Have you ever heard the phrase "Don't put all your of eggs in one basket"? Often it's said when discussing investment strategies. Diversify they say. Spread your investments across an array of investment options - stocks, bonds, mutual funds, precious metals, real estate, etc. The idea is that all investments have some level of risk, some higher than others and some more influenced by economic changes and world events. Having a diverse portfolio protects and minimizes the opportunity to lose everything due to one or two worldly events. Well, the same thinking should apply to how you plan your income and where it comes from because, again, you "don't want to put all of your eggs in one basket."
The current recession offers some daily reminders, often personally painful ones, of the affects a single "one basket" income strategy can have. Most Americans rely on the income from a single source - their job. In a recession we, as employees, see jobs disappear. Today, our national unemployment rate is hovering at just below ten percent. Most likely you or someone you know is a victim of this economy.
In a December 2008 USA Today Gallup Poll, 60% of those polled said today's economic situation is the biggest crisis they have faced in their lifetime. The Baby Boomers are headed towards retirement age and these are the years of their highest income-earning potential yet their savings and investments are shrinking AND they're losing their jobs!
So what can you do? DIVERSIFY. . . .now!
Donald Trump has written, "The first thing I learned is when times are tough, you need to hedge your bets - you need to diversify. If you don't do what I did, and diversify your income, you will most likely see your net worth diminish. Worst case, you will lose everything." Diversification of income suggests we consider new creative opportunities for creating new and multiple streams of income. This means exploring new income opportunities to enhance or replacement the single income source of a job.
So what are the options?
- Find a new and/or second job
- Learn a new skill and start a new career
- Create a revenue-generating "product"
- Become entrepreneurial and start your own business
Finding a new and/or second job
Finding another job is easier said than done especially in an economy where 9 - 10 percent of the workforce is out of work. The opportunities are just not there in today's traditional job markets. People tend to be forced into finding anything in order to keep a roof over their heads, the lights on, and food on the table. Second jobs tend to be low paying and difficult to sustain for any period of time. Quality of life goes down significantly. Staying in the "I need to find a job" mindset is not income diversity and it does not give you control of your income source.
Learning a new skill and starting a new career
Our government tends to promote the idea of "re-training" the workforce to be able to enter into new fields of opportunity. While the fundamental idea is good, changing a career or training for a new skill takes time and money. I have not seen a lot of free accelerated education programs being offered! But even if you are successful in going down a new career path, you start at the bottom and still end up with a single source of income. Again, this is not a diversified income strategy.
Creating a revenue-generating "product"
Do you have an idea or knowledge that others would pay for? Have you ever thought of writing a book or holding a seminar to share your knowledge? This is a great way for diversifying income. This ties into the next section in terms of becoming an entrepreneur. The opportunity to pursue "invention", be it a product, service or knowledge is available now more than ever, however most people never put the time or energy in discovering how they may succeed down this path. When attempted as a part-time pursuit, the majority of people won't commit their free time to discover, develop, and engage the process. If fact that is why most of us have said at some time in our lives, "I thought of that years ago" as we witness someone else making money with "our" idea!
Becoming an entrepreneur and starting your own business
An entrepreneur is someone who puts their money to work in order to create income. Buying real estate, investing in a franchise, or starting a network marketing business, are all entrepreneurial actions. In 2003, a Federal Reserve's Survey of Consumer Finances indicated that families with any entrepreneurial activity, that is, those reporting private business ownership or a self-employed status, had median net worth value of more than five times that of families without entrepreneurial activity.
Real estate investing provides two financial opportunities. The first relates to equity gained by selling a property for more than what you bought it for. This is typically a long-term investment strategy, although the last ten years have given a lot of press to the idea of "flipping" houses for quick returns. The second income opportunity through real estate comes from rental properties. Positive cash flow from rental properties is certainly a diversified income strategy. The problem right now with real estate investing is the volatility of the housing market and the instability of the banking (lending) systems. Today it is not easy to buy property, especially investment property. Banks want very high personal credit ratings and significant money down, 20 - 30% or more of purchase price. Unless you are an experienced real estate investor with available cash, real estate as your first choice to diversify your income is not recommended.
