Research has shown time and time again that millionaires have multiple income streams. They don’t just depend on one job (or if you’re a working couple, two jobs). They do more than the average, and they spread their money out into various money making activities. Based on an IRS study of millionaires, there are mainly 7 income streams that interest the wealthy.
In this post, we’ll dive into what these 7 income streams are, and then what you might be able to do to capitalize on them yourself!
The Misconceptions We Have About Millionaires
What do you think of when you hear the word, “millionaire”?
Likely, you get a picture in your head of some Hollywood actress or famous NBA player, or maybe you think about that neighborhood down the street with the huge houses and luxury cars.
“Those people… They’re millionaires for sure!” you think to yourself.
Well, maybe yes and maybe no.
To be a millionaire, you’ve got to be worth a million bucks – ie. a net worth of $1,000,000 or more. In other words, if you add up all your assets and subtract all your debts, the resulting number should be over a million dollars. Only then can you call yourself a millionaire.
For the most part (according to Thomas Stanley’s research in his book, ‘The Millionaire Next Door‘), most people that look and act like they have a ton of money really don’t have any money at all.
They might make a great income, but if they’re making payments on a $2 million house and have a mortgage that’s $2 million, that means their net worth on that place is $0…not a million or more.
In other words, most people that look like millionaires probably aren’t millionaires at all. They just spend money as fast as they can make it and continue to be worth absolutely nothing.
Related: Everyday Millionaires – Book Review
The Typical Millionaire
If you’ve ever read Thomas Stanley’s book, you might remember your shocked face as you read through the first chapter and discovered what the average millionaire was actually like.
Here’s a few of the bullet points:
- I am a 57 year old male, married with 3 children
- Roughly 66% of us are self-employed
- We are welders, auctioneers, rice farmers, pest controllers, and paving contractors
- Most of us are homeowners (97% of us). And half of us have lived in the same home for over 20 years.
- We live below our means, wear inexpensive suits, and drive American-made cars.
This hardly sounds like the millionaires we often envision, right? Well that’s exactly the point of this article!
If you want to be a millionaire, you’ve got to learn who they really are, not what TV or magazines depict them to be.
All in all, millionaires are people that look just like you and me.
They live frugally, they save, they invest, and they never flaunt what they have.
The 7 Income Streams of Millionaires
How do millionaires become millionaires? I mean, sure, they work hard and save and invest, but do they just stick with their one income source and stash cash into the stock market?
The short answer…nope.
Millionaires develop multiple income sources — 7 income streams actually:
- Earned income – money from a paycheck
- Investment income – dividend income from stocks they own
- Rental income – rents from real estate
- Royalty income – most often from writing or inventions
- Capital gains – from selling appreciated assets
- Profits – net income from a business they own
- Interest income – from savings, CDs, etc.
Not all millionaires have all 7 streams of income. But, according to another millionaire researcher, Tom Corley, 65% of millionaires have at least 3 streams of income! It might be time to examine your income streams and start buying assets that earn more money.
I just finished reading the book, “Who Took My Money?” by Robert Kiyosaki. While I didn’t agree with everything that was stated in this book, there were quite a few points that stuck with me. And one in particular that pertains to this message.
Paraphrasing a story in one of the later chapters…
A mas was asking Mr. Kiyosaki how he could become wealthy – should he invest in real estate like Kiyosaki did?
Instead of answering the question directly, Robert asked him what he did for a living. He answered. (I forget what he did…let’s say he was a machinist).
Then Robert asked him this:
“And what is your money’s profession?”
He responded as many of us probably would at that moment…he stared blankly at Robert and said nothing…
But isn’t this a great way to think about you money???
You make money and then if you want to be wealthy, you’ve got to find out how to make your money work for you.
What is it that you could buy so that your money generates even more money? What would that be?
- Is it stock market dividends?
- Is it real estate?
- Or maybe you love to write and can develop a stream of royalty income with best-selling books?!
Whatever it is, you’ve got to figure out the best profession for your money.
For me personally, I basically invest in two things:
- Real Estate – I currently own my own home and a single-family rental house –they’re fully paid for. I intend to buy more rental properties in the future.
- S&P 500 Index Funds – I agree with JL Collins on this one. If you want to earn more and work less, invest in index funds.
Beyond this, I still have my day job and I earn a small pittance from this blog (but it’s nothing to brag about).
Through these basic income avenues, I actually touch on 6 of the 7 income streams noted above! You see, you don’t need to make life complex to become a millionaire! Just learn what you do well and what your money can do well. With that, the earnings will follow.
What Is YOUR Money’s Profession?
How about you?
What is your money’s profession?
If you still have a blank stare on your face, then I imagine you’ve got some work to do.
If, however, your brain is churning and you’re beginning to think of various income sources that you can generate and generate well, then I imagine you’re well on your way to millionaire status!
The 7 Income Streams of Millionaires – What Do You Think?
How many of the 7 income streams are you currently generating?
- Earned income
- Investment income
- Rental income
- Royalty income
- Capital gains
- Interest income
First, focus on earned income. Earn a healthy living so that you can live far below your means and use your excess money to invest in other streams of income.
Beyond that, invest simply, buy rental properties, build a business, and if you love writing and have a message that needs to be shared, then write a book! The more you think about the 7 income streams of millionaires, the more likely it is that you’ll soon become a millionaire yourself!
Do you currently have the 7 income streams of millionaires? Why or why not? What are you waiting for?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.