4 Income Streams That Help High Earners Hold On To Their Wealth
Written by
Karen Doyle
Edited by
Rebekah Evans
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High earners know that living beneath your means and saving money consistently are the keys to amassing wealth. But once you’ve got a nest egg, what’s next? You have to hold on to that wealth and, hopefully, grow it. Having multiple streams of income is a great way to do that.
Here are four income streams that help high earners hold on to their wealth.
Dividend Stocks
Dividend stocks are a great way to produce an income stream that will help you hold on to your wealth. In addition to appreciating in value over time, like all stocks, dividend stocks have the ability to pay out money every quarter or every year.
Some companies choose to pay dividends to their stockholders when they earn a profit. Dividends are usually paid quarterly and the amount will change depending on how the company performs that quarter. Dividends are paid on each share of stock.
Here’s an example. Suppose you own 100 shares of ABC Company stock, which is a dividend stock. In the first quarter, ABC pays a 20 cent dividend per share, so you get $20. In the second quarter, ABC pays a dividend of 10 cents per share. That’s another $10 for you. The third quarter isn’t great, so no dividend is paid — the company is not required to pay a dividend every quarter. But sales bounce back and in the fourth quarter, ABC Company pays another 20 cent dividend. You get $20 in the fourth quarter, so a total of $50 for the year.
Note that dividends are in addition to any increase in the price of the stock. Besides getting $50 in dividends as a shareholder of ABC Company, you may also have seen an increase in the share price, so your shares are worth more money.
There are two things you can do with your dividends. You can have them paid out to you, creating a quarterly stream of income. Or you can use them to buy additional shares of stock, which creates more dividends. Either way, dividend stocks will likely increase your wealth over time.
Real Estate
There’s a reason that real estate is an investment favored by the wealthy. Like dividend stocks, it can produce an income stream as well as capital appreciation. High earners can purchase vacation homes or investment properties, which they then rent out. This produces a stream of rental income in addition to any market value appreciation.
You can start by purchasing a vacation home, which you can rent out on Airbnb or VRBO when you’re not using it. Then, you might ‘graduate’ to a multi-family home or a small apartment building where you could rent out several units at a time.
The income generated from investment properties is often described as “passive” income, but anyone who has ever owned a rental property will tell you that’s a misnomer, particularly if you’re dealing with multiple tenants. Managing the property can be nearly a full-time job; fortunately, there are management companies you can hire to do that work for you.
Royalty Income
High earners who own or can create intellectual property, such as inventions, art, books and other creative products, can generate an income stream from them in the form of royalties. Royalties are payments made in exchange for the ability to use something that belongs to someone else. If you write a book, for example, a publishing company may pay you royalties in exchange for the right to publish and sell your book.
In order to generate a stream of income from royalties, you need to have something you own or have created that others want. You need to secure your ownership of the intellectual property by getting a patent or copyright on it. That way, if anyone wants to use it, they need your permission and, if you’re going to generate income from it, they need to pay you money.
Peer-to-Peer Lending
Lending money has long been the purview of banks and credit unions. When you want to buy a home or a car and you can’t or don’t want to pay cash, you go to your local bank and apply for a loan. But now there are alternatives to this and that presents an opportunity for wealthy individuals to create an income stream.
Peer-to-peer lending is when someone loans money to someone else, without a bank, credit union or online lender being involved. The borrower receives a lump sum of money and the lender gets back a series of payments that, cumulatively, are equal to the loaned amount plus the agreed-upon interest.
Obviously, peer-to-peer lending is not without risk. Peer-to-peer loans are often unsecured, so there’s a risk the borrower may default. So, there are online platforms that facilitate peer-to-peer loans and provide some security for the lender. Use due diligence when selecting a platform and understand that there’s a possibility you could lose your money (as there is with nearly any investment).
Generating multiple streams of income is a smart way for high earners to make sure they hold on to the wealth they’ve worked so hard for. It also reduces the reliance on the primary income — whether that’s a paycheck or income from a full-time business.
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