Another entrepreneurial venture is the start your own business and work for yourself. Often people pursue a franchised business as a way to do this. Franchises are attractive in that they are "turn-key", meaning the company has already developed the brand, designed the store front, determined the offerings, etc. All you have to do is operate and promote it at a local level within the franchise guidelines. Subway is a popular example. Franchises cost money, sometimes a lot of it. The more successful the chain, the more expensive it will be to buy into. To get into a franchise that has an established brand, you can expect to fork over in excess of fifty thousand dollars. Beyond this initial start up investment realize that you will need to be financially prepared for general business operating expenses such as lease costs, insurance, advertising, payroll, etc. Additionally many of the larger franchisers, like Krispy Kreme Donuts, require past experience that demonstrates business success. No franchiser wants an image of failure.
Limited money and limited-to-no experience can be a deal breaker. But let's say you are successful and get your dream franchise. Now consider this - a large majority of franchise owners end up being the primary workforce of their own business. In other words, you are working for yourself, literally WORKING for yourself. So you got out of your 9-5 job only to replace it with a 24/7 burden. You're trading your time for money and often you end up making less money per hour than you had thought. Work-life balance can become an issue. As far as a diversified income strategy - it's possible, but only if you can separate yourself from the day-to-day operation so you can support your other sources of income.
The final option is perhaps the best option in the current economic landscape - start a network marketing business. Donald Trump writes, "When some industries fail, others take off. For example, when the real estate industry tanked in the early 90's, the network marketing industry exploded. During hard times, people with an entrepreneurial spirit flock to network marketing opportunities." Today, Network Marketing (a.k.a. MLM or Direct Sales) is a very valid multi-billion dollar industry. As an income diversification option, it is perhaps the most viable solution to the majority of people looking to enhance their current and future financial status.
The network marketing industry is one of the fastest growing business models in the world. It has changed quite a bit over the last ten years with it being validated through support from the likes of Robert Kiyosaki (Rich Dad, Poor Dad) and Donald Trump (billionaire entrepreneur). Additionally, some proven well-respected corporate leaders from traditional Corporate America are now heading these companies. One great example is Bill Farley, retired CEO of Fruit of the Loom and recipient of the coveted Horatio Alger Award of Distinguished Americans.
Why is network marketing a good option for diversifying your income? First, it generally requires a low investment for you to start your own independent business. Secondly, the company handles the burden of operating the business, not you. They develop and produce the products and services, they handle the logistics and distribution, and the best companies develop and provide you the tools, education, and support you need to be successful. There are hundreds of network marketing options available today. It is important that any business you engage in, you find one that you have a personal passion or commitment for. Because there are so many options, it is likely that you can find a company that offers a product or service that meets your needs. But chose wisely, not all companies are positioned for long-term growth and success. And take the time to understand the legitimacy of its leadership team and compensation plan. Lastly, you control your personal investment of Time. Network marketing can be worked part time or full time but it does require engagement and some level of effort. The benefit here is that you can get started while you still have your job. Networking Marketing is not a "money for nothing" or "get rich quick" industry but if embraced, it can provide you significant income to enhance your financial outlook.
Diversified income is your path to continued personal and financial growth. Without some diversity in your income source you are living at the risk of having "all of your eggs in one basket." Take control of your financial wellness. Take action today to eliminate your potential of becoming an economic statistic!
[For more information or guidance on selecting a diversified income plan that's right for you, you can contact Doug by emailing him at incomeprotection@yahoo.com or calling (661) 263-7366]
Mr. Conklin is a successful business leader with over 25 years experience in Corporate America. Over the last ten years, he has enhanced his financial position as an entrepreneur, creating a diverse income portfolio which includes consulting, public speaking, real estate investment and network marketing.
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