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Many people dream of becoming millionaires, but what does it truly take to achieve this level of wealth? According to a report from the IRS, the average millionaire has not one, not two, but seven different sources of income. That’s right – seven streams of money flowing into their bank accounts, building their net worth and securing their financial future.
Why are multiple income streams so powerful? It all comes down to diversification and risk management. Just like a smart investor spreads their money across different asset classes to minimize potential losses, a millionaire understands the importance of not relying on a single source of income.
Think about it – if you only have one way of making money, such as a traditional 9-to-5 job, what happens if you get laid off or your company goes under? Suddenly, your entire livelihood is at risk. But if you have multiple irons in the fire, losing one source of income, while certainly not ideal, is not catastrophic. You have other streams to fall back on while you regroup and rebuild.
The 7 Streams Of Income
So what are these seven income streams that millionaires rely on? The IRS data shows:
1. Dividend income from stocks
2. Earned income from a paycheck
3. Rental income from real estate
4. Royalty income intellectual property, inventions, etc.
5. Capital gains from selling assets that have appreciated in value
6. Profits from a business
7. Interest from savings, bonds, or lending activities
Building up to all seven of these can take years, even decades. But you have to start somewhere. Luckily, there are a few income streams on this list that are very accessible to the average person and can be excellent ways to begin expanding beyond a single salary.
Let’s highlight three of the most approachable options:
Dividend Income From Stocks
Investing in solid dividend-paying stocks can provide you with a steady stream of quarterly or even monthly income. And thanks to the power of compound interest, those dividends can really add up over time as you reinvest them.
One of the most popular dividend-focused ETFs is the Schwab U.S. Dividend Equity ETF (NYSE:SCHD). With an expense ratio of just 0.06% and a strong track record of performance and rising payouts, SCHD is an excellent way to build a diversified portfolio of dividend stocks. Over the past 5 years, SCHD has delivered an annualized return of about 11% and currently yields around 3.5%. That means a $10,000 investment would kick out $350 per year in dividends – not enough to retire on yet, but a great start.
Trending: If there was a new fund backed by Jeff Bezos offering a 7-9% target yield with monthly dividends, would you invest in it?
Rental Income From Real Estate
Owning investment properties that you rent out to tenants is a tried-and-true method of generating additional income. And in the age of Airbnb and VRBO, it’s easier than ever for everyday people to become landlords.
However, buying physical real estate does take quite a bit of upfront capital. That’s where a platform like Arrived comes in. Backed by Amazon.com Inc. founder Jeff Bezos, Arrived allows anyone to buy fractional shares of rental properties for as little as $100. You get the benefits of being a landlord – passive income, property appreciation, diversification – without having to deal with the hassles of finding tenants, collecting rent checks, or fixing broken toilets.
Arrived offers shares of both single properties and their Single Family Residential Fund for broader diversification. To date, Arrived has completed over 378 property deals with an average dividend yield of 4.2% and has already paid out over $4.5 million in dividends to investors. With over $161 million in assets under management, Arrived is making real estate investing more accessible than ever.
Interest Income
With today’s high-rate environment, it’s the perfect time to start generating interest income and lock in higher yields.
Basecamp Alpine Notes from EquityMultiple is an exclusive product aimed at first-time investors that delivers a target 9.0% APY over a short 3-month term with a minimum investment of just $1,000. With zero fees, monthly compounding, and a strong Alpine Note track record of meeting all payment obligations, Basecamp is an excellent place to put your extra cash to work.
If you’re looking for a long-term source of income, funds can be rolled over into subsequent notes upon maturity. In fact, over 79% of Alpine Note investors choose to continue investing.
Don’t Wait To Start Building Multiple Sources Of Income
Building multiple streams of income is one of the most important steps you can take on your journey to financial freedom and reaching that coveted millionaire status. By starting with accessible options like dividend stocks through the SCHD ETF, fractional rental properties via Arrived, and higher-yielding cash investments like Basecamp Alpine Notes, you can begin assembling a diverse portfolio of income-generating assets – without already being rich.
Remember, the average millionaire has seven streams of income. Why not start building up a few of your own today? Your future self will thank you.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
This article The Average Millionaire Has 7 Sources Of Income – Here Are 3 You Can Start Building Today originally appeared on Benzinga.com
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