Financial Freedom: Growing your multiple sources of income
Many of us have only employment income
I read Robert G Allen's book "Multiple Streams of Income" where he talks about how you can go about building financial security by diversifying the sources of your income. Most of us only have one main source of income and it usually is our employment. Others may invest their savings into investments such as stocks and shares, fixed deposits and treasury bills.
More savvy investors may venture into property for rental, into commodities and other types of asset classes.
How to go about developing multiple sources of income
The quick-win in going about developing your multiple sources of income is to start with what you know, i.e. to live within your means so as to generate investible savings that you can put in a fixed deposit, treasury bill or even a cash fund. While these truly bring your passive income, the current low interest rates of 1% to below 1.5% means that you have to build up a large pool of capital in order for 1% to mean anything significant to you.
In order for you to seriously start developing multiple sources of income, you must break free from the mindset that you job is a given. Today's age of globalisation means that our jobs and our organisations are subject to the ruthlessness of market competition and consumer trends that can result in our organisations not being in existence in 10 years' time.
Stay in your job whilst it provides you with a steady paycheck. But whilst you are gainfully employed and using your monthly savings to build up your investment assets, consider too how you can make use of your skills, talents and abilities outside of your working hours.
Monetising hobbies
I have taken up AdSense as it helps me monetise my hobby of writing blogs and publishing them on the web. The root of my ability to write and to use internet technologies started not recently with my blog in early 2007 but rather back as early as 1996 when Cyberway Internet (now Starhub) was in existence and I signed up for my first dial-up at 33.6kps internet access package. Now I am on Starhub Maxonline at a blazing speed of above 4Mbps!
It was because I had embarked into the new world of the World-Wide-Web as well as did my very first homepage then that I became familiar with web publishing. I took a break and came back in force in 2007 using some of the very fundamental skills of using Lviewpro (graphics editing software) plus the templates provided by blogger to publish my content online.
With the Googalisation of the internet, AdSense has helped me pay for my broadband bills although it is still a long way before it can allow me to not work for a living.
Building YOUR second career while you are still on your first
Most of you wouldn't mind working until you reach the statutory retirement age of 62. However, you may not be given that choice because organisations can outsource, downsize, be sold off in mergers and acquisitions or you could find your skillsets redundant in today's world.
What can you do about it?
This is where building your second career while you are at your first will help give you more options should your first career ever plateau or worst, be consumed by the forces of globalisation.
I have been building up my possible second career by joining toastmasters. Besides wanted to improve my networking and public speaking skills, I saw toastmasters as a way to build up realy knowledge and expertise in becoming an independent trainer or consultant. This is because I have additional specialist domain skillsets beyond public speaking. While I can teach or share my experiences as a public speaker and impart public communication skills for a second career, I can also be a trainer based on my experience in my chosen profession. Such second careers have a longer lifespan and work in favour for those who are experienced (or older in age!) because the conventional wisdom is that gurus or trainers tend to be old. So this form of a second career is relatively more age-resistant as compared to other careers.
Learn more and take action to build your first multiple source of income
If you are serious about building up multiple sources of income, I urge you to read Robert G Allen's book. You can find it in public libraries and use it to expand your mindset towards another way to help you achieve financial freedom.
Be well and prosper.
2 comments:
Good post Panzer, thanks.
I agree that we should build up multiple sources of income and I have read that Adam Khoo has used this method to become a millionaire by age 26 (incidentally though, I have never attended any of his talks, but I know he does advocate value investing). But in Singapore, it can be difficult to sustain a passive income source because we are generally so busy with work and family that we do not have time to think and plan for passive income.
The 3 main sources of passive income which I always tell my wife are: interest, dividends and rental. For me, I have my dividends from my investments and earn paltry interest from my savings account, but I have yet to achieve the most lucrative and stable form of passive income which is rental income from leasing out of property. I do have a relative who owns a bungalow and leases it out for S$10,000 a month ! Now that's serious financial freedom as you can get a cool $10K a month just by sitting on a deck chair and facing the sea at East Coast Park sipping an ice-tea ! So I guess their family must have planned it very well to be able to achieve this and I take them as a role model. My own parents are past 60 and still have a housing loan to service, let alone consider renting it out for passive income. It is their situation which has made me more aware of being financially free and to avoid the debt trap as I will not want to be paying off loans once I hit 60. In fact, I hope to be retired and happily enjoying life with grandchildren by my side haha.....
Nice to know you are actively involved in toastmasters events. Personally, I have always had stage fright and am shy about expressing my thoughts to a crowd. Imagine me telling a crowd of 100 about value investing; wow I can't imagine that actually. So I admire you for having the gumption to work on your toastmasters as a possible alternative source of income. Hope it works out well for you eventually !
I may pick up the book you recommend, though I suspect it may be from an American (?) context rather than a local one. My earnings from Nuffnang are also giving me a small passive income and as a sideline, I do give some tuition to supplement my income too. I guess I do have "multiple" sources of income but they are all small and not significant at this point in time.
As you say, employment is still the best way to build up your investible savings and as no one can expect to be indispensible, I am saving as much as I can by delaying gratification. The perennial argument is whether one should spend and enjoy life while young (and fit and mobile) rather than when one is in their golden years (when you have $ but may not be healthy any more).
Any thoughts on this ?
Regards,
Musicwhiz
Hi musicwhiz
I also have not attended Adam Khoo's seminars but whilst he claims to be self-made etc, some nay-sayers on the net say that his parents gave him a leg up. His family is wealthy to start with and he can afford to fail.
In its purest form, passive income is derived without having to work at it. My AdSense actually takes up a significant portion of my after-office hours and weekends but because I find it fun, it's not so onerous. But unless I get high traffic, I am still Google's employee so I am exploring other ways to monetise my blog by selling my own products/services. :-)
Robert G Allen's book is US centric but I feel that for many of such books, it is the concepts and principles that are applicable. The operationalisation into Singapore context is where our own individual creativity has to come in.
With regards to the part about delaying gratification, my view is to continue to operate within the live within your means framework.
That means to spend a little on luxuries now and then whilst being within your monthly income. What is little is relative. I got my first car after working for 13 years. This is definitely a "luxury" but there are some economies of scale as I have a baby due and a maid plus my spouse to ferry around.
Also, my car purchase came after clearing my housing debt. It's interesting to note that my parents are very frugal and they also paid up their homes even before they retired. So a lot of my prudence comes from learning from them indirectly.
In short, if I could use the old saying, many roads lead to room, as so it is with financial freedom. I must admit I am fortunate because my family was geared towards frugality even if they were not formally trained in personal finance.
Be well and prosper!
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