How to create multiple income streams for financial security

Losing a job is a situation that worries most people. But imagine how different life could be if you didn’t depend solely on that for your income. Does it seem out of reach? Many people achieve this security by diversifying income sources and reducing reliance on their primary job.

In this article, we’ll explore how creating multiple income streams can strengthen your financial security. The best part? Starting this process is simpler than it seems and doesn’t require advanced financial knowledge. Let’s discover together how to take the first steps toward a more stable and secure financial future.

The Importance of Income Diversification

For most people, salary is their only source of income. While this works in times of stability, it also creates significant vulnerability: any unexpected change in employment or an emergency expense, can completely destabilise one’s finances.

It’s like being in a single-sailed boat: in a storm, control is easily lost. The solution? Have “multiple sails,” or in our case, multiple sources of income. Additionally, diversifying can expand your ability to accumulate wealth more efficiently. Each new income stream is an opportunity to grow your assets!

To better understand how to do this, let’s first look at the different types of income:

Active Income

Ever heard "time is money"? That's exactly what active income is. It is generated by direct work, like jobs and freelancing, where you exchange your time for money. It’s essential, but vulnerable, since it depends on your availability and health.

Passive Income

Passive income comes from sources that don’t require continuous involvement, such as rent, dividends, and interest. It provides ongoing earnings without demanding your time, offering greater financial stability.

Hybrid Income

And lastly, Hybrid income combines active and passive streams, requiring moderate oversight. Examples include small businesses or online courses, which allow a degree of autonomy with recurring income.

Where to Start?

Starting to create multiple sources of income can seem daunting, but breaking it down into manageable steps can make it accessible to anyone. Here's a straightforward approach to get started:

1. Identify your skills and interests: start by identifying what you're good at and what you enjoy. Think about skills you could monetise, whether through freelancing, teaching, consulting, or even turning a hobby into a source of income.
2. Start with a simple passive income: try beginning small by exploring accessible passive income options. For instance, consider a low-cost investment like a dividend-paying stock, a fixed-income fund, or cryptocurrencies with yield-paying strategies (which we will explore in greater depth below). This can introduce you to the concept of earning passive income without a significant initial commitment.
3. Consider hybrid income opportunities: as you become more comfortable, you can look for options that blend active and passive income. For example, creating a digital product, such as an e-book or an online course, can provide recurring income with relatively low maintenance after the initial setup.
4. Regularly review and adjust income streams: continue learning about new sources of income as they arise, regularly assess your income streams and be prepared to adjust your strategy based on changing markets or personal goals.

With these initial steps in place, you'll be better equipped to explore specific paths to diversify your income. Let's take a look at some practical examples to see which might align best with you.

7 Options for Income Diversification

To diversify your income sources and achieve greater financial security, it’s essential to understand the available options.

With a clear understanding of income types and a starting point in mind, let's explore specific sources to see if any align with your goals and fit naturally into your life.

1.  Dividend-Paying Stocks

Investing in shares of companies that regularly distribute dividends (a portion of profits shared with shareholders) can be an excellent source of passive income. In Europe, companies such as TotalEnergies and Royal Dutch Shell are known for paying consistent dividends to shareholders. Over the past 5 years, HSBC has shown an average dividend yield of approximately 6.17% , while Allianz  has registered around 5.19% .

In addition, you can also add to your strategy the purchase of more shares of these stocks with the amount earned through dividends. A nice snowball effect, right?

These investments generally require low involvement, as they don't demand much ongoing management once the initial research is done. However, they come with a moderate level of risk since market fluctuations can impact dividend payments.

2. Real Estate Investment Trusts (REITs) 

Real Estate Investment Trusts (REITs) allow you to invest in the property market without purchasing physical property. Like dividend-paying shares, they distribute periodic earnings to investors, and one example is the FTSE REITs Index, which tracks listed REITs and real estate companies in Europe. This index has recorded an average yield of 4.7% over the past five years.

REITs offer a low to moderate involvement, as these investments require less hands-on management than owning physical property. Still, they carry a moderate risk level, especially in times of economic uncertainty or rising interest rates..

