There are many reasons why you should consider starting a home-based business. Beyond the tax benefits, I’m sure you’ll agree that it’s common sense to have multiple streams of income flowing into your life. Prosperous people have always known this. If one stream dries up, they have others to support them. Having only one stream of income leaves you vulnerable. If you lose one income stream, it could wipe you out and take years to recover.
How much economic and emotional impact did your last layoff have on your life? If you’ve ever lost a job, you know how exposed and vulnerable it can make you feel, so although launching a home-based business may seem like a gamble, the risk of remaining strictly a W-2 employee may be worse.
I strongly recommend that you develop a portfolio of income streams – not one or two – but many streams from completely different and diversified sources so that you’ll barely feel the bump if one stream goes. You’re stable. You have time to adjust. You’re safe.
Although you could always go out and pick up another job, that’s not the kind of income I’m talking about. You want the type of income streams that you can own. Ideally, you want to create residual income, meaning a recurring stream of income flowing into your life whether you continue working.
Unfortunately, too many small business owners report that they’ve gone five years without a vacation. I feel there’s something wrong with that picture. Please understand me; I don’t have anything against hard work, but I also believe you should be free to have your income forwarded to your mailbox in Tahiti after a few short years of hard work. Get the picture?
Not all streams of income are created equal. Some income is linear; other income is residual.
Your income is linear if you are currently paid hourly or on a salary.
Income from a salary is linear because you are only paid once for your effort. When you don’t show up for work, neither does your paycheck.
With residual income, you work hard once, unleashing a steady income stream for months or even years. You get paid over and over again for the same effort. For example, an author will write a book one time and yet be paid repeatedly for that book for years to come.
Although it might take years to write before the money starts to flow, it’s worth the wait.
You’ll find that the ultimate benefit of truly wealthy people is that work is optional and leisure is affordable. This is because most of their income is passive and residual. Therefore, they can spend their time doing whatever they want.
When you start to view people’s lives through a filter of residual income, many groups of people aren’t as wealthy as they may otherwise appear. For example, Doctors and Dentists have a limit on their income potential. They can only see a fixed number of patients in a day. And they have to be there for every single one of them. That’s linear.
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The same holds true for many top salespeople, chiropractors, and attorneys. Most don’t enjoy the benefits and power of a perpetual income. They may appear rich but on the same treadmill as most individuals. Can you see that?
Let’s compare this concept to an escalator to drive this concept home even further. Have you ever walked up and down the escalator?
When you walk up the down escalator, you have to walk at a fast pace to stay in the same place and to get to the top, you have to walk at double speed. By contrast, people on the up escalator don’t have to work hard; they stand there holding the handrail, and the escalator takes them to the top.
The up-and-down escalators give you a good visual perspective of the two kinds of income you can earn: linear vs. residual income. Our economy creates a down escalator each of us must climb. You work hard for your money, but you have to earn 3 to 5 percent more the next year to stay in the same place with inflation.
But this puts you in a higher tax bracket. The more you make, the more they take. You seem to work harder and harder without making any progress. If you’re lucky, your bank account balance might earn 2 percent, while your credit card balance may cost you 20 percent.
Consequently, you’re going in the hole 24 hours a day. Is it any wonder you can never catch up?
And if you stop, the escalator takes you right back down to the bottom.
That’s what it’s like to earn a linear income. You want up-escalator income, or in other words, perpetual or residual payment.
Right now, what percentage of your income is residual?
If you’re smart, you’ll shift your income streams from linear to residual. This will give you the time and freedom to do whatever you want when you want. And that begins with turning on at least one new stream of residual income.
So, as you begin considering different home-based business possibilities, make sure that it can ultimately develop into an inexhaustible, generating stream of cash flow that requires little or none of your presence. For this to occur, you must be able to create, control, and own that stream of income. You may remain in your current employment position, but on the side, as a way of protecting your long-term financial security, you need to create additional streams of income.
