The internet tells me millionaires have 7 sources of income. I don’t know if this is accurate, but I’m sure wealthy people have more than one source of income. Most of us start off with just one source of income – earned income. That’s how we all start our working life. We go to school, get a job, and work hard to get raises. I still remember the exuberant feeling I got when I saw my first real paycheck. It’s a great thing to work and earn some money. However, to become wealthy, you need to figure out how to generate income when you’re not actively working. That’s what wealthy people do. They make
money works for them instead of working for money.
The US tax return filing deadline is coming up quickly and it is a great time to review your income streams since you’ll have to do your taxes anyway. The IRS conveniently categorizes the various types of income you have. Let’s see what we had in 2022.
Multiple sources of income
1. W2 Income
This is the main source of income for most people. Mrs. RB40 is still working and it is the main source of income for our household. We’re both looking forward to the day she retires, but we’ll miss her income.
2. Rental Income
Currently, we have a duplex and a condo that we rent out. I manage the properties myself so it isn’t 100% passive. We live in one of the units in the duplex so I’m doing maintenance pretty regularly. Once our son goes off to college, we’ll sell both these properties. I like investing in real estate better. It’s 100% passive and the return has been good.
3. Real estate crowdfunding
In 2017, I started investing in real estate crowdfunding with CrowdStreet. I plan to get out of being a landlord at some point. CrowdStreet offers a good alternative. I invested in several real estate projects across the country and I don’t have to deal with tenants. It’s been great so far. You can see how I did here – Invest in Real Estate Crowdfunding. Sign up to see what projects are available today. 2022 was a particularly good year for this category. We received over $20,000 in profit.
4. Business Income
I make some income from Retire by 40. Right now, all of the income is from advertising. The main issue here is that blogging is dying. My business income has been decreasing over the last few years and I don’t think it’ll ever come back. I’ll need to figure out how to generate a different stream of revenue soon.
5. Interest Income
We had a very small interest income from our savings and reward checking accounts. The rate is low and I tend to invest rather than keep a lot of cash around. We also have some interest income from our I-bonds. These are great deals and I’ll try to invest the max every year. That’s $10,000 in 2023. These will come in handy when Mrs. RB40 retires.
6. Capital Gains and Dividend Income
I love my dividend portfolio. It’s 100% passive and it did ok throughout the pandemic.
7. Hustle Income
This is extra income that I can make from any source. In 2022, I had some income from scooter charging, credit card bonus signup, bank account opening bonus, and a few others. I’ll try to find a new side hustle after I finish my taxes.
How many sources of income do you have?
Those are the different sources of income for our household in 2022. It’s good to have a solid W2 income, but you need investment income to become wealthy. The key is to save a significant percentage of your income and invest consistently. This will create different streams of investment income which will compound over time. If you make a lot of earned income, but don’t have much investment income, then it’ll be difficult to build wealth. This probably means you spend most of it and aren’t investing enough. That’s not good because earned income does not last. We all get old sometime and you can’t work forever.
Currently, our most significant source of income is Mrs. RB40’s earned income, but that will change when she retires. Luckily, our expenses are at a reasonable level and our passive income can cover our cost of living. In 2022, our FI ratio was 146%. That’s really good. Hopefully, we can keep it up.
*FI ratio is passive income divided by expenses.
Even if things change and our passive income can’t cover our expenses, there are other ways to generate income after Mrs. RB40 retires. Here are some of them.
- Retirement plan withdrawal – Here are 4 ways to avoid the 10% early withdrawal penalty.
- Social Security benefits – This one is a few years off, but I think it should still be there when we turn 67.
- Side hustles – Now that RB40Jr spends so much time at school, it’s time to say goodbye SAHD FIRE, hello Barista FIRE. I’ll look for a side hustle soon.
- Other business income – RB40Jr wants to start a YouTube channel. I should make some videos for my channel too.
Do you have multiple sources of income? What are some of them?
* Sign up for a free account at Empower to help manage your net worth and investment accounts. I log in almost every day to check our net worth. It’s a great site for DIY investors. (Personal Capital is now Empower.)
Disclosure: There are some affiliate links in this article and we may receive a referral fee if you make a purchase through these links.
Image by Fil.Al
Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!
Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.
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