10 Ways to Diversify Your Income For More Financial Stability

Diversification can help you in more ways than one when it comes to your finances. As investors, spreading our money across several buckets can protect us from huge market swings, and lower our risk. Similarly, having multiple streams of income can protect us against financial disasters, like the loss of a job. It can be the difference between facing months with absolutely no cash flow versus months with a lower income.

Even if you don’t end up losing your job, diversifying your income can help you supplement your 9-5 income, help you reach financial independence sooner, and maybe even allow you to retire early!

10 Ways to Diversify Your Income

Ever heard the saying, “don’t put all your eggs in one basket?” Well, diversifying your income helps you to avoid that fatal financial flaw. That’s why we’ve compiled a list of 10 ways you can diversify your income!

Side note: Many of these tips take legitimate work and you’ll need to dedicate time outside of your regular job to keep them up. We understand that some people are content to turn their work brain off the second they leave the office. That’s okay too. Different people have different priorities- we’ll share some tips on other ways to safeguard your finances at the end of this post!

1. Start a side hustle

Perhaps the most common way to diversify your income is to start a side hustle. A side hustle is a money-making activity outside of your regular 9-5. It can provide supplemental income to your day job, (but it could also end up replacing your full-time job if you grow it big enough!)

A side hustle often starts as freelancing or a micro-business venture. And it might take a while before you see a significant return on those hours of labor. However, long-term investments with a meager ROI at the moment that can scale significantly have the ability to provide a bigger impact over time.

But it’s also important to state that a side hustle isn’t the same thing as gig work, like driving for Uber or Lyft, or delivering food for DoorDash. While it’s okay to work for these apps temporarily to make a little more for short-term goals (ex, paying off debt, or saving for an upcoming vacation), they are not scalable, long-term solutions. You won’t get a raise for being the best DoorDash driver.

Instead, focus on side hustles that are scalable. For example, if you start working as a freelance web designer, once you have a few clients under your belt you’ll be able to increase your rates. Eventually, you could even hire someone to take on more of those pesky admin tasks to allow you to focus more intently on doing what you love.

If you’re sold on the idea of a side hustle, but not sure where to start, be sure to check out these posts!

2. Start House Hacking

Another great way to diversify your income is to start house hacking, renting out part of your home or apartment. This provides you with extra income each month that can go directly towards your mortgage, or significantly reduce your living expenses! This means that, in the case of a job loss, you’ll be able to stretch your emergency fund much further, as you’ll need less to get by.

You don’t always need an inlaw suite to be able to house hack- you can rent out a spare room to a friend or family member. Or, consider turning your spare space into an Airbnb if you live in or near a city that people often come to visit.

But, house hacking may not be for everyone. You’ll need to feel comfortable living in close quarters with your tenant or roommate, so be sure to carefully consider whether this move makes sense for you.

3. Buy a rental property

Buying a rental property is similar to house hacking, minus the living together part! Purchasing a rental property comes with tons of benefits, like flexible retirement options, tax benefits, and of course, diversifying your income. You’ll earn rental income each month while building equity along the way! But, you’ll need to save up a hefty down payment.

It’s also important to remember that being a landlord is akin to a part-time job, despite myths of it being truly “passive income.” If a pipe bursts at 2am, you’re the person your tenant is going to call. You’ll need to find and screen tenants regularly and handle administrative and maintenance tasks. If your work schedule is already packed, it might make sense to hold off on your real estate endeavors until you have a little bit less on your plate.

4. Become an author

Maybe the closest thing to passive income is to become an author. While you do need to put a LOT of hard work and time into writing a book, you’ll be able to reap the money that a book or electronic resource earns in perpetuity without having to do much. Do the work once, and continue to profit down the line.

Is there a field you have a certain authority on? Maybe you’re bursting with the creativity to create entire fictional universes. Or maybe you just have a very interesting and unique story to tell! Put pen to paper and start writing.

5. Get a part-time job

Not all of us want to be business owners, and that’s okay. Owning your own business or freelancing often comes with bookkeeping, and managing/finding clientele. That may not be your thing. In that case, consider getting a part-time job.

Even if you aren’t setting your own rates, part-time jobs can provide you with other benefits and opportunities for growth. They give you the chance to develop skills outside of your 9-5, which you can leverage down the line for even better opportunities and pay. Even better, they can offer you the ability to explore your passions outside of your 9-5.

As far as part-time jobs go, my personal favorites are gig-based. They’re more flexible and they can pay well for just a few hours of work, as opposed to clocking in for a full shift at a company.

I’ve worked gig-based jobs such as giving private music lessons, working as a party princess, and giving guided cemetery tours (true story). It was some of the best money I’ve ever made. Best of all, none of these took up more than 4 hours of my weekend.

6. Start teaching

Another great way to diversify your income is to start teaching. Many colleges want to hire professionals who work in their field to teach their students and give them practical, real-world advice. If connecting with students and sharing about your profession sounds interesting to you, why not consider becoming an adjunct college professor?

Adjuncts typically teach 1-2 classes per semester, and many of them teach in the evenings, after 5pm. Some may not even be required to be on campus, teaching entire courses asynchronously. If you have a passion for education, this could be a perfect fit for your life. Plus, being a professor looks great on your resume. 😉

7. Rent out parking or storage space

Want to house hack but don’t have any extra space for someone to live in? Consider renting out an extra parking space in your driveway, or any additional storage space you might have! The website Neighbor allows you to earn around $50-300 each month by renting out your driveway, unpaved lot space, or garage space. This could allow you to enjoy the benefits of house hacking on a smaller scale, and help you to give your monthly income an extra boost!

