There’s no denying the fact that the recent Covid-19 crisis has significantly impacted the way I live and work. It has made us realize the significance of diversified or passive incomes; many people who previously used to rely on a single income source are significantly affected by the economic crisis due to Covid.

This crisis has left many people wondering what I can do to ensure that our income sources are well-protected and guaranteed? How can I establish multiple income streams for ourselves? Well, if you’re one of those people, you don’t need to worry because today, I’ll tell you all you need to know about diversifying your income.   

What do you mean by Income Diversification?

The term income diversification refers to the increase in income streams or balance shares among the various sources. It is an essential technique for reducing the chances of a financial crisis, especially for people living in rural, amid, and semi-arid areas. Diversifying your income sources can play a significant role in improving your living standards and ensuring financial stabilization. Many people tend to diversify their income streams by investing in stocks or bonds, which may be risky at first but is a great way to start and create a diversified portfolio. Yeah exactly, crypto came to your mind, let's not exclude that option as well.

Importance of a Diversified Income

Whatever the circumstances may be, you cannot deny the significance of a diversified income in the current era. This might leave you wondering, can I expand our income sources? I’ll get into the complete details of the various methods for income diversification later, but first, let’s tell you why exactly I am emphasizing so much on its importance.

Undoubtedly, Income Diversification is an effective method as different industries and revenue sources are affected differently by the constantly changing and diverse market conditions, which results in an unbalanced complementary effect. However, if you start investing your time and money on multiple streams, it may help you in the following ways:

• By diversification, you can reduce your financial risks significantly by investing in different categories depending on the market conditions, such as vehicles, instruments, stocks, bonds, industries, etc.
• While systematic and market risks are generally unavoidable, diversification can help get rid of unsystematic risks.
• Diversification presents new opportunities for you to widen your business, get in touch with new clients, and survey new opportunities.
• People who opt for more than one income source generally don’t need to rely on any single income stream and enjoy a state of financial ease. 
• Generating more than one income stream helps you establish a ‘safety net’ if one of your income streams dries up.

Diversifying your income flow also offers the opportunity to alter things up a bit or look at your business strategies in a new and better way. You’d be surprised to know how many money-making opportunities may be present around you without you realizing it. So, if you’re looking for peace of mind and never have thought about expanding your income sources, now might be an excellent time for you to start.

Common Ways to Diversify Your Income

Some approachable and straightforward ways to diversify your income and generate good revenue are mentioned below.

·      Side Hustle

Whether you’re self-employed or do a job somewhere, you could start a part-time side business without investing much time and money. The nature of this business could be related to your hobbies as well and can generate a good stream of income.

In other words, find something you enjoy doing and try to generate an income from it.

·      Real Estate Investment

As real estate has shown to be a consistent source of revenue for many homeowners, it is a good idea to learn about the nature of this business first and then invest in the right place. This could prove beneficial to you if you are looking for a passive income source. A couple of years ago I made a downpayment for a flat and then was paying off the rest of the amount on monthly basis with installments. I used an internal loan from the construction company whilst the residential building was still being constructed, now the blocks are all ready I paid 1500 azn for a square meter back in a day & now it is up for sale for 2200. 32% increase sounds good to me, don’t you think?

·      Trade Stocks

Many amateur investors fear consistent trading, but it isn’t a bad idea to invest in the stock market. Undoubtedly, the stock market has a persistent and stable growth history, so even you can easily take care of temporary losses. By the way, I am one of those amateur investors and recently I started making my first trades. However, I started holding crypto 2 years ago as well. Can't comment much on stocks yet, because I don’t consider myself an expert, but on crypto no one is… So I would suggest getting on the ride as well

·      Freelancing

The internet has opened many doors for individuals to earn online. So, providing unique and efficient services to clients by freelancing through social media platforms is a great way to boost your income. A lot of my teammates do offer freelancing services, which I do not mind. You should consider this option as well.

·      Reselling

Even if you aren’t that creative-minded, you don’t need to worry much because you can also resell items. You just need to simply find things at garage sales and audits and then resell them at online stores such as eBay and Amazon. You can even turn your head to Dropshipping & if you decide to do so browse through Jafar Najafov’s Instagram feed first – the guy is an expert.

Reinvesting your Income to Generate Passive Income

Passive income constitutes the money that you earn other than your primary job or business. If you want to create new income streams or generate an extra cash flow, a little side hustle may be precisely what you need. Reinvesting your income in order to create passive income is a great way to diversify your income sources. A passive income stream gives you some extra security in addition to your primary job, which requires your main focus and dedication. Hell with it you can even mine crypto or buy SOCAR bonds. Possibilities are endless.

Thus, some common ways to generate passive income include affiliate marketing, car advertising, selling informational or other products online such as designs, paintings, etc. In addition to this, passive income can also be generated through retail products and rental income. Social media platforms, including Youtube-the most popular one, are also being widely used nowadays by many people, so it is a great way to earn some extra money.

