How to Diversify your Income to Protect Yourself from Economic Changes

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If you’re here, it’s likely you’re looking for ways to diversify your income. You may have experience with losing a job, getting laid off, being underpaid, or randomly losing an important income stream, and you probably don’t want that to ever happen again.

You probably know that when you lose an income stream that covers vital expenses, it doesn’t matter how much couponing, frugal living, or cutting expenses you do, it can’t make up for insufficient income. In this post, we’ll be talking about creative ways to diversify your income, so you can avoid the situation where you lose an income source, and feel distraught about how to cover your expenses.

You can only cut expenses so much, but you can increase income to limitless potential.

In fact, the highest earning people in the world have been able to earn such high incomes because of income diversification.

You may have a job or an income stream that is difficult to grow–it may have caps on how much you can make and how often you can get pay raises. You might feel forced to deal with a toxic or unethical environment, but with income diversification, you can avoid being stuck in situations like that once you’ve set it all up–that’s what we’ll be discussing in this article.

If you’re interested in learning:

  • Why income diversification is important
  • The 95/5 Rule about Spending and Income
  • How Income Diversification Works
  • 10 Creative Ways to Diversify Your Income
  • and a Step-by-Step Plan to Diversify your Income

….Then you’re in the right place so let’s get started!

What is Income Diversification?

According to Science Publishing Group:

Income diversification refers to an increase in the number of sources of income or the balance among the different sources. It means, on the one hand, that total income of a household accrues to more than one sources and on the other hand, no one source is much dominant compared to the other sources

It’s recommended for most scenarios. For example, farmers who rely on one crop may have an off season or be completely distraught when the weather disables them from yielding the one type of vegetation, so it’s important for them to have multiple streams of income (outdoor and indoor plants, animals, etc.) that can offset situations like that.

Why Income Diversification is Important

In addition to the freedom that comes from knowing your boss or business partners can’t put a cap on what you can earn, income diversification is a great way to hedge yourself from hard times. In the world economy we live in, it’s no guarantees when it comes to income.

  • You can make money from a job and loose it without warning
  • You can invest in a great stock and the price can fall
  • You can invest in real estate and the market collapse
  • You can set up a website and algorithm updates crash your traffic

Tragedies happen, so it’s important to hedge yourself with multiple streams of income. If one income stream dries up, you can safely rely on others–this will give your family stability that can’t be given by solely relying on one income source, or even by saving money!

Grant Cardone’s 95/5 Rule on Income and Expenses

Many people who lose an income stream first resort to cutting expenses. They might:

  • Try to cut back on grocery spending
  • Cut subscriptions
  • Try to find the best “bargain” on everything
  • and even do silly things like drive extra miles to save a few cents per gallon on gas

All of these are “noble” things to do. It’s consistent with the age old saying to “live within your means”, but what if your means isn’t big enough? What if you focused more on raising your means that limiting yourself to live within it?

In his course on Wealth Creation, Grant Cardone says that many people are off balance and place more emphasis on expenses than on income. They spend 95% of their personal finance time on cutting expenses or discussing expenses, and only 5% on trying to raise the income. He proposes that instead of spending 95% on expenses, we should spend 95% on growing income and 5% on looking over expenses.

There’s nothing wrong with having expenses if you have the money to cover them, right?

How Income Diversification Works

When you have several streams of income, one income stream may be growing while the other is drying up. Some income streams may be stable while others are fluctuating. Overall, having multiple streams of income helps to secure a stable standard of living because you’re not solely focused on one person (or company) paying on time.

10 Creative Ways to Diversify Your Income

Here is a list of 10 creative ways to grow multiple streams of income:

  • Start a Side Hustle (Low Startup Costs)
  • Start a blog (Low Startup Costs)
  • Learn affiliate Marketing (Low Startup Costs)
  • Master a Trade (Varying Startup Costs)
  • Get a Job (Free)
  • Start a business (Varying Startup Costs)
  • Invest in Stocks (Low Startup Costs – Long Term Investment)
  • Invest in a Retirement Plan (Low Startup Costs – Long Term Investment)
  • Invest in Health Savings Accounts (Low Startup Costs – Specific Insurance Plans Only)
  • Buy Real Estate (Requires Capital)
  • Invest in Startup Businesses (Requires Capital)

A Step-by-Step Plan for How to Diversify Your Income

Now, you’ve heard why diversification is good, how it works, and some ideas for what you can do to diversify, but now you might be wondering, “How do I get started?”, so here are a few steps I’d recommend you take to get started diversifying your income.

