How Income Diversification is the Key to Survival in Todays Economy Diversification

Income diversification is the key to survival in today’s economy because diversification lowers the risk of complete financial loss. The more income sources an individual has, the better off they will be. It is no secret that the current markets are extremely volatile. Effective income diversification reduces this by a large margin.

Income diversification means having a variety of income streams. For example, a person can have a full time job as an administrator and have another part time job to rely on. Earned income is not the only type of income a person can have. Passive and portfolio are also types of income. Passive income would be considered income from rents.. Portfolio would be considered income from divididends and interest.

This is why most financial planners stress its importance. Most people are familiar with asset diversification. It is dispersing one’s assets among different sectors. As I mentioned earlier, volitity is very high. Investing in one sector is not a wise decision when the market is this way. Many have seen the affects of this. Millions of people lost portions of their retirement accounts because they invested it in certain places. Most of these individuals had thousands of dollars tied up in one area. Don’t let this happen to you. If this has happened to you, you will need to learn from this and gradually move on.

Having a job no longer guarantees security. This is attributed to the great number of job losses this year and last year. Unemployment is higher than it has ever been and people all over the world are feeling it. A person can have a job today and loss it the next day without warning. What protects an individual is having more than one revenue stream. It will work to be a monetary safety net. If a person loses his or her job, they will not be in the worse shape. This is the position a person will want to be in if the unthinkable occurs.

In the current financial atmosphere, people are struggling to make ends meat. We’ve witnessed the collapse of some of the largest financial institutions in the world. The lesson that can be learned from this is to never put all your eggs in one basket. You never know if that basket will break. A wise person will put their income in a variety of places so that if one fails, one will carry them through the rough patch. Be smarter and stay ahead of the financial game. Some would say, invest in your self. In the end, you will be your best asset.