7 Things You Must Do When You Have Multiple Income Streams
Written by
Cindy Lamothe
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Joe Evans
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Spending your money seems pretty clear cut when you have only one source of income. But add in more than one? Then things get trickier.
“Managing multiple income streams is both an opportunity and a challenge,” said Michael Ryan, finance expert and founder of Michael Ryan Money. “You’re diversifying your revenue, which is excellent for risk management, but it’s crucial to have a solid financial plan to make it all work.”
Below are some expert-backed tips for things you must do when you have more than one income.
Also see the pros and cons of working two jobs simultaneously.
Create a Budget
When it comes to people with multiple income streams, Credit Summit CEO Carter Seuthe recommends a budget as an absolute necessity.
“The most successful people working with multiple streams of income I have seen tend to designate different incomes for different things,” he said.
He said certain income can be used for basic expenses such as bills and groceries, while another stream of income might be used for more removed financial concerns like investments, retirement accounts and so on.
“This helps ensure your bases are covered,” he said, “and can be a less confusing way to handle this type of financial situation.”
Ryan agreed, noting that it’s crucial to track income sources by keeping tabs on every dollar that comes in. He suggested using budgeting tools or financial management apps to gain a comprehensive view of your monthly and annual budgets.
Invest Extra Income
“If you have surplus money coming in from various channels, put it to work,” Ryan said.
You can invest in assets that will generate additional income — anything from stocks to real estate investments.
“It’s a smart move to invest for the future and spread out your income when you’ve got multiple streams of cash coming in,” said Rob Whaley, finance specialist at Horizon Finance Group. “When you invest, you’re ensuring you’ll be financially secure, so you have money for unexpected stuff and retirement.”
Always Diversify
Experts agree that diversification is a key component of effective risk management. It’s not just about having several income streams, Ryan noted; it’s about having different kinds of income — some active, some passive.
“Diversifying your income means you’re not putting all your eggs in one basket, which is a good way to protect yourself from losing it all,” Whaley advised.
This approach boosts your financial security, acting as a safety net during economic slumps or job loss, he added. “With the world always changing, these steps give you a solid financial foundation to relax and watch your wealth grow over time.”
Keep Separate Bank Accounts
Whaley said maintaining separate bank accounts for each income source makes good financial sense.
“Having different bank accounts for your various incomes keeps things neat,” he said, “making it easier to keep tabs on your money, create budgets and handle your expenses. It’s a straightforward and smart way to keep your finances organized and in control.”
“For organized banking, I recommend separating your business and personal finances,” said Jonathan Merry, finance expert at Moneyzine.
He explained that this separation clarifies income and expense tracking for each area, preventing mix-ups and facilitating tax filings by easily identifying business costs.
While managing several accounts might seem challenging, he suggested simplifying this by connecting your accounts to a personal finance app for an all-in-one view that can aid in informed decision-making and transaction reviews.
“I suggest using apps like Mint or Empower for a full financial snapshot,” he said.
Automate Savings and Payments
You can make your life a lot easier by automating as much as you can. This means setting up auto payments for bills and savings.
“In my experience,” Merry said, “it’s easy to lose track of financial matters when you’re getting income from different sources.”
With multiple income streams, he said, manual savings or bill payment allocation gets complicated. For this, you should set automatic transfers for savings and bill settlements through your bank or apps, reducing manual tasks and ensuring timely payments. You can decide on a specific saving fraction or amount from each income, automatically redirected to savings.
“When you automate things, it means you’re regularly stashing away some money without the temptation to blow it on impulse purchases,” Whaley said. “This kind of discipline helps you build a routine of saving for things like emergencies or investments.”
Consult Financial Experts
Finance experts can help you evaluate and optimize your income streams, ensuring they’re adequately diversified.
“A skilled financial planner can help you set realistic goals,” Ryan said, “optimize your asset allocation, and perhaps most importantly, help you see the forest for the trees.”
Different income streams also might carry different types of risk. Finance experts can help you identify and manage these risks effectively, whether they involve market volatility, business risks or other factors. However, Ryan advised to always look for professionals with a proven track record, perhaps verified through case studies or client testimonials.
Tax Planning
Multiple income streams can complicate your tax situation, said Sherman Standberry, a licensed CPA and managing partner at My CPA Coach.
“You might fall into a higher tax bracket or have to deal with self-employment taxes,” he explained. “It’s advisable to consult with a tax professional to plan accordingly and avoid any surprises during tax season.”
Merry advised the same: “You have to understand and pay attention to your tax obligations. Many freelancers and business owners neglect this, often only to haunt them later in life.”
He said multiple income streams have unique tax implications and it’s important to understand the regulations for each, especially for side hustles, regarded as self-employment with specific tax forms (like 1099-MISC).
“For side gigs, deduct business expenses when filing taxes, as you’re taxed only on profits,” he said, adding that you should maintain detailed records of all financial transactions, including receipts and invoices, for a smooth tax filing process.
Keeping all of the above in mind, Merry said that, even with multiple income streams, you should regularly evaluate your financial goals.
“This is because your finances may shift often, he said. “Whether due to prioritizing certain incomes, variable investment returns or irregular freelance work, your financial strategies must adapt.”
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