If anyone was in any doubt about the merits of having more than one source of income, then the tumultuous credit crunch economic crisis should have put an end to any such doubts. Not only has the recession resulted in mass redundancies and static wages, but it has also wrought a combination of low interest rates and high inflation which has been extremely damaging to those dependent upon savings income.
Before we go on to detail the advantages of having more than one source of income, let’s take a moment to list the main types of income that people may typically enjoy:
Primary employment salary, Secondary employment salary (i.e. where a person has a weekend job or has two part-time jobs), Pension, Savings interest, Share dividends (and capital sums if shares are cashed in)
Now, let’s look at some of the specific benefits of having more than one income source:
Safeguard against redundancy:
Being reliant on one sole source of income leaves an individual very reliant on the security provided by that employment. Being made redundant could suddenly thrust their household into financial crisis, at least until they are able to obtain a new job. Clearly, where an individual has two or more sources of income, the impact of losing one job will be softened to some extent. An example of this might be someone in the retail sector who works 3 days a week for a shoe shop and 2 days a week for a clothes shop. If the shoe store goes bust or has to lay off staff, then at least they will retain the other income to help them get through until they can find new employment.
Contribution towards holiday costs and/or other expenses:
Even if you are pretty sure of the security of your primary source of income, it’s always nice to have some other income coming in. This might take the form of taking a weekend job or being paid for writing commissioned online articles. You might choose to use this money to facilitate luxuries, such as a nice summer holiday or to fund your chosen hobby. It will become increasingly common for pensioners to take on part-time employment to supplement their pension income, as the population ages. As well as bringing in more money (which is always appreciated!) this may also bring other non financial benefits, such as a continued sense of worth and the opportunity to interact with fellow employees and with customers.
Not putting all your eggs in one basket:
Savers are currently finding that their real income is being squeezed as savings rates are much lower than the current inflation rate. People who are reliant on savings interest to help with their expenses, particularly pensioners, will currently be going through a tough time. This is where having your wealth spread across a range of income-generating mechanisms can help. For example, in times when savings rates are poor, there might be value in having money invested in bonds or in the stock market.
Avoiding the risk of becoming institutionalised or jaded:
If someone stays in one job, with one company, for too long, there is a danger that they may become jaded in that role. Even worse, they may become so dependent on that employment that they feel daunted at the prospect of having to seek replacement employment even if they are bored and depressed in their current role. Having two part-time jobs enables a person to see that there are different ways of doing things and may provide additional opportunities to make new contacts and find even more lucrative roles.
Although there are clear benefits to having more than one source of income, it is still the case that the majority of people have just one job. This is likely to continue for the foreseeable future but it is certainly worth considering whether you have opportunities to extend your income streams so that you are not so reliant on just one source of income. It’s also important to think about how you can get your disposable income to work for you to generate additional income streams. There’s certainly nothing better than knowing that you are going to earn income from a pension, savings accounts and shares without having to lift a finger!