3. Government Bonds

Government bonds are debt securities issued by national governments to finance public spending. They are generally considered low-risk investments, as they are backed by the government's creditworthiness, offering periodic interest payments and the return of principal at maturity. In the UK, these bonds are known as "gilts," with the 10-year yield there recently around 4.5% annually.

Government bonds are ideal for conservative investors seeking stable returns and diversification, as they provide predictable income with relatively low volatility, and are a great option in times of crisis when interest in higher-risk investments declines.

These bonds are ideal for conservative investors seeking stable returns and diversification, as they offer low involvement after purchase and are associated with a low risk level, though inflation can affect their real value over time.

4. Property Rental

Similar to REITs, owning rental property can generate stable monthly income. In Europe, for example, the average rent for a furnished one-bedroom apartment can range between €950 to €2,275 , depending on the city.

In an era where everything is becoming digital, owning physical assets can be a good option once they are well-established investments over time. However, it’s essential to consider that buying a property is a high-value and low-liquidity investment (in other words, harder to sell). Additionally, there is a risk of having no tenant for a period, and therefore, no rental income.

Owning property requires high involvement, especially in managing tenants and maintenance, and comes with a moderate to high risk due to potential vacancies, property damage, or changing market conditions.

5. Digital Content Creation

Creating and monetising online content, such as blogs, YouTube channels, or digital courses, has grown significantly in recent years and can be an excellent hybrid income source. For instance, YouTube content creators can earn between €0.25 and €4.00 per thousand views, depending on the niche and audience.

Choose a topic within your expertise or interest and start producing content. Research to understand how people prefer to consume that type of content, whether in text or video format. Keep an eye on what top creators are doing in the field and model your path accordingly. Building a solid audience isn’t easy, but it pays off if done correctly.

This option involves high effort initially, especially in building an audience, but the ongoing involvement can decrease once the content is established. The risk level varies, as it depends on changing algorithms and competition.

6. Opening a Physical or Digital Business

Starting your own business, whether through a physical store or a digital platform, opens up exciting possibilities, from establishing a local retail shop to launching a service-based business. With the digital world offering lower barriers to entry, many entrepreneurs find it to be an ideal space for providing online services or selling products on major marketplaces.

Launching a business often demands significant involvement, especially during the initial stages of planning, setup, and marketing. However, the level of risk can vary, as the upfront investment depends largely on the chosen business model.

7. Cryptocurrency Investments

Investing in cryptocurrencies goes beyond simply buying and holding assets. It also offers opportunities to generate passive income through yield strategies. By diversifying your passive income sources across traditional investments, like stocks, and the rapidly growing crypto market, you can enhance financial security.

Tools like SwissBorg Earn can provide customisable yield strategies, allowing users to tailor investments according to their unique risk profiles and financial goals with crypto yields varying based on factors such as application type, chosen currency, and market conditions. For instance, as of 6 November 2024, staking Polkadot (DOT) can offer an annual yield of up to 13%, while the latest staking strategy for SOL reached up to 8%. 

Some of our strategies also offer additional rewards provided directly by the protocol, and, unlike many centralised exchanges, Swissborg passes these benefits directly to users, effectively “boosting” their passive income. Additionally, the platform offers transparent risk reports directly within the app, ensuring users have a clear understanding of the risks associated with each investment option.

While crypto investments may require low to moderate involvement in terms of research and active management, they carry a higher level of risk. By empowering users with insights and “boosted” earnings, SwissBorg aims to balance the potential risks with rewarding, accessible strategies.

Conclusion

Acquiring multiple income streams is an accessible and powerful strategy to enhance financial security and reduce reliance on a single revenue stream. By diversifying investments across active, passive, and hybrid income, you can build a more robust and balanced financial foundation. 

Embracing new opportunities, such as the cryptocurrency market and its yield strategies, further improves your chances of achieving consistent and flexible earnings. Remember, the success of this journey relies on informed decisions aligned with your risk profile and financial objectives.