Income stream

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Income stream is a source of income for an individual or an organization. An example of an income stream may be a business or an investment. Creating more than one income stream is something many people practice to earn more money and scale their income.

One way to gain financial independence is to become "less dependent on a specific income stream". One of the most popular ways to develop a secondary income stream is by investing. However, many don't have and follow an achievable investment plan and therefore fail (Create A Secondary Income Stream 2012, p. 3).

Examples of different income streams:

  • Contract job;
  • Investing;
  • Pension;
  • Side business (ex. Affiliate marketing);
  • Book publishing.

Passive income stream vs. active income stream

A day job can be considered an active income stream. Passive income can be characterized by: "ease of scalability", having some tax advantages, and the nature of the income, which is passive. Passive income only requires an investment of some amount of work at the beginning (for example witting a book) and has the potential to generate steady income after this period (7 Predictable Ways... 2018, p. 1).

Examples of passive income streams:

  • Affiliate marketing;
  • Kindle publishing;
  • YouTube videos;
  • Service arbitrage business;
  • Membership sites (7 Predictable Ways... 2018).

Income streams generate economic wellbeing

According to research conducted by Luxembourg Income Study, people living together and combining their income streams can live more cheeply than people living individually. So there are economic advantages coming from living together in one household. "These are reffered to as household economies of scale and are measured (in this research) through a technique known as an equivalence scale (Ageing and Income... 2001, p. 30-31).

Tendency to having multiple income streams

Nowadays people tend to having more than one income stream. It is slowly but surely becoming a norm in many households. There are various reasons why people decide to activate more than one income stream, one of the reasons being that it is harder than ever to survive having only one source of income. Due to inflation and rising costs of living people are diversifying their income streams (Enriching All Women 2017, p. 3).

Additional income stream is not usually the main job but rather some additional activity that a person performs during weekends or in a spare time to generate some additional income on the side while also working in the main job that pays the bills. Having only one income stream would be ideal situation but many individuals and businesses do not have a stable, high-paying or good enough main income stream, therefore they have to look for secondary sources of income (Enriching All Women 2017, p. 3).

Many people diversify their income streams because their worry about their future or current financial situation. On the other hand, there are also others that find their passion and turn it into an income stream. Both may stay reassured that loosing their "primary source of income" will not leave them without a source of income as they can still support themselves gaining money from a different income stream (Enriching All Women 2017, p. 15).

How to generate secondary income streams

In order to generate any source of income an individual needs a set of skills. The same applies when looking for a secondary income stream. There are two main ways to generating secondary income stream:

  1. Getting trained in a specific field;
  2. Learning useful skills on the job and becoming experienced (Enriching All Women 2017, p. 73).

Examples of Income stream

  • Salary: the most common income stream for most people is their salary from a job. This is a regular stream of income that is paid on a regular basis and often comes with additional benefits like health insurance, vacation time and retirement contributions.
  • Freelance Work: An increasing number of people are turning to freelance work as an additional or primary source of income. This type of income stream can be unpredictable, as the amount of work and payment depend on the individual’s ability to market themselves and find clients.
  • Rental Property: Rental income from rental property can be a reliable source of income, as long as the property is well maintained and the tenants pay their rent on time. The income will depend on the location of the property and the demand for rental units in that area.
  • Investments: Investing in stocks, bonds, mutual funds and other financial instruments can be a great way to create an income stream. The amount of income generated will depend on the performance of the investments and the amount of money invested.
  • Affiliate Marketing: Affiliate marketing involves promoting and selling products or services from another company, and earning a commission when a purchase is made. This type of income stream requires an individual to have a good understanding of online marketing and the ability to drive traffic to the product or service.

Advantages of Income stream

Income streams provide numerous advantages that can help individuals and organizations increase their profits. Some of the benefits of having multiple income streams include:

  • Improved Financial Security: Having multiple income streams provides financial security in the event that one of the income sources fails. This helps to reduce the risk of financial hardship.
  • Easier to Save and Invest: With multiple income streams, it is easier to save and invest money. This can help to build wealth over time and provide a cushion in case of an economic downturn.
  • Increased Flexibility: Having multiple income streams provides increased flexibility to pursue different opportunities. This can help individuals and organizations to increase their profits and grow their businesses.
  • Ability to Pursue Passions: Having multiple income streams can provide the ability to pursue passions and hobbies. This can be an enjoyable way to make money and can lead to fulfilling careers.

Limitations of Income stream

Income streams can have several limitations. These include:

  • Lack of control: Depending on the income source, you may have little to no control over the amount of money you can generate or when it will be available.
  • Volatility: Income streams can be volatile, with the amount of income received varying from month to month.
  • Limited resources: Depending on the income stream, you may have limited resources to help you generate income, such as a limited number of investments or limited access to certain markets.
  • Dependence on external factors: Some income streams are dependent on external factors such as the stock market or other economic conditions, which makes them unpredictable and difficult to manage.
  • Tax implications: Depending on the type of income stream, there may be tax implications that need to be taken into account when calculating income.
  • Risk of fraud: There is always the risk of fraud when dealing with income streams, which can cost you time and money.

Other approaches related to Income stream

Income stream can be generated in a variety of ways. In addition to a business or investments, some of the other approaches to creating an income stream include:

  • Rental Income: This type of income comes from renting out a property or a room. It often requires an initial investment in the form of purchasing a property and then ongoing maintenance and upkeep.
  • Freelance Work: Freelance work can be an effective way to generate an income stream. Freelance work can cover a variety of tasks, such as writing, graphic design, consulting, or web design.
  • Selling Goods or Services: This type of income stream involves selling goods or services. Examples of goods that can be sold include physical products, digital products, and services.
  • Investing in Stocks or Mutual Funds: Investing in stocks or mutual funds is another way to generate an income stream. Investing in stocks or mutual funds can be a profitable endeavor, but it does come with a certain level of risk.
  • Passive Income: Passive income is income generated from sources other than actively working. Examples of passive income include royalties from books, affiliate marketing, and rental income.

In summary, there are a variety of ways to generate an income stream. Some of the most popular approaches include rental income, freelance work, selling goods or services, investing in stocks or mutual funds, and passive income.


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References

Author: Justyna Szczepaniec