When you think of billionaires and millionaires, what do you typically think of? Private jets, big mansions and fancy cars? Well, I hate to ruin that fantasy for you, but most rich people or people who live “comfortably” in today’s economy do not live like that. Sure, some may have a few toys here and there, but those flash images of those living larger than life portrayed on social media are posers with nothing but rented props!
Welcome to “Money Moves”, where I dive deep into some of the money habits and disciplines from the world’s richest individuals. I believe just about anyone can learn from these tips, no matter what your current financial situation is!
Yes, it’s true. Rich people are rich because they know how to earn… but before we dive into just how they earn and use money to make money, we’ve got to first talk about saving. Frugality is a commitment to saving more, spending less, and sticking to a tight budget! All wealthy people in the world who built wealth from the ground up has understood the gold rule:
If you can’t manage money when you don’t have much, you won’t know how to manage money when you have a lot more
It’s not just about needing more money. It’s all about your ability to live beneath your means no matter what your income is.
Did you know that the rich save approximately 80% of their annual income? Did you know that most millionaires are so frugal that they typically live in a home and a neighborhood that’s affordable? They only buy houses that’s within 3 times their annual income?
No matter their background or industry, one thing that most self-made millionaires and billionaires have in common is their ability to create multiple streams of income. When you follow their money and study their blueprint, you’ll see that every single one of them start with a small, stream of income… then add a new income stream at a time!
According to author Tom Corley of the book “Rich Habits”, approximately 65% of self-made millionaires had 3 streams of income, 45% had 4, and 29% had 5 streams of income.
Each of them have mastered the art of growing a stream steadily, then leveraging it to invest into another. There are a total of 7 streams of income:
- Earned Income – Your salary. Your monthly income from your job. This is where you trade your hours for money. Subject to taxes.
- Business Income – Alongside your earned income, you may receive extra income from the businesses you have set up. This is the number in your balance sheet, taking the difference between profit and loss. Subject to taxes
- Interest Income – this is the interest on your bank account savings! If you funded any loans, you are also likely to be eligible for interest… this is where you are no longer trading your time for money
- Dividend income – The stocks and shares you invest… Dividends are more commonly known as a share of the profits!
- Rental Income – Once you own a property, you can begin collecting rental income
- Capital Gains – Income acquired through the sale of assets such as art, stocks, business and loans.
- Royalties or Licensing income – this one is for my creatives! Do you produce music, photography, or some type of art? Royalties may not be significant on their own, but mass production of your content will bring in a steady stream
No matter where you are in life, your goal should be to never rely on one stream of income. Diversifying your income stream helps you slowly but surely turn your side hustle into a business, reduce your working hours and stop living paycheck to paycheck. If you’re working a 9-5, and you’re exhausted… you’re busy. Try to squeeze out just 4-5 hours a week to work on a passion project, and see if there is a way for you to use the 7 income strategies to start monetizing somewhere down the line!