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If someone told you that millionaires have seven different income streamsyour first thought might be: Seven? I'm struggling to keep up with one paycheck and these people are out here collecting seven cards like Pokemon? But according to the IRS, that's exactly what the average millionaire does.
The logic is simple. Relying on one income stream is like balancing on a tightrope with no safety net – one swing or layoff and you're in trouble. But with multiple streams of income, you have a financial safety net that turns making money into a game of “the bigger, the merrier.”
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So, what are these magical income streams and how do millionaires make them work? Let's break them down – and beware of spoilers, they're not as unattainable as you might think.
The 7 Streams of Income Millionaires Use
This is what the IRS data reveals where millionaires get their cash flow:
1. Earned Income: Yes, that's your old paycheck. This is where most people start, but millionaires don't stop here.
2. Dividend Income: Money from stocks that pay you to own them. It's like being on a company's VIP list, except the perks are cold, hard cash.
3. Rental Income: Owning property that others pay to live or work in. Think of it as becoming the landlord of your financial dreams.
4. Business Profits: Run or invest in businesses that generate income. It could be anything from a tech startup to a local coffee shop.
5. Royalty income: Money from intellectual property – books, music, inventions, you name it. Write a hit song and you could get paid forever.
6. Capital Gains: Selling assets like stocks or real estate for more than you paid. It's not predictable but it can be a game changer.
7. Interest Income: Earnings from borrowing money through savings accounts, bonds or other vehicles.
Rental Income As A Power Shift
Rental income isn't just another paycheck – it's freedom. Once you have enough rental income, you can step back from your job (if you want) and have time to build those other streams. TIME becomes your most valuable asset.
By prioritizing rental income, you create a foundation that allows all other income streams to grow. It's like planting the first seed in a financial forest that eventually grows itself.
It is important to note that real estate is not a magical, risk-free ticket to wealth. The term “passive income” can be misleading because owning a rental property still requires time, effort and management – dealing with tenants, handling repairs or keeping up with unexpected expenses. Like Dave Ramsey draws attention oftenpassive does not mean effortless.
That said, real estate offers solid, a historically reliable path to building wealth but comes with risks. Tenants may stop paying, properties may require expensive repairs and home values may fluctuate depending on the market. However, data shows that real estate tends to hold or increase in value over time. According to historical statistics housing prices in the United States have appreciated on average by around 3-5% annually over the long term, even when accounting for periods of decline such as the The housing crash of 2008.
You don't need to wake up tomorrow with seven streams of income – this is a marathon, not a sprint. Here's how to get started:
1. Start Small: Focus on one or two streams that are appropriate for your skills and resources.
2. Reinvest Wisely: Use income from one stream to build another. For example, rental income can be put towards stocks or business ventures.
3. Educate Yourself: Learn about investments, real estate and other opportunities. Knowledge is your best asset.
4. Be Patient: Building wealth takes time, so stay consistent and don't give up.
The goal is not necessarily to hit a magical seven income stream, but rather to diversify enough to never rely on just one source. Whether you're starting with a side hustle or diving into real estate, each step toward multiple streams of income gives you closer to financial freedom.
Because really, who wouldn't want to wake up one day and think, Wow, my money is making money – this is life.