1. Grow the 1st Income Stream as Big as it Can Go

Although income diversification is a great thing to do, it’s important to do it strategically, or it could backfire. If you’re living paycheck to paycheck, it’s not the time to diversify income streams into large investments (like real estate or starting businesses with high startup costs). It’s probably best to first see if there’s a way to increase the income from the primary income source as large as it can go first. You can try:

  • Negotiating with your employer
  • Raising prices for your services
  • Or, finding a primary income stream that covers your expenses (possibly a job until other things work out)

2. Set Aside an Emergency Fund between $1000 and 6 Months of Living Expenses for Rainy days

Once you’ve got an income stream that’s stabilizing your basic needs (transportation, shelter, food, and healthcare), then you want to set aside an emergency fund of at least $1000. You may need to set aside a higher amount for your emergency fund if you have a lot of income fluctuations or uncertainty with your primary income source–in that case, it’s probably best to focus on getting your emergency fund big enough that it gives you time to live off of savings (if you need to replace it in an instant).

3. Get a Side Hustle and Grow it into a Full-time Income or More

Step two and step three may overlap. For my family, we were growing our emergency fund a growing other income streams at the same time. We felt compelled to do this because we needed something that would bring an income soon, so we needed to invest some money to the emergency fund and some money into growing the side hustle.

There are several side hustles you can start: from cutting grass for neighbors to flipping furniture to affiliate marketing. There are many ways you can start to make money with a small upfront investment. Often times, the side hustle you start will give you so much enjoyment, you can turn it into a full-time income, and even replace your job or other income source (if you want to).

4. Pay off Debts and Keep the Debt-to-Income Ratio Low

Having an income that’s more than 33% absorbed by debt payments can be extremely stressful. You know that if your income goes down for more than three months, it’s likely, you won’t be able to cover everything.

The pressure of the financial constraint can be toxic. If this is your situation, it’s important to:

  • Raise your income
  • Pay down your debts
  • Lower interest rates
  • Consolidate payments
  • and renegotiate with bill collectors

…So you can get a handle on things, and get your debt payments to be much less than your income.

5. Develop High-Income Skills

When you have high income skills, you can make money with or without a job. High income skills are valuable to corporations, small businesses, and individuals, so you have income security that you can’t have with a job.

It’s important to develop high-paying skills so you have the confidence that you’ll be able to earn an income (regardless of whether you’re able to get a job or not).

Recommended Reading:

6. Choose a Niche or Audience to Serve

Imagine you’re in a room with lots of people, but you’re looking for a specific male with a blue shirt that has some of your belongings. Do you think it would be more effective to scream “man with a blue shirt with my stuff!”, or do you think it would be best to call him by name?

Don’t you think that if you called “man with a blue shirt with my stuff”, some of the wrong people would turn? Or, don’t you think some people with a blue shirt would assume ‘he can’t be talking to me’?

Choosing a niche is a way to make sure you’re addressing the most relevant audience as specific as possible to get the highest engagement rates.

Once you have high-paying skills or a side hustle, it’s important to choose a group of people that need the side hustle or high income skill you’ve developed. Sometimes, we think everyone needs what we do, but you’ll find that when you focus on a group of people, the relevance goes up, so the smaller group is more likely to respond.

For example, I can write an article to “entertainers” in effort to attract a large group of people, but some people may not feel that I’m talking to them. If I write on the same topic, and I do an article specifically for “influencers”, “bloggers”, “athletes”, or “musicians”, then I’m likely to attract a smaller group, but the relevance is higher, so the smaller group is more likely to respond.

7. Network and Grow an Audience

Once you’ve chosen a target audience, then it’s important to network within the audience: online and offline. You want to find people who are your ideal customer, let them know about you, let them know how you help them, and where they can find you when they need you. The more people who know, like, and trust you, the more buyers you’ll have.