8. Open up a High Yield Savings Account

If you don’t diversify your income with this simple hack, we WILL find you… 👀

I’m sorry, but your current bank just doesn’t deserve you. Big banks are charging you ludicrous fees, and aren’t paying you the interest you’re entitled to on your savings. That’s why you need to open up a high-yield savings account.

High-yield savings accounts allow you to earn more interest on your savings, sometimes to the tune of 25x more! For example, CIT Bank allows you to earn up to 5% on your savings at the time of writing this. That’s not small potatoes! And it’s vastly superior to the piddly rates your massive bank offers.

Let’s say you’re saving for a home down payment, and have $45,000 in your savings account. You’ll earn an extra $1,890 within a year on your balance for doing absolutely nothing. That amount of money can help to get you to get closer to your home ownership goals and can help to hedge your savings against inflation.

If you do nothing else from this list, please let it be this. It takes minutes to set up, and is ridiculously simple! Why wouldn’t you want to earn money every month by doing nothing?

9. Start consulting

Another great way to diversify your income is to start consulting.

Many companies want professional advice but aren’t able to add another person to the payroll. For example, a school might want to bring in a professional to advise them on how to best set up their auditorium space. They may hire an audio engineer to provide insight into what gear they should purchase.

If you’re interested in consulting, the best thing you can do is to talk to tons of people about your job and the good work you do. Networking is key here. Print up a few business cards, create a quick website, and you’ll be surprised at how many offers will come your way.

10. Buy an existing business

If you have the capital to invest, buying an already existing business could be the right move for you.

Buying an existing business means starting with an already established clientele, and already tried and true workflows. You’ll have access to trained employees, and in many cases, you’ll be able to hit the ground running. Instead of starting from scratch, you’ll be able to pick up where the other owner left off and improve upon what they already built.

Tips for success:

Diversifying your income may seem simple at face value, but it takes hard work and commitment to actually make it happen. Here are a few tips for success.

Start small & don’t overdo it

It’s going to be tricky to jump from working 40 hours each week to working 80 hours between your day job, part-time job, side hustle, and landlording responsibilities (wouldn’t recommend it)!

We want you to diversify your income in a way that is sustainable for the long haul. Start small and work to scale over time. Focus on adding one new income stream at a time to begin with. Remember that at the end of the day, money is not the end all be all. It’s important to find a balance and to also prioritize your family and social life. Don’t forget about your hobbies too!

Don’t forget to raise rates as you go

If you start a side hustle, it’s important to remember to increase your rates as you accumulate more experience. It’s easy to get comfortable charging a certain amount, but remember that you deserve to earn more the better you get at your craft. Don’t undersell yourself!

Invest along the way

You might be surprised that we didn’t include investing in this list. That’s because EVERYONE should be diversifying their income by investing for retirement regardless. Even as you add income streams, it’s important to remember that you should always be working to build your retirement nest egg as you go.

“What if I don’t want to work outside of my 9-5?”

Maybe you have growing kids you want to spend more time with, or maybe you have other responsibilities or hobbies you want to prioritize. That’s totally okay, we get it!

While diversifying your income will give you more financial stability, we understand that money isn’t always the top priority. However, if you are only relying on one income stream, here are a few tips to help you safeguard your finances beyond diversifying your income.

Keep your skills current

Even if you’ve been at your job for over a decade, it’s important to keep your skills up to date. Learn the latest software programs, and take classes to ensure that you are always learning. This can help increase your likelihood of finding a new job sooner should you ever be laid off, and can help to make you more essential at your current job.

Network regularly

Keeping in touch with your network is a great way to safeguard your finances. Here’s a little truth bomb for you. No one likes only being called when you need something. So be sure to reach out to your network regularly to check in on how they’re doing. Focus on forming real connections with them and you’ll find that you’ll never be out of work for too long.

Fully fund your emergency fund

If you only have one stream of income, it’s even more important to keep your emergency fund fully stocked. This means having between 3-6 months of living expenses saved up, which could help you avoid ludicrously hard times should you lose your job. If you don’t plan on diversifying your income, I would recommend keeping your e-fund more fully stocked, with ideally closer to 6 months’ worth of expenses saved.

Keep your expenses in check

If your living expenses are out of control, that emergency fund is going to dwindle fast. If you pass on diversifying your income, it’s even more important to keep your expenses in check and to keep lifestyle inflation at bay. Regularly negotiate your bills, stick to a budget, and track your expenses monthly to identify any rogue spending habits!

The Bottom Line:

Diversifying your income can help protect your finances in the case of job loss. It can help you to save money at a faster rate too. It will also provide more stability and flexibility over the years. Side hustles, owning a business, and managing rental properties are all common ways to diversify your income.

Remember, adding income streams takes time and energy outside of your regular job. Start slowly and build income streams over time. Work-life balance is extremely important for sustained financial success. Working 100 hours a week across 6 different part-time jobs will diversify your income, but it won’t be sustainable and could lead to burnout. Instead, take a balanced approach, then diverse income streams will be a financial blessing for years to come!

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