Principle #4: Live Within Your Means, Then Increase Your Means
Many personal finance experts emphasize managing debt and controlling costs, along with investing your savings, as the primary approach to increasing wealth.
And certainly the old adage "Live within your means" is a very fundamental principle in personal finance. As I pointed out before, it's not how much you earn, it's how much you get to keep.
However, I also subscribe to the idea that we ought to find ways all the time to increase our income, not just watch our expenses.
That is, increase your means.
To me, it includes getting a raise or increasing sales (if you own a business or work on a commission). But it's more than increasing your income from its current source. I believe in finding alternative sources of income.
Robert Allen calls it "multiple sources of income". Whatever you think of the guy, the concept has its merits. It's the same thing for companies. Those that diversify their sources of income are better able to sail through rough times during the usual business boom-and-bust cycle.
They diversify by selling various products and services, by selling to different market segments, and by acquiring other companies.
You have to start thinking the same way. If you're dependent on a single source of income, say, a salary, what would happen if you get fired? Or get a cut? It happens all the time.
If you own a restaurant, and some major crisis forces you to close down your restaurant, or stiff competition suddenly lowers your sales significantly, and your income comes solely from it, how would you cope?
Do I suggest getting another job on the side? Another business? Well, it depends on your situation.
If you're a full-time employee, consider getting a franchise that can later run on its own with minimal supervision. Or get into network marketing, or even, a part-time sales job, that you can do on weekends or evenings.
If you're a freelancer or entrepreneur, consider another business. Or, simply expand your products or services. If you're doing PR, consider handling events. If you're selling pastries, maybe start selling coffee. Whatever.
Or if you're generating substantial income, you can diversify by investing in income-producing assets. Put your money in stocks, bonds, mutual funds, rental properties, etc.
If possible, diversify without over-extending yourself or going into totally unchartered territory. That is, diversify without losing your focus.
The point is, just like with investments, you don't want to put all your income eggs in one basket. Ideally, you receive regular, predictable income, plus commissions, fees, or royalties as well as interest and capital gains. In other words, multiple streams of income.
So think about your own diversification strategy.
