Most of us were raised under the assumption that if we work hard building a career then we will be successful both professionally and financially. For many people this may be true, but have you ever stopped to think about how self-made millionaires earned their wealth? How many streams of income do millionaires have? Well you don’t have to look too far to learn the various streams of income and characteristics of millionaires. Tom Corley researched the topic in his booked titled “Rich Habits – The Daily Success Habits of Wealth Individuals“. In the book, Tom describes several habits of the rich that were universally found as keys to success. Some interesting findings include: wealthy people rarely spend more than 25% of their income on housing, 5% of their income on vacations, 5% of their income on vehicles (they NEVER lease vehicles!), and they create multiple streams of income.
The IRS conducted a study of millionaire tax returns to better understand how “rich people are different from you and me“. The research pointed to seven specific streams of income that wealthy people build up to generate wealth.
Millionaire Income Streams
Millionaires often spend a lifetime creating multiple streams of income and rarely rely on any single source. In fact, Tom Corley shared that 65% of all self-made millionaires have three sources of income and 26% have five or more sources of income.
Earned Income – Salary from employment; this is a paycheck that is received every two weeks or so from an employer
Investment Income – Dividends from stocks and bonds
Rental Income – Rent payment from tenants
Capital Gains – Gains received from selling appreciated assets
Interest – Money received from lending; Examples: Savings accounts, certificate of deposits (CDs), bonds, etc.
Profits – Business earnings after all expenses are paid
Royalties – Payments for licensing original content or a patented invention
Characteristics of Millionaires
The research conducted by the IRS and Tom Corley points to specific identifiable characteristics of most millionaires. Millionaires are not the “rich and famous” we often see depicted on the television! They are hard working individuals that have spent a lifetime making deliberate decisions with their time and money. I was once told that “you can’t become wealthy being an employee for someone else”. Millionaires become wealthy through investing in the stock market, owning and profiting from real estate, and creating businesses.
Passive income – Millionaires have passive income coming from multiple streams such as businesses, rentals, and investments. Passive income streams frees up time for the millionaire to focus on family, passion projects, and/or seeking new avenues to create wealth.
Business Owners – Many millionaires create vast wealth by creating value through new business ventures. This is not to say that one can’t become a millionaire by working for other people…but owning a business is a characteristic of most millionaires.
Even Elon Musk (I know…he’s a Billionaire) has multiple jobs, passive income streams, and has created businesses from passion projects! He is the CEO of Tesla and he is CEO of several passion projects (SpaceX, Starlink, The Boring Company). He also created PayPal…but who’s counting?
Actionable Steps to Building Multiple Income Streams
Moving beyond a single source of income can seem challenging to some, however it doesn’t have to be difficult. Below are some actionable steps that can be taken to building multiple streams of income.
- Collect an income for as long as possible – Prime earning years are often described as being between 35-64 years. During this time period the income levels peak thus providing an opportunity to maximize savings and investment opportunities.
- Save, save, save! – A high savings rate is crucial to creating vast amounts of wealth and may even provide an opportunity to retire early! (See my post that describes “How to Retire at 30 or 40 and Achieve Financial Freedom“)
- Invest early and invest often – Having money invested in both taxable brokerage and retirement accounts can produce capital gains and dividends over a lifetime. An investment portfolio is the anchor of many millionaires.
- Invest in real estate – Real estate investing can not only produce passive income in the form of periodic rental payments, but may also produce capital gains when the asset is sold.
- Turn a hobby into a business – Many side hustles and hobbies can be turned into legitimate businesses that produce regular income. Passion projects are a great place to start!
- Turn your knowledge into a business – If you are professional (Pharmacist, Lawyer, Physician, etc) then you have a unique knowledge and skill set that may benefit others. Creating intellectual property from this knowledge can be the source of inspiration for a new business venture.
Helpful Resources
What is my approach to building building multiple income streams?
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I continue to work a salaried job to maximize my earnings in my prime years of employment.
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I have diversified my investment portfolio into taxable brokerage and multiple retirement accounts (IRA, 401k, HSA). The portfolio delivers dividends and capital gains from asset appreciation.
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I receive interest payments for any money that is not invested in the stock market. Mostly from a high-yield savings account and staked stablecoin cryptocurrencies. (sign up for a saving account that produces 8.6% APY HERE)
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I invest in real estate in vacation areas to produce short term rental income.
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I reinvest profits from my short term rental business to acquire additional income producing assets.
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In addition to my short term rental business, I am working on a stealth project that will generate royalties from intellectual property.
