Multiple streams of income

A key element of financial independence is the ability to generate multiple streams of income: ideally, some combination of pension income (employer and government), investment income (interest and dividends), rental income, income from royalties, plus business and consulting income. Once you reach 55 or 60, depending on whether you have a solid defined benefit employer pension or are inclined to receive Canada Pension Plan benefits as soon as it’s available, semi-retirement becomes feasible. Perhaps modest pension income is coming in and you decide to move to four six-hour days for a start; then, once you turn 65 (eventually 67 for younger folk), you may take this down to two or three four-hour days. Every person is different. As a 61-year old financial writer, author and editor, I found a recent session at the Canada Writes 2014 conference in Guelph, Ont., to be of considerable interest. Sheila Wray Gregoire runs a nice business from her website at www.tolovehonorandvacuum.com. Addressing younger freelance writers she warned that “the days of making a good living writing articles for magazines are gone.” What’s needed, she suggested, is to leverage a book and its associated website so it can generate sales of related products, plus affiliate sales (selling other people’s items on your website), website advertising, speaking gigs and sale of products after the speaking event. In her case, she found writing columns and articles, or anything carrying a one-time fee, generated only 6% of her income stream in 2013. Book royalties from Amazon.com and other publishers generated 18% of total revenue, advertising on the website 9%, product sales from the web site 26%, affiliate sales 22%, speaking fees 11% and product sales during speaking events 8%. Note that while article sales are labour-intensive and generally create only a one-time fee, many of these other sources of income are “passive” and generate recurring income: Once created, a book can generate royalties well into the future—as can affiliate sales and web advertising, assuming sponsors stay on board. So these income streams are similar to the recurring dividend and interest income that investors enjoy with stocks and bonds. Couple such an approach with traditional investment income and pensions and you can see that—especially for couples—it’s quite feasible to create dozens of income streams. In my own website at www.findependenceday.com, I have the beginnings of such an approach: once a quarter I receive royalty checks from www.trafford.com for the sale of the US edition of my book (they’re not huge but at least they’re in US dollars!) The original Canadian edition I warehouse and fulfill personally as orders come in, either single copies or by the case (generally to financial planners.) But after attending Gregoire’s session, I can see I’m only scratching the tip of the iceberg. Now I’m an editor-at-large with more time in the normal work week, I have an opportunity to move a weekend hobby site into a vehicle for generating multiple streams of income. The more passive it becomes, the more the “semi” will apply to the extent of my personal retirement. Gregoire suggests trying to create one more project every year that will earn passive income for the foreseeable future. From your writing, you can create products like how-to guides, curricula for educational institutions and self-published collections of articles. Multi-media products like CDs and DVDs can be spun off of public speaking events. Digital products like e-books and audio downloads can also be created from talks or articles, or e-courses for people to learn from home. Those with social media or mass media expertise can generate extra fees consulting for businesses that need help in those areas. The only downside I can see is that one could very quickly go from “semi-retired” to “fully self-employed,” a phenomenon I’ve observed in several self-employed family members and relatives I could name.

About Jonathan Chevreau

As MoneySense’s Investing-Editor-at-Large, he is also author of Findependence Day and co-author of Victory Lap Retirement. Reach him at jonathan@findependencehub.com, where he is the founder of Financial Independence Hub.