Managing multiple income streams can seem like a daunting task, but with a few simple strategies and the guidance of experienced financial advisors, you can make your multiple streams of income work for you, and make your life easier and more manageable in the process.
High-net-worth individuals know that it is not enough to simply generate passive income in the background. Smart investors know that to grow their wealth, achieve all of their financial goals, and leave behind a legacy for those who will follow, they need to use their multiple streams of income to make more income.
At Avidian Wealth Solutions, we understand just how difficult it can be to manage additional streams of income without the right guidance. In this article we will discuss how to manage a number of streams of income and why managing them correctly is one of the most important decisions that you can make.
Is it smart to have multiple income streams of income?
High-net-worth individuals can benefit from multiple streams of income in many ways. Having multiple streams of income on top of a well-organized and diversified portfolio of assets can be beneficial for several reasons, including:
- Financial stability in the event that one stream of income or set of assets experiences a downturn.
- Increased earning potential for those who manage their money well and take advantage of market conditions and unique opportunities.
- Protection against market fluctuations is an added benefit of having multiple, diverse income streams.
- High levels of independence are afforded to those who do not rely on one stream of income. If one income stream shuts down, you have the ability to plan around it and make sure that your life and goals are not interrupted.
Multiple income streams, if managed properly, can lead to an improved standard of living, the potential for more growth, or even early retirement. Multiple streams of income do not manage themselves, however. In order to truly take advantage of your potential and grow your wealth, you’ll need to manage that money and keep your assets active.
How do you organize multiple streams of income?
1. Track your additional streams of income
In order to effectively manage multiple income streams it is essential that you track all of your sources of income. You can’t be in control of your money if you don’t know how much you currently have, where you have it, or a forecast of how much you will have in the future.
There are countless budgeting apps that you can use to track your earnings, but there is nothing wrong with a simple spreadsheet. Or, better yet, hire an advisor to do the tracking for you. The important thing is that you have a clear picture of your overall financial situation — even better if you can gather enough data to predict what your financial situation will project to be.
2. Familiarize yourself with the tax liability of every income stream
Anticipating how your income and assets will be taxed is just as important as monitoring the amount of income itself. Sound tax planning can help individuals with multiple income streams minimize overall tax liability by taking advantage of tax laws and deductions.
As important as reducing tax liability is ensuring compliance. Compliance with tax laws is necessary if you want to avoid costly penalties, criminal proceedings, and damage to your business or reputation.
Noncompliance with tax laws can often be due to an innocent mistake or misunderstanding of the laws. Tax liability is difficult to calculate, and tax laws change frequently. Partnering with a fiduciary tax planner can help you make sure you’re in compliance, saving money, and working towards your financial goals.
3. Set clear and accomplishable financial goals, and update them regularly
Setting clear and realistic goals will allow you to accomplish things in the short term, and encourage you to revisit your overall financial plan often — which will help you to remain agile and prepare you for uncertainties. Some questions that you should ask yourself when setting your financial goals include:
- What are my priorities?
- Is there money in my budget that can go towards something else?
- Do I have any revenue streams that I am not utilizing?
- How am I going to track progress?
- How often will I revisit my financial goals?
- Do I have a plan or fail safes in place in case a revenue stream dries up?
- Have I planned for my legacy?
Regularly setting clear financial goals will also help you know which of your multiple income streams it would benefit you to prioritize whether it’s real estate, investments, or funding a startup. You’ll know where to focus your time and energy by revisiting your goals and updating them to reflect your current financial situation and the current market conditions.
4. Seek professional management that you can trust
Managing multiple streams of income can get complicated fast. The point of having multiple income streams is to grow your wealth and meet your financial goals so that your portfolio and your life can live up to their maximum potential. But this likely won’t happen if you generate passive income and allow it to stay passive.
Taking an active stake in the organization and management of your money can help you to take advantage of the full power of your income, but that takes quite a lot of time and know-how.
Financial advisors can help you take advantage of alternative investing strategies, check your tax compliance, and update your financial plan to adapt to the market and your changing portfolio. Partnering with a financial risk management firm is a great way to make sure that your money isn’t doing too much or too little, without having to do it all yourself.
How do you make your money work for you?
Making your money work for you, once you get a clear idea of your income, tax liability, and risk tolerance is largely about putting the right amount of your money in the right place. Rather than letting your money sit dormant, it might be helpful to diversify your portfolio with some low-risk investments that offer more consistent returns, such as:
- High-yield savings accounts
- Retirement funds
- Treasury securities
- Money market accounts
- Fixed annuities
These low-risk options are a great way to make sure that your money is actively making you more money, but they are only one part of a healthy, diversified portfolio. This is where partnering with an established financial advisor can really come into play.
An experienced fiduciary financial advisor can help you take advantage of the market and unlock the full potential of your multiple streams of income by offering access to private securities, advice on the best managed investment accounts, and recommending alternative investment vehicles such as:
- Hedge funds
- Managed futures
- Private capital
- Real estate
Making your income streams work for you can provide long-term growth and stability, but it can be difficult to do without seasoned professionals in your corner.
Grow and protect your multiple income streams with the help of Avidian Wealth Solutions
By following these money management tips as well as making sure that you have sound counsel from a multi-disciplinary team of financial professionals, you can make the most of your multiple income streams while also living the life that you’ve worked so hard to achieve.
Whether you need to plan your estate, reduce your tax liability, or refocus your portfolio on the safest investments for retirement approaching, Avidian Wealth Solutions can help. We are a Houston-based wealth management firm offering comprehensive, specialty financial services to high-net-worth individuals, families, and business owners.
Schedule a consultation today to learn more about how we can help you grow and protect your wealth.
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