You can use social media, search engines, your website, email marketing, and other things to engage with more people and grow your audience. If you don’t have a website already, you can create one here in less than 30 seconds…

8. Find Other Opportunities for Active Income Selling your Services

When I first started making money from home, I was self-publishing books. It was exciting to think I could create something I love and make money at home.

I still had alot to learn in order to take the book publishing and make it into a full-time income, but other people were constantly asking, “How did you publish a book?”, so I decided to help them. I did some ghostwriting, helped them make book covers, proofread, and provided other services that collectively earned me more than my book royalties!

Once you have a side hustle going, you’ve developed some skills, and you’re growing an audience, you’ll be many steps ahead of most people–this will give you the opportunity to reach back and get paid for mentoring others or helping them with your skills.

9. Package Your Knowledge into Products

At the time of this writing, we’re going thru an international lock down because of COVID-19: an international pandemic. Many businesses who sold their products or services direct-to-consumer are suffering great losses of income because governments have mandated that everyone stay in their homes.

Without a way to direct sale products or services, companies are forced to shut down or find other ways to diversify what they offer and how they earn their money.

At the same time, consumers are looking for ways to do things themselves they never had to do. People who didn’t cook before the lockdown are being forced to order delivery or learn how to cook. People who didn’t cut their hair or nails before, are being forced to learn how, or to look unkept.

Webinars, Youtube channels, articles, and course sales that teach people new skills are skyrocketing!

Packaging your knowledge into products is one way to diversify how you deliver your services. You can offer services for some people, and sell courses to serve DIYers.

Recommended Reading:

10. Partner with Companies who Compliment what you do

Regardless of how you package it, there’s only so much work you can do. There is only 24 hours in a day, so you can only sell a certain amount of products or services (even once you grow a team).

You can leverage partnerships with complimentary companies to make even more money. For example, let’s say you’re an accountant, you can get paid commissions for recommending your clients sign up for accounting software when you learn affiliate marketing.

Affiliate marketing is a great way to get paid commissions for recommending products and services that are complimentary to what you offer your audience.

Recommended Reading:

9. Invest in a Retirement Plan

Once you’re debt to income is low (or debt is completely paid off) and your income is high enough to cover basic needs and some wants, then it’s time to invest money into a retirement plan. Even if you love what you’re doing, stats show that most people see a decline in productivity in their older age.

A retirement plan can help you to stability a comfortable lifestyle even when you’re body isn’t as productive as it used to be.

Hopefully, you have a much higher income from all of your other streams, and they’re paying you big time, but having a retirement plan can be an additional income to hedge your bets and lower your tax burden.

10. Invest in Stocks, Bonds, Startup Businesses, or Real Estate

Stocks, bonds, equity sharing with startup businesses, and real estate are all great ways to multiple your money over time, but they’re not short term investments. It can take more than one year and even more than a decade to see the appreciation you might be looking for, so it’s important to invest in stocks, bonds, and other things once you’re personal finances are squared away (including your savings accounts and retirement plans being stocked up).

11. Be Generous

People are attracted to generosity. If you’re the expert in your niche that gives the most value, you’ll find that you’re able to attract more than others. If you’re the friend that gives more than others, you’ll find you’re the friend that will attract more people.

Find opportunities to be generous everywhere you go. It helps to build lasting memories for others, it makes you stick out, and it helps others.


Income diversification is one important components of financial freedom. It helps you to feel secure knowing that you have many ways to earn an income, and you’ll be okay even if one dries up. If you have any questions about this, leave them in the comments below.

If you’re like help starting or growing a business that can diversify your income and eliminate your risk, join me here and let’s start growing your dream business.

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2 thoughts on “How to Diversify your Income to Protect Yourself from Economic Changes”

  1. Tiffany Denise

    Very nice article. Company blog and good real estate is a perfect connection.
    First one always gather new clients, and second, generate passive income.

    1. Tiffany Denise

      Thanks. I agree having a company blog helps to bring clients, then there are a few milestones in the middle, but eventually investing in real estate is a good place to hold money for long term appreciation.

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