Furthermore, blogging, digital courses, real estate investments, and stock market investments are in high demand nowadays. So, what are you waiting for? You just need to find out which category suits your interests best and start focusing on generating new income streams.

Not Putting All Eggs in One Basket

By diversifying your revenue streams, you’re ensuring that you’re not putting all your eggs in one basket. It means that someone who decides to go for passive income sources and his main job or business isn’t dedicating all his efforts and resources to a single project. He’s concentrating on multiple income sources, which is a great way to increase your income as you wouldn’t lose everything at once, even in the worst scenario.

So, it would help if you try to sell your skills, provide any other services, or even invest somewhere as a side hustle to ensure that you don’t depend solely on a single money stream.

Honestly speaking I am currently diversifying my personal incomings as much as I can, however, I would like to do the same with the companies I own as well. We are trying hard on diversifying income at ATL Tech so that we can generate revenue not only in Azerbaijan but also in USD as well. This takes me to my next point.

Currency Diversification – if you are living in an economy where local currency is volatile

Currency Diversification can have significant benefits, especially for those living in such economic conditions where the native currency is volatile and doesn’t hold its value for a more extended time period. As currency volatility increases the exchange rate risk, short-term investments may not be ideal for people living in such economic conditions. For people experiencing this issue, it would be best to try to opt for trade options or other stocks investments; you can also invest in international currencies.

You can eliminate such currency volatility risks simply by opting for more than one source of income. As discussed above, investing in stocks and currencies can prove to be a great way to avoid volatility, although it does require some luck as Ill.

• Investors can benefit from this method by investing in overseas equities.
• Investors can also limit their foreign currency risks through various instruments such as options, forwards, and futures.
• By studying and understanding the short and long-term behavior of exchange rates, I can comprehend how they affect the overall profit.

Geographical Diversification – mobility, being able to work from anywhere in the world.

Geographical distribution is a great way to expand your revenue sources and make them even more work-friendly. So, if you opt for such diversification, you can simply work from anywhere in the world as it provides you the luxury of the movement of resources from different locations. This one is the ultimate dream, I do not want to be confined to a single economy or a single country. I do want to roam free, someday.

International Diversification can boost your company’s performance to a great degree by growing sales and ultimately revenues in foreign markets, minimizing the risks of economic downfall in your home market, and lowering the costs of marketing and distribution systems. Diversifying your work interests can also help investors make up for the volatility or loss of any single economic region.

In addition to this, geographical diversification can reduce volatility by providing you more opportunities to explore throughout the world, safeguard your interests against the constantly changing market cycles, and minimize the risks of losses to your overall portfolio. Research has also shown that people who adopt geographical diversification progress swiftly by improving their managerial skills and technological innovations.

Why not acquire a money-making skill instead of spending endless hours in cafes, tea houses & pubs?

Did this one hurt? I bet it did if you are one of those… However, I am sure that most of my readers value their time a lot. But you never know…

Many people spend endless hours in tea houses, cafes, and pubs, practically wasting their precious time while they can utilize it doing something valuable and productive. Why not acquire a money-generating skill instead? Although it requires a lot of determined work and you need to come out of your comfort zone to achieve something, trust me, it’s totally worth it.

Once you invest your time and money to learn a skill such as Freelancing, Graphics designing, SEO, Affiliate Marketing, Copywriting, etc., or whatever, you could do wonders to improve your financial condition.

Let me give a few brief examples

I know a guy who got tired of working and living in Baku, moved to New York started washing dishes first as an illegal, moved onto waiting tables, cashier, worked a couple of startups, ended up at a real estate company as a salesman & now is starting his own agency plus buys crypto, stocks & NFT’s on the side. And all of this within 3 years.

I know a girl who works for a local e-commerce company and is responsible for coordination with suppliers & vendors. However, on the side, she is handcrafting kitchenware in her own 10 sq meter workshop and selling them online.

Our former head of marketing has been in that field for years and one day he decided to quit to become a full-time filmmaker. His movie was featured at the Cannes film festival.

A friend of mine is a CEO of a multimillion manufacturing company and that’s his day job. After working hours he is a day trader and is trading stocks on daily basis.

A graphics designer and a friend of mine who designed a lot for ATL and me personally is also a sculptor and a photographer.

Not disclosing any names for privacy reasons, however, I assure you all of these people are real and they are quite successful. So now, are you feeling discomfort? If yes, that means that you are wasting a lot of your time on meaningless shit. Become an essentialist and you will see your rewards in no time. Look up the essentialism definition by Greg McKeown and you will know what I mean. Or grab his book, even better…

Conclusion

So, it wouldn’t be naive to say that income diversification has become very crucial in the modern era. Its advantages are clearly visible in the long run; it can provide solutions to a number of problems, including economic downturns or financial breakdowns. That is why most financial advisors recommend you to start investing or trading as a side business. So, what’s stopping you?