The importance of diversifying income sources

Hello friends!

One of the richest men I knew once told me, “I never looked for a job.” At first glance, it might seem like a contradiction for someone to be rich and not have worked. But he added, “I’ve always looked for deals.” The distinction between work, job, business may not seem very easy at first for everyone. In this text, we will explain the differences and also show the definition of income and the importance of diversifying, that is, increasing the ways in which we receive money, whether having a job or business.

Being employed or publicized, having a job and receiving a fixed and stable salary is the dream of many people. On the other hand, there are those who hate the idea of ​​working, thinking of work as a burden, as slavery, as torture. Interestingly, the word work comes from tripalha, which was an instrument of torture…

To define business, we can think of the famous concretist poem that says the following;

Epitaph of a banker (José Paulo Paes):

Business

ego

idleness

heat

O

Although this poem can have different interpretations, what I like about it is the idea of ​​business and the negation of idleness. Leisure, in turn, means, according to the Michaelis Dictionary:

1 Rest, time off from work. 2 Time that this break lasts. 3 Leisure, leisure. 4 Idleness. 5 Laziness, laziness. 6 Rest.

Given the previous definitions, we can think of a job as when someone sells their time to perform a certain activity or service for another person or company. Business is when someone creates income from an enterprise which, may cause the owner of the business to need employees.

Going back to the example above of the rich man – an acquaintance of mine – we might think that even though he had a childhood in the countryside, he never went out to look for a job, that is, to be someone else’s employee. He has always sought to create business. First a bar. It didn’t work out. A farm. It didn’t work out. A store. It worked. With the proceeds from the shop he bought an inn, a bakery, built houses, etc., etc.

The importance of diversifying income

At the end of the previous example, I already said about income diversification. That man, instead of wasting the money on the store that he had succeeded in, started creating and creating other businesses. As each business generated more income, more and more he had more money. And money creates money and that’s how he built his fortune.

The importance of diversifying sources of income is very simple: if in the 1970s, this same man made a lot of money with his store, the same did not happen in 1990. If he depended only on the store (on a single source of income) would have problems at the time of his retirement.

But what we see most are people who rely on only a single source of income. If we think that not everyone has the talent to have a business, that not everyone is an entrepreneur, it is still useful to remember the rule of economics that says: “don’t put all your eggs in one basket”.

In other words, if I have X source of income… what happens if that source dries up? What if I have income stream X, Y, Z, A, B, C, D… what will happen to my money if income stream X dries up?

The principle is very simple: when money comes in from different places, I will have fewer setbacks, in addition to the probability of earning more in a month, in a year it will be greater.

Examples of how to increase the source of income

Imagine a newly formed dentist. His dream is to have his own office. When setting up the office, this will be a source of income. If he also starts teaching at the dental school, it will be another source of income. If he creates a website and sells direct ads and google ads – for example – he can create yet another source of income. If he sets up a shop with his wife or with his brother, he will have even more income and so on.

In the example above, we are talking about a liberal professional. Having just the office is a choice, but patients come and go… beyond that he will have a limit on his salary – which is the limit on his own time.

Imagine a store owner. The store is a small company but has a reasonable income compared to the minimum wage. If the store owner only has that one store, again, he only has a single recipe. If two, three, four competitors start to appear in the city, the store’s revenue may start to drop and the entrepreneur then sees his income dwindle…

Well, therein lies the importance of also having other sources of income, even if the current monthly income is high. He could, for example, start investing in stocks, or set up another store, or start manufacturing a certain type of product that is not produced much, or buy property to rent or sell, etc.

Talking about real estate, I was quite impressed by an article I once read with one of the most important managers – of a fast food chain. He said that the secret of the brand’s success was not selling hamburgers, but owning the land where the stores were located… that is, although they sold thousands and thousands of sandwiches, the company also had profit (and stability) for having the point and the possession of commercial establishments in the best locations of the big cities. In other words, one more example, quite clever, of how it is possible to broaden the focus and increase profitability.

Conclusion

At the beginning of the text, we gave the definition and difference between employment, work and business. The idea here was to show that having a job – of course – is something positive, it is a source of remuneration. However, if you are looking to earn more money, it is interesting to consider methods to increase the amount of money you receive per month. Regardless of whether you have a job or own a business, it is highly recommended that you diversify.

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