1. Economic Conditions - There is nothing certain in today’s economic environment. Financial conditions are such that it is a risk to depend only on your job or the one profession/business that you have. You can be laid off, market conditions may become unsuitable for your business and it may become unviable. This would mean putting yourself and your family in a financial risk and leading to disarray in your financial plan. It is therefore important to take control of your finances and a good way to do that is by having more than one source of income. This will ensure that you are not dependent on only one stream of income and help you meet your financial goals and increase your wealth
2. Unexpected Expenses – You can get burdened with additional expenses without warning. It could be due to an illness of yourself or a family member or some major repairs in your house. If you have an alternate source of income, some of this can be cushioned if not all.
3. Avoid loans – An alternate source of income helps in making cash purchases. If you want to buy a motorcycle or go for a dream holiday, you need not take a loan or maybe take a partial loan only as the additional source of income supplements your budget
4. Rising Health Care costs – Medical costs are rising. If you have an extra source of income, you can pay for high costs of medical care, regular check ups etc.
5. Reaching Financial Goals – On our way to reach our financial goals, we might face a few hurdles and these can disrupt the financial plan. Additional sources of income can ensure that the hiccups are covered for and help us reach our financial goals as per plan.
6. Diversification – As per your financial plan, you invest in a diverse set of assets so that you are not dependent on the performance of any one asset thereby reducing risk in your portfolio. Similarly if you have extra sources of income, you will have multiple income streams. If any of them get cut off, you always have a backup. This reduces the risk of getting caught unawares and struggling for money.
It is quite clear from the points above that it is important to have additional sources of income. It will increase your earning capability and give you financial freedom. We at GettingYouRich propose that you should think of having alternate income sources and try out different ways. In our next article, we will list down various alternate means of income.