We must diversify our investments and income streams – I am sure no one will have any issue with this statement. In case you have any doubts, you can read almost any book on investing or perhaps just this article, to refresh your memory.
And it is not by idle chance that the wise people of olden times, have come up with the often quoted “we should not put all our eggs in one basket.” This sums up the concept of diversification perfectly.
Surprisingly, while almost any discussion on investing will include at least some references to diversifying, people do not have the same stand on jobs.
Almost all of us plan our financial future along these lines:
a) Work and earn money,
b) Spend less than we earn,
c) Invest the savings and make it grow.
d) Repeat till we feel we don’t need to anymore, or don’t want to anymore.
Hence at the earlier stages of executing this plan, we only have our “work income.” This work income is the very foundation of our entire scheme for financial independence. (You can see why, FMF keeps reminding us that our career is our most important asset).
This begs the question. Should we then not immediately work towards diversifying this “work income”, and hence reduce risk?
This risk can come suddenly and in so many ways. Just ask any of the people who have lost their jobs in this sub prime mess, or read this story of an unfortunate, gutsy lady of ex-Taco Bell.
To be sure, we are diversifying this work income by investing and creating investment income. But this income stream comes only in trickles in the beginning.
Lazy Man and Money has an interesting and very motivating post on side businesses. (Though he calls it alternative income). He likens ideas for alternative income to a virus that spawns itself and multiplies. One idea soon becomes two and this becomes four and so on. Thus setting us on the way to financial abundance.
The Lazy Man further reminds us not to sneer at ideas that result in what may seem to be small amounts, like $10 a month. This idea could be the bedrock for the next biggie.
Brad Isaac’s blog, Achieve-IT, presents this same view with an interesting twist. He starts off by asking us “How to add some fun and excitement to our evenings and weekends and make some decent money too?” This is a powerful way of getting anyone to sit up and listen.
What can we do to diversify our work income at the early stages of our financial lives?
Why, one good way is to start a side business of course. A side business that meets most or all of the requirements for a business, except for those things that we, most probably, will not have at this stage in our financial lives………..example, ample resources.
What, then are the fears that hold us back? We shall explore this in our next post.