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How and Why to Diversify Your Income

Written by Matt Jabs - 16 Comments

How and Why to Diversity Your IncomeTime and again we hear that investment diversification is a must, and rightly so. Diversifying investments – by investing in a variety of different types of index funds and/or ETFs, for example – is a wise strategy for reducing risk.

In contrast, how many of us maintain a similar diversification perspective with respect to our income? Multiple streams of income can be one of our greatest allies in the pursuit of financial security, and yet few pursue this sort of thing. Having additional sources of income serves to hedge against job loss and other employment variables, so shouldn’t income diversification be sewn into the fabric of our daily financial strategy?

Multiple streams of income

How much time you’ve spend diversifying your income (or even thinking about it) probably depends on the circles in which you run. I can say with confidence, however, that our culture generally does not place enough emphasis on the concept… So we need to think outside the box and adopt it ourselves.

In 5 years of marriage, I have had three separate employers and my wife has also had three (jobs in Michigan are particularly unstable). Since January of 2009, we have been focused on expanding our income sources to increase financial security and buffer risk. The possibility of job loss, pay cuts, furlough days, and dubious markets fed our desire to assemble a sprawling network of income sources that we continue to build upon today.

In 2008, we had 2 sources of income; today we have more than 10. The sources we have developed usually center around our passions, tend to be at least partially passive in nature, but also have the potential to grow with additional effort. We get out of them what we put in, and have become addicted to the direct control of our own success.

Don’t quit your day job

Do not misunderstand my appeal for income diversification as a call to quit your day job. The idea is to diversify income sources, not eliminate or constrict them.

Both my wife and I still hold our “career positions” and intend to do so until our debt is eliminated, or until our alternate sources are earning us enough for us to bow out gracefully – whichever comes first. Neither of us are crazy about our “day jobs,” but any discontent we have is rooted more in the necessity to maintain them due to our debt load than in the jobs themselves.

If you have recently lost employment and are in the process of looking for work, then you have a perfect opportunity on your hands! When you’re not out searching for a job, brainstorm a list of several alternate income sources that you could develop and get started. You will be as successful as you want to be… More than anything, success is driven by hard work and consistency.

Trim fat and reallocate existing income

Always remember that there are two parts to leading a healthy financial life. Earning more and spending less. In addition to searching for more income sources, you should take a close look at your spending and see if there are any areas where you can plug unnecessary leaks. For example, if you’re spending a ton of money on servicing your debts, you need to get serious about debt reduction. In the long run, you might find that “trimming the fat” improves your bottom line more than some of your possible alternate income opportunities.

How to brainstorm alternate sources of income

I started with a highly technical approach that I like to call “doing whatever you can think of to make an extra buck,” then tweaked things over time by visualizing things with a mindmap.

Mindmaps provide an excellent canvas to freely sketch out ideas in digital format. If you are unfamiliar with them, mindmaps are diagrams used to represent words, ideas, tasks, or other items linked to and arranged around a central key word or idea (source).

The following image provides a fairly generic representation of my current income sources. I actually have a much more detailed and descriptive breakdown for my personal use that I update and refer to on a regular basis. Laying everything out in this manner helps me brainstorm and organize my projects with a much higher degree of success.


If you want to get started with mindmapping, here are some software options that I recommend:

  • Mindjet MindManager – This is the software that I use. In my opinion, it’s the best option on the market, but it costs nearly $300. There is, however, a free 30 day trial.
  • Freemind – A free and open source option that I recommend you use to get started with mindmaps.
  • Xmind – Offers a free version and a more feature-rich pay version.

In closing…

Income diversification is a prudent practice that can increase financial security and even self-fulfillment. If you’ve never taken the time to map out a network of actual and potential income that incorporates all your gifts and passions, then I highly encourage you to do so. I promise that you will (at the very least) be intrigued by your findings, and you might discover some new possibilities.

Published on March 11th, 2010 - 16 Comments
Filed under: Miscellany

About the author: is a thirty-something IT manager and blogger who wants to help himself and others get out of debt. He writes about personal finance and debt-free living at Debt Free Adventure.

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16 Responses to “How and Why to Diversify Your Income”

  1. 1
    daddy paul Says:

    Good read and great advice. One characteristic of many people who are well off is they have more than their day job as a source of income. Some have picked up rental homes at a good price, some work part time jobs or moonlight. Today there internet options.

  2. 2
    MoneyHoneySF Says:

    Great presentation. Good job to you and your DW having 10 different income stream. Your presentation really helps illustrate how we can go about having additional income stream outside of our career job.

    I guess I can say I have about 4 income stream.

    1.My job
    2.DH job
    3.Interest & Dividend –> This is a good one and never thought to consider this an income stream.

  3. 3
    DJ Says:

    Great article. My wife and I currently have about 4 also, but we are slowly increasing them. Thansk for the tip about mind mapping!

  4. 4
    John @ The Financial Ladder Says:

    Selling used goods on ebay, half.com, and amazon have helped generate some spare change. And a little blog advertising has helped.

  5. 5
    Monevator Says:

    Hmm, several of those income streams are connected to your website though, n’est pas mon ami? Obviously a good idea to diversify how the site makes money, but is it really correct to count those as separate income streams?

    That’s not to criticize the point of the post one iota, but to reinforce it! Really! :)

    @MoneyHoneySF – Dividend income is the king of passive income! No more work required, and at least some hope of inflation matching increases over the years.

  6. 6
    Bibledebt Says:

    Now that I have the ideas, I hope to put them to good use. How have you been able to build your blog traffic? Any ideas on how I can improve my blog to create a more consistent traffic flow? Anything obvious I am missing on my blog at http://www.bibledebt.com?

  7. 7
    Peter Says:

    I think my wife and I have just about as many income streams as you do Matt, although I haven’t done the mindmap – I may have to try that. Having the extra income does help A LOT in helping us to save, give and invest our money more in the way that we’ve always wanted to. Diversify and increase your income!

  8. 8
    Ginger Says:

    I love the idea of having multiple sources of income. Between my fiance and I we have a few too.
    His job, surveys, ad sense and rental income. I am trying to get into grad school so no income for me for now but I hope to increase the blogging and ad sense income and get into grad school and get a better income soon. So far our income is 25% non W-2 income but I am looking at ways to increase that.

  9. 9
    Big Spender Says:

    Please forgive the shameless plug but the “Earn More” archive at http://debtbeat.com/earn-more has ideas on new income streams like online surveys, scrapping and other quick cash gigs.

  10. 10
    Squirrelers Says:

    Very good topic, enjoyed reading the article.

    I certainly think that diversification is very important, not just in your portfolio but in your income streams in general. For the average person, I think that putting energy into your career and keeping your earning potential is key, but one must always be open to different income streams, be it your own business or passive income through investments. Remember, a full-time job can be pulled out from under you in flash…then what? Be prepared through diversification.

  11. 11
    i hate Says:

    I could not agree more. Like in “Rich Dad, Poor Dad” you have to find assets. Things that will create you money, not things that will spend your money.

  12. 12
    Victoria @LendNotBorrow.com Says:

    I’ve been researching income diversification lately and I found some useful information here. Our society relies heavily on the “security” of our 9-5 jobs (including myself) and never even think to branch out and gain other sources of income. Thank you for your information. This will help many people!!

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