your income streams, use the concept of diversification to hedge your bets:
Everyone can agree: A business should never rely on just one customer to generate the majority of its revenue. When that client moves on — poof! — there goes the business. But you need to apply that thinking to the bigger picture, too. Are you relying upon your business to generate all your personal income? That’s a problem.
While Entrepreneur frames this topic from the perspective of a business owner (it is in their name, after all), the idea applies to anyone. If you have a day job, consider a side business that relies on other skills that you’re not utilising to their fullest potential. If you’re thinking of buying into a business, think outside the one field you specialise in. No matter what you’re aiming for, try to avoid putting all your eggs in one basket.
Are You Diversifying Your Income? You’d Better Start. [Entrepreneur]