Why is it Important to Have Multiple Streams of Income?

11 Benefits of Having Multiple Sources of Income

FAQs about Benefits of Multiple Streams of Income

What are some of the popular ways to create multiple sources of income?

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There are three popular ways of generating multiple sources of income. This usually includes passive income, active income and portfolio income. Active income is the monthly earnings from your job, passive income is from hobbies or rents, and portfolio income is from investments.

Why is it important to have multiple sources of income?

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Numerous sources of income provide you with the peace of mind that you can have sufficient money to meet immediate expenses. Also, if any of your income streams dry up, you can depend on the others while replenishing the same. Moreover, you will not have to go for credits in case of immediate fund needs.

What are the problems associated with multiple sources of income?

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The only problem associated with generating multiple sources of income is efficiently managing them. It becomes important to manage your passive, active, and portfolio income equally well. Also, you should track your earnings from each and look for ways to diversify them.

Which income sources provide you protection against financial risks?

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Several income streams can supply you with money when you need cash. This includes emergency funds, life insurance and mutual funds. You can build a goal-oriented emergency fund and keep it in a savings account for returns. Life insurance also gives your beneficiaries money in case of your untimely demise. Furthermore, you can withdraw money from mutual funds as and when required.

What are some of the top multiple streams of income?

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Some of the multiple sources of income include earned income, capital gains, interest income, dividend income, rental income, business income, and royalty income. You can select any number of income streams as per your financial goals and the duration within which you will have to achieve them.

Is life insurance needed if I already have income from investments and rentals?

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Yes. A life insurance policy is not just income replacement; it also helps with wealth transfer, tax-saving, and long-term financial planning. If you die unexpectedly, your family might not be able to manage or access your investments immediately. Life insurance provides immediate, tax-free financial support during tough times.

If I have multiple sources of income, do I still need term insurance?

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Yes. Term insurance plan protects your family from financial loss if you pass away, regardless of how many income streams you have. Even if you earn from multiple sources, those incomes might stop after you’re gone. Term insurance ensures your dependents continue living comfortably without depending on others.

I’m earning from a business and a salary, should I buy separate health insurance or rely on employer coverage?

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Always get a personal health insurance plan even if your employer provides one. If you quit your job or your business faces a dip, your employer's health cover ends. Your personal plan stays with you, gives better options, and protects your savings across all income situations.

Disclaimer

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  • This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
  • All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
  • Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.

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